Still Building a Better Denver with Borrowed Money

7/29/2019 Still Building a Better Denver with Borrowed Money

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Still Building a Better Citywith Borrowed Money


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Office of the Auditor

Communications DivisionDenis Berckefeldt

Sharon Bailey, Ph.D.City and County of Denver

Dennis J. GallagherAuditor


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has had a positive impact on Denvers

infrastructure and quality of life. And it has done so by accelerating the

completion of over 275 capital projects in just four years.

Denver has a long history of borrowing to build a better City. Since the turn of the

century, citizens have authorized the issuance of bonds to undertake a variety of

projects, which in turn have provided an improved quality of life. Denver votershave historically approved capital improvements for infrastructure (streets, sewers,

etc.), libraries, cultural facilities, parks, and recreation facilities. The issuance of

general obligation bonds are public decisions based on the vision of City leadership

and economic, political, and social landscapes. Increasing taxpayer debt has always

been subject to extensive debate, scrutiny of citizens and the media, controversies,

and even struggles in the courts. That is part of the democratic process and why the

undertaking of taxpayer debt is subject to the will of the people.

In 2004, Mayor John Hickenlooper appointed a 115-member Infrastructure Task Force to examine and

prioritize the Citys capital facility and infrastructure needs. In a process that lasted more than a yearand included input from more than 1,500 residents, the taskforce developed eight separate ballot

questions (the Better Denver Ballot Questions) authorizing debt in the aggregate principal amount of

$549,730,000. In November of 2007, Denvers citizens passed the ballot initiatives that established this

program and its bond financing. This program targeted City facilities, health and human services facilities

public safety facilities, cultural facilities, libraries, parks, and roads for improvement, preservation, and

renovation. A separate but companion ballot question, authorizing a 2.5-mill levy on all taxable property

was also approved at the same election in order to fund the restoration, rehabilitation, refurbishment

and replacement of the Citys capital infrastructure.

In January 2008, the City began implementing the program. In light of the economic downturn then occurring

Mayor Hickenlooper implemented an acceleration effort in October 2008 to begin construction projects

and speed the flow of construction dollars into the economy. The Better Denver Bond Program responded

by facilitating an aggressive contractor outreach program in November 2008. The City held a large event for

potential contractors in December 2008 at the Colorado Convention Center. Over 600 people attended! This

event, along with information on the Better Denver Bond Website, helped to stimulate awareness of and

interest in the projects from the design and construction community. This in turn generated extraordinary

competition, with many more bidders and proposals than projects typically receive. This competition drove

down pricing which resulted in the $20 million of savings that

enabled the creation of new projects. Those projects are set tocomplete by early 2014.

This report summarizes the progress, accomplishments, and

challenges of the Better Denver Bond Program. Overall, it is my

observation and belief that the Better Denver Bond Program

has stayed consistent with voter intent, was delivered on-time

and on-budget, and is providing Denvers citizens with quality

and value for their dollars. Additional factors contributing to the


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overall success of the program include the commitment to communication, public outreach, transparency,

and the management of risk. The program has also integrated opportunities for disadvantaged and small

businesses, focused on sustainability, and incorporated public art into many projects. One of the Better

Denver Bond Programs most significant accomplishments has been to accelerate the delivery of the vast

majority of projects for completion in four years instead of the originally anticipated five years. This is a

great improvement over the ten years it took to complete bond

projects approved in the 1990s.

The Better Denver Bond Program has allowed us to invest in our

infrastructure, beautify our City, improve our quality of life, and

aid our economic recovery. Over 290 projects were initially slated

for design and construction. However, because of cost savings

generated during Program implementation, funds were leveraged

by the Bond Executive Committee and City Council to complete 321 existing projects and create additiona

contingency funds within each Program category.

The Better Denver Bond Program has had the added benefit of serving as an economic stimulus in this challenging

economy. It has helped the City put people to work and pumped millions of dollars into the local economy. Focompanies working on these bond projects, it has been very welcome at a time when design and construction

work was in short supply. Bond projects gave the local construction economy a much needed boost.

JOBSThe City used a combination of the American Recovery and Reinvestment Act (ARRA) and the Association of

General Contractors (AGC) calculations to establish the number of jobs generated by the Better Denver Bond

Program. Roughly 1,000 annual jobs are created or preserved for every

$100 million of capital expenditure. Therefore, with a $500 million capital

program, it is estimated that Better Denver Bonds provided for 5,000 jobs

over the life of the program, or roughly 1,000 full-time equivalent jobs per

year. This is the direct impact of the Bond Program. That impact extends

and is multiplied throughout the economy with the work that the projects

generate for contractors, subcontractors, suppliers, and workers. Based

on the data from both the ARRA and AGC it is probably safe to say that

the impact of the Better Denver Bond Program on the metro Denver area is 5,000 direct construction jobs

over the 5-year timeframe, nearly 7,500 when considering the beneficial impacts of related supply and

manufacturing jobs.

