City of Boulder 2B – Open Space General Obligation Bonds

In 1993 voters approved the issuance of bonds payable from the open space sales and use tax. The city has not yet issued $33.45 million of those bonds. The city intended to issue general obligation bonds which have favorable interest rates, but the Colorado Supreme Court subsequently determined that the voters only approved revenue bonds which require that the city keep a 10% reserve fund while the bonds are outstanding. On the other hand, the general obligation bond safeguard requires the city to increase property taxes if open space sales and use taxes are insufficient to repay the bonds. Five previous open space bond issues have been issued with a general obligation pledge, but the pledge has never been needed because sales and use tax collections have been sufficient.

Recommendation: FOR

This technical change would allow the city to save money on interest and not have to hold over $3 million in reserve -- two smart financial moves in these tough economic times. Property taxes which are fairly low in Colorado would be raised only if the designated open space sales and use taxes and other city revenue are insufficient. In this economy it seems possible that city income from the sales and use tax could be lower than expected and a property tax increase might occur. However, I think the certain benefits of this proposal outweigh the potential, if any, costs.


City of Boulder Ballot Issue 2B (Approved Ballot Language)

OPEN SPACE GENERAL OBLIGATION BONDS

SHALL CITY OF BOULDER DEBT BE INCREASED UP TO $33,450,000 WITH A REPAYMENT COST OF UP TO $80,863,800, AND SHALL CITY TAXES BE INCREASED UP TO $3,200,000 ANNUALLY, (TAXES TO BE INCREASED ONLY IF EXISTING DEDICATED OPEN SPACE SALES AND USE TAXES ARE INSUFFICIENT TO REPAY THE DEBT); AND

SHALL THE PURPOSE OF THIS MEASURE BE TO ALLOW THE CITY TO OBTAIN MORE FAVORABLE INTEREST RATES AND TERMS FOR BONDS APPROVED BY THE VOTERS IN 1993 BY ISSUING GENERAL OBLIGATION BONDS; AND

SHALL THE BOND PROCEEDS BE USED TO CONTINUE THE PURCHASE OF OPEN SPACE REAL PROPERTY INTERESTS AS WAS PREVIOUSLY AUTHORIZED BY A VOTE OF THE PEOPLE IN 1971; AND

SHALL THIS PURPOSE BE ACCOMPLISHED BY THE ISSUANCE AND PAYMENT OF CITY BONDS AT A NET EFFECTIVE INTEREST RATE NOT TO EXCEED 7% PER YEAR AND WITH A MATURITY DATE NOT TO EXCEED 30 YEARS FROM THE RESPECTIVE DATES OF ISSUANCE; AND

SHALL SUCH BONDS BE ISSUED, DATED, AND SOLD AT SUCH TIME(S) AND IN SUCH MANNER AND CONTAIN SUCH TERMS, NOT INCONSISTENT WITH THIS MEASURE, AS THE CITY COUNCIL MAY DETERMINE; AND

SHALL SUCH BONDS BE PAYABLE FROM REVENUE DERIVED FROM EXISTING SALES AND USE TAXES, WITHOUT ANY INCREASE IN RATE, EARMARKED AND COMMITTED FOR SUCH PURPOSES BY VOTE OF THE CITY’S ELECTORS AND BY A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY AS AUTHORIZED IN THE CITY’S CHARTER AND PURSUANT TO THE ADOPTION OF ORDINANCE NO. 7673; AND

SHALL AD VALOREM PROPERTY TAXES BE LEVIED IN ANY YEAR WITHOUT LIMITATION AS TO RATE AND IN AN AMOUNT SUFFICIENT, TOGETHER WITH OTHER AVAILABLE REVENUES, TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON SUCH BONDS WHEN DUE; AND

SHALL ANY EARNINGS FROM THE INVESTMENT OF THE PROCEEDS OF SUCH TAXES AND BONDS (REGARDLESS OF THE AMOUNT) CONSTITUTE A VOTER APPROVED REVENUE CHANGE WITHOUT REGARD TO THE REVENUE AND SPENDING LIMITS OF ARTICLE X, SECTION 20 OF THE COLORADO CONSTITUTION?

FOR THE MEASURE ____ AGAINST THE MEASURE ____


Ordinance 7673 submitting Ballot Issue 2B to the voters
http://www.bouldercolorado.gov/files/Elections/2009/Ordinance_7673_-_Open_Space_General_Obligation_Bonds.pdf