From The Colorado Springs Gazette (Benn Farrell):
At the board’s Sept. 21 meeting, they heard recommendations from town staff and special legal counsel regarding the potential for using the sale of revenue bonds to fund major improvements to its water system over the coming years.
However, instead of revenue bonds, it was recommended Monument create an ordinance to enter a site lease agreement and lease purchase agreement to market Certificates of Participation (COPs) — an alternate form of financing…
Presently, the town has a 2A water fund and an enterprise water fund for its improvements. Formal revenue bonds would have the town fund improvements from just one fund, Richey said. Using Certificates of Participation is a way many municipalities, counties and school districts fund projects without having to raise taxes and is a financial structure approved by the Colorado Supreme Court, Richey said. The collateral for the agreement would be town-owned property, infrastructure and improvements.
With the agreement, Monument would lease its collateral property to BOK Financial in Denver, which would act as the financial trustee in exchange for an anticipated $22 million. BOK Financial then leases back the property to the town, and Monument pays “base rents” to pay off the $22 million over time, Richey said.
Richey said Certificates of Participation also carry added protection for the town since they involve leases over a particular term and not transfer of title. Monument would not lose title to any of its assets, he said.
While town staff plans on raising $22 million through marketing these COPs, other terms like interest rates and repayment amount will depend on market conditions when the certificates go to market. The agreement guarantees the interest rate would not exceed 4.5%, but with present rates it is expected to be just under 3%, Town Manager Mike Foreman said…
Terms for repayment would not exceed 30 years, but Richey said town staff is negotiating for lower terms. Richey also said as base rents are paid, subleased property in the agreement could be removed, which is the goal, or substituted with other property of equal or lesser value.
The board approved the ordinance 6-0 with no opposition from trustees, staff or the public…
Foreman noted the anticipated $22 million from the COPs would leave an additional $5 million in the 2A fund.