COMPANIESAs of June 2012, the number of companies under direct contract with the City was in excess of 500.Additionally, those companies have subcontractors and suppliers. A conservative estimate suggests that

over 1,000 companies have had opportunities that they would not otherwise have had as a result of the

Better Denver Bond Program.

Among those companies were ones that were minority- and/or woman-owned business enterprises

(M/WBE). The City requires participation by MBE and WBE on City projects. With the Better Denver

Bond Program, nearly $75 million worth of work went to MBE and WBE companies.

i

Over 290 projects were

originally planned but

cost savings allowed

funding for 321!


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There are more than 321 bond projects throughout the Denver Metro area that were made possible by the

Better Denver Bond Program. If youre a Denver resident, youve probably seen evidence of construction

throughout the City, but do you know how the Program isbenefiting your neighborhood specifically? The City of Denvers

official Better Denver Bond Program website provides information

on bond projects, maps, and the ability to search by neighborhood:

www.denvergov.org/betterdenver

The passage of the Better Denver Ballot Questions authorized

funding totaling $549.73 million for capital projects across the

following eight categories:

Purpose 1 Ballot Issue FDeferred Maintenance for Public Office Facilities ($10,350,000)Denvers historic City and County Building, opened in 1932, has

received exterior maintenance that included repair of front steps,

replacement concrete, masonry cleaning, and exterior upgrades

including replacement of windows and blinds for energy conservation

and functionality. Projects also included the remodeling of restrooms,

addition of exit lights, modification of existing bronze doors, repair

of heating, ventilation, and cooling systems, and installation of asprinkler system in the basement. Public office building projects

were also funded at the Denver Permit Center and included repair of heating, ventilation, and

cooling systems, upgrade of electrical systems, and repair of exterior concrete and sidewalks.

Purpose 2 Ballot Issue GDeferred Maintenance on Cultural Facilities ($60,546,000)The Botanic Gardens, Boettcher Concert Hall, and

the Denver Museum of Nature and Science (DMNS)

are a few of the Citys most prized cultural facilities in

need of maintenance and repair authorized through

two Better Denver Ballot Questions, 1G and 1F.

That work included renovation and improvements

to DMNS Phipps Hall and the Newton Theatre;

The Botanic Gardens Greenhouse and Irrigation

as well as ADA improvement; Boettcher Concert Hall had necessary repair work done.

Better Denver Bond

Questions authorized

funding totaling

$549.73 Million for

Capital Projects!


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Purpose 3 Ballot Issue BHealth and Human Services ($48,583,000)Bonds issued under this Better Denver Ballot Question

have funded projects including the expansion of

hospital facilities at Denver Health, and the renovation

and repair of heating, plumbing, and electrical

systems in five low-income child care facilities as well

as Denver Cares Drug & Alcohol Treatment Center.

Additionally a new Eastside Human Services Building

and new Animal Shelter were built.

Purpose 4 Ballot Issue EParks System Facilities ($93,387,000)The construction of a new recreation center,refurbishment of existing park features, replacement

of outdated irrigation systems, and attending to

overdue park maintenance projects are some of

the projects funded pursuant to this Better Denver

Ballot Question.

Projects included work at City Park, Sloans Lake,

Ruby Hill Park, Berkeley Park, Parkfield Lake Park, and

historic park facilities at Civic Center Park, CheesmanPavilion, City Park Bandstand and Washington Park Boathouse. Funds were also used for land

acquisition for a future Central Denver Recreation Center on Colfax.

Purpose 5 Ballot Issue IPublic Safety ($65,195,000)This Better Denver Ballot Question authorized

funding for a new Crime Lab, a firing range, Traffic

Operations Center and a Police Command Vehicle

Garage for the Police Department. It also included

the future Lowry Fire Station and the renovation of

six existing fire stations.

The new crime lab is state of the art and is a prime

center for DNA testing and other laboratory

procedures in the western United States.


