Vail considers millions in debt
August 17, 2010
VAIL, Colorado – If voters approve Amendments 60 and 61, the town of Vail’s ability to incur debt would dramatically decrease – one reason the Vail Reinvestment Authority Commissioners are considering issuing millions of dollars in bonds before the November election.
The commissioners, made up of Vail Town Council members acting as the Vail Reinvestment Authority, listened to Vail staff recommendations Tuesday that include issuing 20-year tax increment financing bonds to fund $12.3 million of public improvement projects within the Lionshead Tax Increment Financing District.
The commissioners directed town staff to pursue the bond options, but would decide on how much they want to issue and for which projects at the Sept. 21 Vail Reinvestment Authority meeting. The commissioners could decide to issue more or less than the suggested $12.3 million.
Dee Wisor, an Denver-based attorney, told the commissioners that federal law states the town would have to use 85 percent of the money within three years.
Vail Finance Director Judy Camp said the bond buyers would also like to know what the money would be used for specifically.
“It’s easier to sell bonds with specific, approved projects,” Camp said.
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The question over whether to issue bonds has come up quickly as the town prepares for the potential impacts of Amendments 60 and 61.
Amendment 60 would cut future Vail Reinvestment Authority revenue and bonding capacity by limiting future property tax collections, according to an Aug. 12 memo to the commissioners from Camp and Town Manager Stan Zemler.
Amendment 61 would change the rules for urban renewal authorities, requiring a November vote to incur debt, as well as limiting the term of the debt to 10 years and requiring a reduction of taxes when the debt is paid off.
Wisor compares it to people being forced into 10-year mortgages rather than 30-year mortgages – a situation that is impossible for most people, he said.
While the timing of an economic downturn and uncertain economic future might seem like the wrong time to incur debt, current municipal bond rates are approaching 30-to-40-year lows, said Jonathan Heroux, managing director of public finance for the investment banking firm Piper Jaffray.
Combine that with the potential that Amendments 60 and 61 are approved this November, and the town of Vail is considering debt at a time that might not seem ideal otherwise.
“We’re taking the issuance of this debt very seriously,” said Commissioner Andy Daly. “It’s a significant obligation to the town. We’re not going to spend on willy nilly projects that really aren’t in the long-term best interests of this community.”
Commissioner Susie Tjossem said she was a little uneasy about spending money on improvement projects at the Lionshead parking structure, such as the current Lionshead Transit Center project that already began construction and improvements to the entrances to Lionshead Village, without adding a single parking spot.
“We’re up against a wall with this timing, but we don’t have our answer on what we want to do with parking,” Tjossem said.
The Vail Town Council is scheduled to talk about future parking options at its Sept. 7 meeting, while reinvestment authority commissioners would have to decide on the bond amounts by Sept. 21.
The projects listed as recipients of the bond money include the transit center, a Lionshead Welcome Center, Lionshead portal improvements at both East and West Lionshead Circles and a library remodel. The projects could be completed within the next three years, the time frame in which 85 percent of the bond proceeds would have to be spent.
“The (federal) tax code says the town has to have a reasonable expectation, on the date of issuance, that it will spend the money in three years,” Wisor said.
The town’s bonding capacity, assuming A-rated bonds, is about $26 million, Heroux said.
If Amendments 60 and 61 pass, however, the town’s bonding capacity would go down to about $8.5 million.
Commissioner Kevin Foley said he doesn’t want to pay more than $7 million in interest over 20 years when the town could tap into its healthy reserve funds to pay for important projects with cash.
Camp said the town would not be able to fund all of the projects in 2011, and rather than using cash to take advantage of current market conditions.
Vail Homeowners’ Association Executive Director Jim Lamont told the commissioners they need to “exercise excruciating sensitivity to this subject before making a final decision.”
The commissioners will listen to another presentation on the harmful impacts of Amendments 60 and 61, and Proposition 101, at the same Sept. 21 meeting in which they plan to decide on the bond amounts.