elegante, noun
: a fashionable woman
My experience of women — speaking as a male raised up during the mid-20th century — is that they are generally helpful creatures who enjoy shopping for clothes and who appreciate a bouquet of flowers now and then.
But occasionally, you run across a woman who is willing to drive into the political mud and get dirty with the Good Ole Boys. I will gladly take off my hat to such a woman.
Back in Part One, I mentioned my disappointment with certain decisions made recently by two members of the three-member Archuleta Board of County Commissioners — and noted that, due to our particular County government structure, it takes only two commissioners to put the taxpayers of Archuleta County deeply into debt, using the financial scheme known as “Certificates of Participation.” COPs.
The BOCC did not hold their usual public work session on Tuesday November 27, because they were in Colorado Springs at a Colorado Counties Inc. (CCI) conference. According to the agenda posted to the County website, it appears that they might have been spending the night at the Hotel Elegante Conference and Event Center.
At any rate, we understand that our three County Commissioners — Steve Wadley, Ronnie Maez and Michael Whiting — had a meeting scheduled at the Hotel Elegante with a financial advisor named Deb Hinsvark from Ehlers Inc, to discuss “COP Financing.”
Under Colorado law, all meetings of the Archuleta Board of County Commissioners are open to the public and the media (except for executive sessions, in special cases.) But when you schedule your “open public” commissioners’ meeting in Colorado Springs at 4:30pm at the Hotel Elegante, you can be pretty sure the public and the media will have a hard time attending. Which allows for an open public meeting without an annoying audience.
To judge by the short resume posted to the Ehlers Inc. website, Deb Hinsvark seems like a great advisor for our County Commissioners, if they are expecting to put the community’s taxpayers millions of dollars in debt to build the jail that the voters recently rejected.
From the Ehlers Inc. website:
EHLERS IS COMMITTED TO COMMUNITY
Ehlers is an independent advisory firm. We’ve been in business since 1955 working exclusively for public sector clients. Our fiduciary duty as independent financial advisors has always been our commitment to you. We have always recommended financial solutions that are in solely in your best interests…
Our mission is to design customized financial solutions that help build outstanding communities… We work closely with clients to better understand what it is they need and want to accomplish – whether that’s a new water system (for healthier living), a new road (for less accidents) or a new school (for greater learning). Once the need is defined, we then help clients find the financial resources to make the project a success and minimize risk to taxpayers…
Our clients want to improve lives, and we help them strategically and tactically build stronger, financially stable, outstanding communities.
“Certificates of Participation” — COPS — are a clever tool used by the financial industry in co-ordination with Colorado governments, as a way to avoid requirements in the Colorado Constitution that all multi-year government debts must be approved by the voters.
From the Colorado Constitution, Article XI: Local Government Debt:
No political subdivision of the state shall contract any general obligation debt by loan in any form, whether individually or by contract … unless the question of incurring the same be submitted to and approved by a majority of the qualified taxpaying electors voting thereon, as the term “qualified taxpaying elector” shall be defined by statute.
The BOCC attempted to get a $25 million debt approved by the voters earlier this month, and failed. So at least two of the three commissioners appear ready to sign up for a “Certificates of Participation” scheme.
Colorado’s state government has been using COPs since the late 1970s to sidestep this constitutional limitation. Here’s an explanation of how the process works at the state level, quoted from a 2015 article published by the Colorado Legislative Council Staff. The process used by a county government is very similar.
How COPs work.
Once authority for a COP issuance is obtained from the legislature, the state enters into a lease-purchase agreement for a proposed facility. Typically in COP financing, the state transfers its interests in a property to a lessor and then leases the property back through annual lease payments…
The state makes annual payments authorized through the annual budget bill (Long Bill) that include both principal and interest. The interest rate paid by the state is fixed and depends on market conditions at the time COPs are priced for sale. The state renews the lease each year through an appropriation in the Long Bill. When the lease ends, the state owns the facility at no or minimal additional cost.
If the state fails to make the annual lease payment, the lease terminates and the trustee may sell, re-let, or otherwise dispose of the property, using the proceeds to pay the investors. Also, the state can decide at any time to terminate the lease and payments. If the state so chooses, by not appropriating funds for the project, it would forfeit the leased property to the investors, and it would not be obligated to repay any remaining costs.
There are a couple of drawbacks to a lease-purchase scheme — where the taxpayers are concerned — when compared to, for example, general obligation bonds. General obligation bonds, when approved by the voters, must include a new influx of tax revenues to cover the debt payments. But under a lease-purchase scheme using COPs, the County makes the lease payments out of existing tax revenues. Which means, the BOCC necessarily extracts the money out of some existing area of the annual budget.
Another drawback is a higher interest rate. If the County were to build a jail using a lease-purchase scheme, and the economy were to suddenly head south, a future BOCC could — if they were so inclined — walk away from the payments and owe the investors nothing. That would leave the investors owning an empty County Jail facility. To whom would they sell such a facility, to recoup their investment?
To cover that risk, the investors naturally want to charge a significantly higher interest rate. Based on the recent discussions I’ve heard at BOCC work sessions (held here in Pagosa) it sounds like a COP scheme for funding a $12 million jail facility would cost the taxpayers around $800,000 a year for 20 years or so. So then, maybe $16 million, with interest included. (Does that equal a 25 percent interest rate? Or is it 33 percent?)
Of course, none of this nonsense — this COP, lease-purchase nonsense — is necessary. And maybe financial advisor Deb Hinsvark explained that to the BOCC yesterday?
But I wasn’t there to listen.