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Purpose 6 Ballot Issue DStreets, Transportation, and Public Works ($149,786,000)Projects funded under this Better Denver Ballot Question are intended to increase traffic capacity

in targeted areas and help make Denver more pedestrian-friendly and sustainable. Specific projects

included construction and reconstruction of roadways and streetscapes, widening of sidewalks,

improvement of pedestrian walkways, provision of access to transit lines, and facilitation of transit-

oriented development. The new Central Park Interchange at I-70 was constructed as part of this.

Purpose 7 Ballot Issue C Libraries ($51,883,000)All 23 of the City library facilities (except for

the Denver Public Library main branch) are

being improved under this Better Denver Ballot

Question. Improvements have included repair of

roofs, heating, ventilation and cooling systems,

boilers, electrical systems, fire alarms, and network infrastructure in many locations. Some fundsare also being used to bring libraries into compliance with the Americans with Disabilities Act.

In addition, funding was provided for the construction of three new branch libraries for under-

served or high-growth communities: Green Valley Ranch Branch Library, Sam Gary Branch Library

(Stapleton) and the future West Denver Library.

Purpose 8 Ballot Issue HNew Construction of Cultural Facilities ($70,000,000)This Better Denver Ballot Question authorized overdue maintenance and repairs of each of the

Citys cultural facilities, as well as both an extensive renovation and expansion of BoettcherConcert Hall and the construction of a new storage facility at the Denver Museum of Nature

and Science. This ballot measure contemplated a public-private componentprivate funds

were to be raised and then matched by bond funds for each particular project. In the case of

Boettcher Concert Hall, there was to be $25 million in private funds raised. Unfortunately, due to

the serious fund raising challenges presented by the economic downturn, this project has been

deferred. The remaining authorized amounts in both 1G and 1H have not been issued, but the

authorization is there and the bonds could be issued at any time for use on a project or projects

that would fit under the terms of the original bond authorization. The City proposes to use that

bonding capacity for the improvement of City cultural

facilities. Proposals have been solicited from cultural

facilities for maintenance or construction projects. A

review committee has evaluated those proposals and

forwarded recommendations to the Mayor. (See Mayor

Hancocks recommendations regarding the final projects

to receive the remaining cultural bond funds from the

Better Denver Bond Program on page 7)

Three new branch librarieswere constructed in under-

served or high-growth areas


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Nearly all of the bonds approved in the 2007 election have been

issued. The remaining authorization includes $3,533,794 for Parks

and Recreation, $18,497,001 for refurbishment of cultural facilities,

and $38,629,205 for new construction on cultural facilities. Under

the terms of the bond authorization, City Council can move funds

from one project to another, but the projects must be within the

category approved by voters. For instance, bonds approved for

Parks and Recreation can be moved from one project to another

within Parks and Recreation but could not be moved to projects for cultural facilities, Human Services, etc.

The Parks and Recreation money is for the Central Denver Recreation Center. Land acquisition and conceptua

design work have been completed, however additional private funds must be raised before the bond money

can be spent on construction.

The Cultural Facilities bonds are discussed below.

Cultural Facilities BondsThe economic downturn, which began at the same time that the City was preparing to issue bonds, negatively

impacted the public-private component of the cultural facilities project. Private funds were to be raised and

then matched by bond funds. In the case of Boettcher Concert Hall, the $25 million in private funds were not

raised, so the demolition and reconstruction of this cultural facility did not move forward, and the bonds

were not issued. Now, however, the City has decided to reauthorize this remaining bonding capacity. The

City is required to reauthorize this remaining bonding capacity within the original purpose approved by

voters. Question G related to deferred maintenance for City-owned cultural facilities, and the remaining

amount is $18,497,011. Question H related to financing the cost of new construction of City-owned culturafacilities, and the remaining amount is $38,629,205. The proposed allocation of proceeds of this bonding

reauthorization will be $53,526,000 toward projects and $3,600,000 toward Bond Program management

During this past summer, a Cultural Facilities Steering Committee, appointed

by the Mayor and comprising individuals from the public and private sectors

and nonprofits, was convened to request proposals from City cultural facilities

for projects that might be done with the proceeds from the bonds, to review

and evaluate the submitted proposals, and then forward recommendations

to the Mayor for final selection. The eligible applicants were required to:

Demonstrate that the project proposed is for a cultural facility within

the context of the voter-approved 2007 ballot issue;

Demonstrate that it is a City-owned facility;

Demonstrate that it may complete its proposed project within the time

and financial constraints of the Better Denver Bond Program; and

Respond sufficiently to each question contained in the subject Request

for Proposals.1

1 Source: Office of the Mayor, 2007 Better Denver Bond RFP Process, Presentation to Denver City Council- Government and Finance Committee, 8/22/2012


