DENVER -- Colorado's tax and spending limiting Amendment 1 has thrown a wet blanket on an estimated $600 million in approved financings, but some new issues approved by voters are beginning to crawl out.
Last week saw the first rated new general obligation and certificate of participation lease issues brought to market in Colorado since Amendment 1 went into effect in the fall of 1992, bankers and bond attorneys said. More new issues are expected to come to market in the next few weeks.
Montrose County voters in south central Colorado approved a $12 million lease financing last fall for a new jail. The issue, underwritten by Dougherty, Dawkins, Strand & Bigelow Inc., was priced last week. George K. Baum & Co. priced a $700,000 GO issue for Evergreen Park and Recreation. District, a taxing district for a mountain suburb of Denver.
The $600 million in debt authorized by voters last fall has not been issued because of pending legal battles over Amendment 1's treatment of ballot question wording. A Boulder school district case involving the ballot wording is awaiting a Colorado Court of Appeals decision.
Although Amendment 1 requires debt votes to be worded in two different questions, one asking if the debt should be authorized and the other asking if taxes should be raised to pay for the debt service, most Colorado issuers have lumped the questions together. In Boulder, Amendment 1 supporters sued to block a GO issuance based on violation of the ballot wording requirements. Boulder won in lower court and the Amendment 1 forces have appealed.
Amendment 1 allows refinancings, and there have been several lease and general obligation debt refinancings, but almost no new issues. A small unrated general obligation issue was sold this year in Telluride, but rating agencies are still concerned about the legal battles. As a result, one rating agency, Moody's Investors Service, has classified all Colorado debt as limited obligation because Amendment 1 requires voter approval to issue new debt.
Both Evergreen and Montrose worded their. ballot questions separately, as will the issuers who plan to come to market shortly. Evergreen persuaded voters to authorize a twomill levy to be assigned to the bonds as additional backup to the general obligation pledge, noted Moody's analyst Dov Iskowitz. The two-mill levy provides 3.7 times debt service payments.
Evergreen's, rated AI by Moody's Investors Service, is the first new-issue general obligation deal that the rating agency has rated since Amendment 1 became law, Iskowitz said. Legally, Moody's still views the pledge as a limited one, however.
But, "analytically, we treat it as an unlimited tax pledge," Iskowitz said.
The law firm of Sherman & Howard in Denver issued a clean opinion on the Evergreen deal, meaning that there are no problematic legal questions hovering over the issue.
Blake Jordan, bond counsel for Montrose County, said he also issued a clean opinion because of the way the vote was structured. Standard & Poor's rated the jail issue BBBminus.
Montrose county voters approved the new jail lease financing last November. The debt authorization gained a higher approval rate than the increased taxes question.
"We told [the county] that in order to avoid any questions of Amendment 1 and to avoid litigation, it would be advisable to go to an election with separate ballot questions," Jordan said.
Meanwhile, a separate court case involving Daugherty Dawkins is also pending. Again, the city of Boulder is involved, this time because Boulder sued EPaUgherty Dawkins for refusing to underwrite a new-money lease. Daugherty Dawkins refused to do so because of level of uncertainties. The case, won by Boulder on the lower court level, awaits. a decision from the appeals court.
"We would not have closed it [the Montrose deal]. without an election because that issue is being litigated in the Daugherty Dawkins case," Jordan said.
Dee Wisor, bond counsel on the Evergreen issue, said several more new-money general obligation financings in Colorado are in the works. They all involve strict adherence to Amendment 1 ballot requirements.
Referring to Amendment 1 author Douglas Bruce, Wisor said, "The unique thing about Evergreen is that we submitted questions that even Doug Bruce would like."
