Public safety financing process questioned
Dennis Simpson supports efforts to replace aging police and fire department facilities in Grand Junction, but questions why city voters didn’t get a say in financing a $35 million public safety project.
In authorizing an arrangement to lease new and remodeled buildings and pay for them through what are called certificates of participation, the Grand Junction City Council committed the city to long-term debt without a ballot measure, said Simpson. The Grand Junction accountant long has been involved with efforts to oppose government debt without an election. “It not a good way to deal with the people who elected you,” he said.
Simpson also raised his objections before the council at a public hearing on the issue in September.
City Manager Laurie Kadrich said in a telephone interview with the Grand Valley Business Times that council members did respond to what they’ve been hearing from voters for two years, and that is to downsize the scope of the public safety project and proceed without raising taxes. Given that directive, the lease and certificates of participation offer one of the few options available to move forward with the project at this time, Kadrich said.
Construction on the public safety project is expected to begin in April and conclude in the fall of 2012. The project will be about two-thirds the size and a third the cost of a $98 million proposal to build seven buildings that was rejected by city voters in November 2008. That plan would have been financed through a quarter percent increase in city sales taxes.
The revised project will involve the construction of a new, 58,000 square foot building as well as the remodeling of three existing buildings with a total of about 43,000 square feet. Limited remodeling is planned for a fifth building.
A new building will be constructed near the intersection of Fifth Street and Ute Avenue to house police headquarters and an emergency dispatch center. Meanwhile, the west wing of the existing police building will be remodeled to serve as the headquarters of the fire department. A building on West Avenue that previously served as a city fleet facility will be remodeled for a police annex.
The fire station near the intersection of Sixth Street and Pitkin Avenue will be fully remodeled and updated. Limited remodeling also is planned for a fire station near the intersection of 28 1/4 and Patterson roads.
Jodi Romero, financial operations manager for the city, said the city will lease the public safety buildings to Zions Bank, which will act as a trustee and lease the buildings back to the city for its exclusive use. The arrangement will allow the use of the property as collateral for certificates of participation sold to investors.
The city will pay back investors over a 30-year period in the form of annual lease payments of $2.2 million, Romero said. The city will make the lease payments with $500,000 from the surcharge on telephone bills to fund 911 service as well as $1.7 million from a capital construction fund derived from revenue from three quarters of a percent of sales tax.
Simpson said that over the course of the 30-year lease, city payments will total $66 million — money that could be used for other purposes, such as maintaining streets or pruning trees.
Certificates of participation have become an increasingly popular way for governments to execute what Simpson called an “end run” around constitutional prohibitions against going into debt without voter approval. He acknowledged, though, that some court rulings have determined the financing mechanism doesn’t constitute debt.
Even if the Grand Junction City Council doesn’t have a strictly legal obligation to put the public safety financing plan before voters, the council has a moral obligation to do so, he said.
Kadrich said the city could use money from the capital construction fund for other projects or even operational expenses. While the city is not legally limited to use money from the fund strictly for capital projects, it’s long been the policy to do so, she added.
But at the same time, the public safety project long has been a priority. And the expense of providing police and fire services “is not going to go away,” she said.
Simpson said he’s also concerned the city will use certificates of participation to finance other city projects, perhaps additional fire stations.
In addition to the public safety project, the council approved a similar plan involving a lease and certificates of participation to finance $7.8 million in improvements at Suplizio Field in Grand Junction. Under that plan, the city will lease the facilities from the Grand Junction Finance Corporation. The city make an annual lease payment of $515,000 for the next 25 years. Of that, $300,000 will come from Grand Junction Baseball Inc. and $215,000 will come from lottery funds the city receives each year.
Kadrich said there’s a possibility the city could use certificates of participation for other projects, but probably not in the near future. She said it’s more likely the city would ask voters to extend the override of constitutional spending limits they approved to more quickly pay off bonds issued to finance the Riverside Parkway.