Justice center's new revenue idea: It's bond, mini-bond

James Paton, Rocky Mountain News

Wednesday, March 14, 2007

Talk about creative financing.

The city of Denver used a debonair, tuxedo-clad James Bond impersonator to announce the latest piece of a plan to pay for a new courthouse and jail downtown.

Denver officials said Tuesday they're set to sell up to $10 million in 2007 - or "007" - bonds to average residents. The move is a small part of a $378 million bond measure voters backed in 2005.

Mayor John Hickenlooper, "M" as he was called in a news conference to pitch the opportunity, said most municipal bonds are sold for $5,000 apiece, often to institutional investors.

Now "from Denver with love," come $500 bonds, which ordinary investors can cash in only when they mature in 15 years. The bonds will be worth $1,000 then, an annual tax-free rate of return of 4.75 percent. There are no fees or commissions.

"Colorado residents have a chance to invest in their future because tomorrow never dies," Hickenlooper said, smiling as he painfully kept to the Bond theme.

The city can sell as much as $10 million in bonds but expects to raise $3 million to $6 million.

Jeanne Robb, Denver city councilwoman, said the sale allows residents to "get a return on the tax investment they have made."

It boils down to taxpayer dollars. The principal and interest on the bonds are paid from the property taxes Denver collects.

The site of the justice center complex, between West Colfax and West 13th avenues and Fox and Delaware streets, will include a courthouse, a jail, a post office and a parking garage.

Supporters of the plan had cited overcrowding at the main jail facility in northeast Denver.

While Hickenlooper urged residents at the time to vote yes, critics, including Bill Vandenberg of the Colorado Progressive Coalition, had played the role of Dr. No.

"The crux of our argument was that it was too damn big and too expensive," he recalled, adding that his group wanted the city to pursue thoughtful alternatives to simply locking people up.

The bond initiative was similar to a $325 million proposal that was defeated in 2001.

The city already has issued justice center bonds in two rounds, one for $70 million and another for $125 million. After the current sale, Denver plans to offer the remaining piece (for $173 million) in 2008, said Alan Nuss, a senior department of revenue analyst.

Denver is selling the bonds as older debts are paid off. The effort was billed originally as a way to build without boosting residents' net property-tax bills.

The total cost of the project would be less than $600 million, including interest, the city said.

Bond-rating agency Fitch said earlier this month that Denver's debt burden "remains moderate," and debt levels "are manageable but approaching high." Nuss said each investor in the current sale is limited to buying 40 bonds for $20,000. Residents with young children might consider its a way to save for college, he said.

The "mini-bond" sale - the fourth the city has done - begins April 2 and ends April 6. Investors can buy the bonds with bank checks, the city said.

"This is a long-term investment," Nuss said. "Individuals shouldn't be putting all their money in these things because they won't get it back for a while."

Justice center financing

• What Denver is selling to the public: $500 "mini-bonds" as part of a plan to borrow money to finance the new justice center.

• When they mature: 2022

• How much a single bond would be worth in 15 years: $1,000

• Annual tax-free yield: 4.75 percent

• Orders accepted: April 2-6

• More information: Go to denvergov.org/treasury

patonj@RockyMountainNews.com or 303-954-2544