Vail may have to borrow to fund public works facility
Town is currently spending reserves on economic recovery efforts and may not be able to pay cash for other projects
- The state’s Taxpayers Bill of Rights, or TABOR, amendment, prohibits state and local governments from making multi-year financial commitments. Instead, courts have approved a funding tool called “certificates of participation.” Those are essentially lease-financing agreements sold to investors. As opposed to conventional revenue bonds, the certificates don’t require voter approval.
Vail has for the last several years been in an enviable position: The town since 2012 has been debt-free. That may change in the near future.
As the town looks at its 2021 budget, officials believe the town can no longer cash-fund some important projects, particularly rebuilding the town’s public works facility on the north side of Interstate 70 between the main and East Vail Interstate 70 interchanges.
That project carries a current estimate of at least $20 million. In the days before the COVID-19 pandemic, it’s likely the town could have simply paid for the work out of its reserves. But these days, those reserves are being used for economic recovery — everything from resident and business rent relief to helping fund heated outdoor seating for restaurants. Rebuilding reserves could take several years.
That means it may be time to borrow. No decisions have been made yet, but the most likely form of financing comes from a tool called “certificates of participation.”
Those certificates, essentially a series of one-year lease-finance agreements, have been used elsewhere in the valley.
Certificates used elsewhere
According to an email from Town Manager Eric Heil, Avon used those certificates in 2016 to fund its portion of the public safety facility that houses the Avon Police Department and the Eagle River Fire Protection District. The town also used those certificates for a 2014 street improvement project, and a 2009 project to build the Avon Regional Transit Facility.
Eagle County used certificates for a jail expansion in 2010, and to finance its portion of the Two10 at Castle Peak workforce housing project.
Eagle County also carries debt at the Eagle County Regional Airport, but that debt is being paid through user fees. No local taxpayer money is being used.
The town of Eagle is carrying just less than $5 million in loan and bond debt, mostly for water and wastewater projects.
The town of Gypsum is carrying about $3.1 million in debt. Town Manager Jeremy Rietmann emailed that the debt is being used to finance the purchase of the Gypsum Creek golf course, the expansion of LEDE Reservoir and leases for carts at the golf course. Those carts are replaced every five years.
Vail Mayor Dave Chapin said he has mixed feelings about the prospect of financing a project.
Chapin noted that it’s always a “point of pride” for him to talk about the town’s lack of debt at Vail’s annual community meetings in March.
“Not a lot of towns can say that,” Chapin said.
Thanks to the success of the town and resort, Chapin noted that the town has been able to pay cash for a number of projects over the past several years.
Pandemic time is different
But this is a different time, Chapin said.
“With the uncertainty going forward, we can’t throw all our eggs in one basket,” he said.
On the other hand, the town’s public works facility was built in the 1970s and the town has outgrown the facility’s abilities.
“The town services that are now required have outgrown the ability of the public works shop to maintain,” Chapin said, adding that updating the public works facility is a matter of being more efficient in town operations.
Those operations touch a number of things visitors and guests see, Chapin added.
Again, no decisions have been made. Chapin said with ideas for a solar energy facility and the need to charge and maintain electric-powered buses, there’s a possibility that grants could be found for at least partial funding.
Then there’s the matter of waiting until the town could pay cash. That could be quite a lot more expensive, Chapin said.
“If we were to cash fund and delay for six or seven years, that’s potentially a 25% increase,” he said. “And, if you want to cash fund this, you’ll delay other projects in town.”
The town will spend time finalizing the 2021 budget over its meetings in November.
“We’ve got some tough decisions in front of us when it comes to funding capital projects,” Chapin said.
Vail Daily Business Editor Scott Miller can be reached at firstname.lastname@example.org.
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