No vote on new Aspen city offices; COPs to finance project
August 16, 2017
The ongoing debate over whether to let voters decide on a new civic office building spilled into another Aspen City Council meeting Tuesday, with elected officials opting to pay for the project using a financial instrument that would not require the electorate's blessing.
Three of the five council members — Adam Frisch, Ann Mullins and Mayor Steve Skadron — favored the use of certificates of participation to finance $20.9 million of the $22.1 million administrative office building next to the Rio Grande Parking Garage. The city would pay the remaining balance using $1.2 million in cash.
Unlike general obligation bonds, certificates of participation, also known as "COPs," do not require voter approval.
The conclusion was drawn after a near 100-minute work session where multiple scenarios were fleshed out in a backdrop of testy exchanges among council members.
His previous efforts to take the project to voters having previously failed, Councilman Bert Myrin conceded that the office building would go up one way or another.
But he argued that voters should have a say on how to finance the project by being asked to approve general obligation bonds, which city finance experts said would likely command lower interest rates than COPs.
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He was in the minority, as was Ward Hauenstein, who suggested letting voters decide on general obligation bonds while having other sources of funding at the city's disposal if the ballot question failed.
"My choice is to finance it with a combination of borrowing from the Wheeler (Opera House) fund and cash, with general obligation bonds as fallback in case the Wheeler needs funds before they are repaid," he said.
Hauenstein also urged the city to move forward with the project to avoid any delays and "not have to come back to it in two or three years."
Mayor Steve Skadron, maintaining his previously stated position on how to finance the new building, said, "I think COPs are the right way to go."
Skadron called COPs the most "conservative option" to finance the project and suggested an election would bring unneeded divisiveness to the community.
"Our responsibility at this table is to exercise judgment. … We're put here to make hard decisions, and the representatives that sit here owe the public not just their hard work, but their judgment."
Said Myrin: "Steve, I agree that we are here to make difficult decisions. There are times, though, when the voters have, for instance, passed a law on TABOR (Colorado's Taxpayer Bill of Rights, passed by voters in 1992). It wasn't passed by one person or by the Legislature. It was passed by the voters. So the voters (in Aspen) are saying they would like to check in, and I think we have the opportunity here to check in with the voters and for a good reason."
By using COPs, the City Council would be putting up a "barrier" to voters, Myrin said, referencing the city's denial of a petition effort by residents Steve Goldenberg and Marcia Goshorn. The city rejected the petition, which aimed to have voters decide on the fate of the new civic project on the grounds that it did not have enough valid signatures and it was submitted after the deadline expired.
"The intent was there," Myrin said of the failed petition. "The people were asking us to do something, and we are putting up barriers to that."
Like Skadron, Mullins said a vote — even if just for general obligation bonds — would just drive a wedge through the community.
"I think a vote right now would be very ugly," she said. "I don't think it's in any way going to unify the community."
Even if the Aspen electorate shot down the option of using general obligation bonds, the office building could still move forward because the city would have other options in its financing arsenal.
As an alternative to COPs or general obligation bonds, Finance Director Don Taylor and Assistant Finance Director Pete Strecker told council members another option would be to use more than $17 million in cash and borrow $5 million from the Wheeler Opera House fund.
However, the downside of those options would pose a financial risk, the two said.
The risk would come because the city would be diverting the $17 million cash that has been intended for the renovation of the existing City Hall, with construction planned in 2020 at the earliest. Costs tied to borrowing money in 2020 for the City Hall renovation would be greater than borrowing it now for the Rio Grande building, they said.
The city has used certificates of participation before on other projects such as the Isis Theater building renovation. In the instance of paying for the construction of the new city office building, the city would issue the certificates, good for no more than 30 years, to an investor, presumably a bank. The city would make monthly lease payments to the bank over the life of the certificates. Once the certificates are paid off, the building ownership would transfer to the city.
"It's time to move this forward," Skadron said.
Frisch was lukewarm to using COPs compared to Mullins and Skadron, but he ultimately leaned in that direction. While he said he liked Mullins' idea to consider letting voters decide on general obligation bonds in the November 2018 elections, he could not endorse that route because the city could fall back on the COPs option if it were defeated.
"I think to go back to the COPs model would send the wrong message for a lot of different reasons," he said.
The second-term councilman also said he believes "decisions should be made here as much as possible."
The new office building will encompass 28,400 square feet on Rio Grande Place near the Pitkin County Library. The city also will use another 6,400 square feet of existing space on Rio Grande Place for future offices.
The City Council will meet again within the next six to eight weeks to discuss moving the project forward.