CAÑON CITY AREA METROPOLITAN RECREATION AND PARK DISTRICT BALLOT ISSUE # 6B:  POOL DEBT FINANCING

SHALL CAÑON CITY AREA METROPOLITAN RECREATION AND PARK DISTRICT DEBT BE INCREASED UP TO $24.8 MILLION, WITH A MAXIMUM REPAYMENT COST OF UP TO $44 MILLION, AND SHALL DISTRICT TAXES BE INCREASED UP TO $1.68 MILLION ANNUALLY IF NECESSARY, BUT ONLY AFTER THE APPLICATION OF DEDICATED SALES AND USE TAX REVENUES RECEIVED FROM THE CITY OF CAÑON CITY TO REPAY THE DEBT, ALL FOR THE PURPOSE OF FINANCING THE COSTS OF CONSTRUCTING AND EQUIPPING A NEW COMMUNITY RECREATION POOL TO REPLACE THE DISTRICT’S PRIOR SWIMMING POOL WHICH WAS PERMANENTLY CLOSED, SUCH DEBT TO CONSIST OF THE ISSUANCE AND PAYMENT OF GENERAL OBLIGATION BONDS WHICH SHALL BEAR INTEREST AT A MAXIMUM NET EFFECTIVE INTEREST RATE NOT TO EXCEED 5.5% PER ANNUM AND BE ISSUED AT SUCH TIMES AND PRICES (AT, ABOVE OR BELOW PAR) AND IN SUCH MANNER AND CONTAINING SUCH TERMS, NOT INCONSISTENT HEREWITH, AS THE BOARD OF DIRECTORS MAY DETERMINE, PROVIDED THAT ISSUANCE OF DEBT AUTHORIZED BY THIS BALLOT MEASURE SHALL BE CONDITIONED UPON PRIOR VOTER APPROVAL OF A BALLOT MEASURE AUTHORIZING THE CITY OF CAÑON CITY DEDICATED SALES AND USE TAX; SHALL AD VALOREM PROPERTY TAXES BE LEVIED, IF NECESSARY, WITHOUT LIMIT AS TO THE MILL RATE TO GENERATE AMOUNTS SUFFICIENT IN EACH YEAR TO PAY THE PRINCIPAL OF, PREMIUM IF ANY, AND INTEREST ON SUCH DEBT BUT ONLY AFTER THE APPLICATION OF DEDICATED SALES AND USE TAX REVENUES RECEIVED FROM THE CITY OF CAÑON CITY; AND SHALL THE DEDICATED REVENUES RECEIVED FROM THE CITY OF CAÑON CITY AND ANY EARNINGS FROM THE INVESTMENT OF SUCH REVENUES AND THE PROCEEDS OF THE BONDS CONSTITUTE A VOTER-APPROVED REVENUE CHANGE UNDER ARTICLE X, SECTION 20 OF THE COLORADO CONSTITUTION?

What does this language mean?

6B is not a tax increase.  This question would allow the Cañon City Area Recreation and Park District to go into debt to sell General Obligation Bonds in the amount of $24.8 million to replace the Icabone Swimming Pool.  The debt would be paid off over a period of 25 years at an interest rate of no higher than 5.5%.  It is anticipated the interest rate will be closer to 4% when the bonds are sold, so the repayment cost will end up being lower than what the ballot language says.  The 5.5% number is used to meet TABOR requirements. Rather than using property tax to pay off the bonds, the District would use the revenue from the .30% sales tax question from the City of Cañon City.  Again, this is not a tax increase as sales tax will pay for the bonds.  The Recreation District is simply asking for permission to go into debt to construct a new swimming facility.  TABOR requires the Recreation District to put in ballot language in regard to property tax because that is how General Obligation Bonds are paid for.  We are not going to levy property tax, because we are using sales tax to pay for the bonds.  This is not unheard of in Colorado.  A great example of this is Montrose.  The City of Montrose passed a sales tax for construction of a recreation center in 2014 and passed it through to the Recreation District to pay off the General Obligation Bonds.  They don’t levy property tax for the repayment of the bonds and the tax sunsets once they are paid off.  We are doing the exact same thing, but instead of a recreation center, we are constructing a swimming pool.  This will sunset at the same time as question 2A.

Is this a "blank check" for the Recreation District?

No it is not.  As a requirement of TABOR, the use of General Obligation Bonds to pay for a capital project is financially backed by levying mills, an increase in property tax.  The mills are assessed on an annual basis to pay off the annual repayment, similar to a mortgage.  Because of this we are allowed to get the best credit rating possible and have a lower interest rate.  It makes this a better investment for the taxpayers.  It is illegal to assess more mills than what is needed to make the annual payment according to TABOR, and the specific condition in the ballot measure itself that a mill levy, if any, would be “ONLY AFTER THE APPLICATION OF DEDICATED SALES AND USE TAX REVENUES RECEIVED FROM THE CITY OF CAÑON CITY”. We are required by TABOR to put language in the ballot question that mills can be assessed. 

In the case of question 6B, given the historic levels of the City sales tax collections we are not going to levy mills for the repayment of the General Obligation Bonds.  Instead, we are going to separately account for and report the sales tax revenue received from the City and use the revenue from the sales tax for the annual payments for the bonds.  Historically the sales tax returns for the City of Cañon City have increased year over year going back to 2000.  There was only one year where there was a drop.  Using that historical information, we know sales tax continues to be on an upward trend and would cover the GO Bond repayments based on the proposed plan. 

The Recreation District Board of Directors cannot even consider levying any mills unless the sales tax was inadequate to make the bond repayment based on the wording of the question.  In this case the District cannot levy mills more than what was needed for the annual payment.  Anything above that is illegal.  However, this situation is highly unlikely considering the history of sales tax revenues.  It is more likely we will have more sales tax revenue than needed for repayment and this could be saved for capital reserves, to pay down the debt faster, or be used to pay off any shortfall.  This way the Recreation District would not be in a position to levy mills.  There is no “blank check.”  In the ballot language we must mention property tax due to TABOR and get the citizens the best returns on their tax dollars, we can mention the use of sales tax, but are required to add the mill levy language.