TABOR Committee letter to city of Loveland urges care with DDA bonds
Letter sent via a lawyer says language in ballot question ‘ambiguous’
Through an attorney, the TABOR Committee delivered a message to the city of Loveland last week reminding the city to tread carefully when issuing bonds for the city’s Downtown Development Authority.
The letter’s stated concerns relate to the anticipated bond issuances greenlit in November via a ballot issue.
The TABOR Committee, which was the original vehicle for getting the Taxpayer’s Bill of Rights passed in 1992, is an organization whose mission is to defend the statewide law. It is the advocacy side of TABOR defense, while its affiliate the TABOR Foundation is an educational organization.
The letter was sent by Michael Mulvania through Denver-based law firm Mulvania Law, LLC. It is “non-threatening,” according to City Attorney Moses Garcia, though it serves as an important reminder that the city could be at risk of violating TABOR if it were to finance repayment of debt taken for the DDA through any means other than the fund specially designated for the purpose.
Ballot issue 5C, which appeared on the November 2017 election ballot for Lovelanders living within the DDA boundaries, asked voters to grant the city permission to borrow up to $61 million for DDA infrastructure projects. Final election results showed 58.68 percent of voters in favor of the issue.
The ballot question states the debt will be “payable from and secured by a pledge of the special fund of the city which shall contain tax increment revenues levied and collected within the boundaries of the authority.”
This statement is almost word-for-word a reflection of the section of the Colorado Revised Statutes Title 31 dedicated to codifying the issuance of bonds by an authority.
But, as pointed out by TABOR Committee board member Brian Vande Krol, a couple of words are missing from the ballot language that keep it from matching exactly. Section 2 of CRS § 31-25-109 includes three mentions of how a bond may be payable, and on each mention, the law states bonds “are payable solely from” a pledge of income, contributions, grants or other funds.
Vande Krol said that he and the Committee think the omission makes the statement “ambiguous” about how the bonds will be repaid. Without the word “solely,” the city could potentially look to funds other than the specially designated fund to pay back the debt, which could violate TABOR by making city residents outside the DDA area contribute to repayment of a debt they never had a chance to vote on.
“Loveland citizens … must not foot the bill in the event opportunistic forecasts for future tax increment revenues are insufficient for bond repayments,” the letter reads.
DDA debt is financed through tax increment funding (TIF) within the DDA district. TIF is a mechanism for funding redevelopment projects in targeted areas, and is reliant on committing annual increases to real estate taxes, property taxes and sales taxes within the DDA boundary to finance the debt issued to pay for projects.
In Vande Krol’s opinion, any person who buys the DDA’s bonds might also have cause to sue the city if the tax increment fails to materialize, therefore leaving the city unable to pay off its debt. The bond buyers could feel the city has defrauded them by not stating clearly that the bonds carry the risk of “solely” being able to be repaid by TIF funds, he said.
Vande Krol said Loveland citizen Larry Sarner originally alerted the Committee to this language in the ballot issue.
There is no requirement that the city repeat the statute’s language word-for-word, only that the city get the substance of the law’s message across, Garcia said.
The letter did not ask for any specific action, so the city is interpreting it as an advisement to make sure that the DDA bonds are indeed only repaid from the special fund.
Julia Rentsch: 970-699-5404, firstname.lastname@example.org