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The Mayor has now selected the projects that will go forward. City Council must approve ordinance changes

to allow the bonds to be issued and the proceeds used for the specific projects selected. The projects

selected are listed in the table below.CITYOWNED CULTURAL FACILITY QUESTION G QUESTION H TOTAL

Boettcher Concert Hall - Improvements $6,700,000 $10,075,000 $16,775,000

Denver Performing Arts Complex - Champa Street Bridge $2,500,000 $2,500,000

Denver Art Museum - Ponti Building $3,000,000 $3,000,000

Denver Botanic Gardens - Caf & Restrooms and Science Pyramid $6,619,000 $6,619,000

Denver Center for the Performing Arts - Deferred Maintenance $9,932,000 $9,932,000

Denver Museum of Nature and Science and the Denver Zoo - Parking $4,400,000 $4,400,000

Levitt Pavilion Amphitheatre - $2,000,000 $2,000,000

McNichols Building - Improvements $700,000 $4,800,000 $5,500,000

Red Rocks Amphitheater - Water Supply and Concession $2,800,000 $2,800,000

Total $17,332,000 $36,194,000 $53,526,000

Better Denver Bond Program

10

30

50

70

90

110

130

150

2008 2009 2010 2011 2012 2013 2014

44

82

120

121

62

3

71

29

33

MillionsEstimated vs. Actual Expenditures By Year

Post P rogram

Current Estimate

Actuals

Better Denver Bond Program

78%

14%

5% 3%Expenditures To-Date

By Type

Construction, Eqt, Materials

Planning, Design , Pro Svcs

Land

Program Management

Expenditures To-Date

Description Amount %

Construction, Eqt, Materials 332,512,137$ 78%

Planning, Design , Pro Svcs 58,260,584$ 14%Land 22,225,511$ 5%

Program Management 14,964,972$ 3%

Public Art 1,619,172$ 0%

429,582,375$ 100%

Components of Program Management Costs

Description Amount %

Program Management 11,651,584$ 78%

Agency Staff & Office Exp 2,072,719$ 14%

Legal Services 693,954$ 5%

Tech Services 477,015$ 3%

Signage 69,700$ 0%14,964,972$ 100%

Source: Better Denver Bond Program Financial Update November 2012

78 percent of

Better DenverBond expenditures

have been forconstruction,

equipment andmaterials.


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Over the life of the program, the Better Denver Bond Program has continued to meet its financial objectives

Total savings from projects completed by the end of 2010, when the economy was struggling, of $20

million have been re-invested in other projects consistent with the original ballot measures where

the savings were generated.

As of Q4 2012 (thru Dec.) $451 million (89%) of Bond Program funds have been contracted or

committed and financing is complete for authorized projects.

Financing is complete for authorized projects.

Denvers financing techniques, and AAA credit ratings from all three credit rating agencies (Standard

and Poors, Fitch, and Moodys ), have resulted in lower interest rates, which have resulted in

savings of over $19 million on debt service. The City would have had to pay approximately $10

million more in interest if it moved from an AAA to a Baa investment grade issuer.

The Citys financial team has continued to explore alternative means to finance the Bond Program

and drive down long-term costs of bond issuance and debt service. The combined Commercial Paper

and General Obligation (G.O.) bond program has provided flexible, cost effective financing. Debt

service interest costs were substantially reduced by the use of the Commercial Paper Program.

The Better Denver Bond Program utilized a financial modeling system that allowed the City to issue

debt just in time. Schedule and cash flow were analyzed for each project; commercial paper was

issued to cover costs on a quarterly basis, with G.O. bonds being issued annually in arrears to pay

off the commercial paper. This technique saved taxpayers millions of dollars in interest over thetraditional method of issuing G.O. bonds in advance.

In response to the tax exempt financial markets facing significant challenges during the Great

Recession, the U.S. government instituted the Build America Bonds (BAB) program as part of the

American Recovery and Reinvestment Act (ARRA). State and local issuers of BABs receive a 35%

direct federal subsidy resulting in lower borrowing costs and a broader group of investors than

normally invest in tax-exempt bonds. In 2010, Denver issued $312 million of BABs for the Bette

Denver Bond Program.

Better Denver Bond Program Sustainability AchievementsBetter Denver Bond Program projects have incorporated green design and construction approaches that

use energy efficiency, recycling, and wise use of land, water, and other materials. In coordination with

Denvers Sustainability Committee, each project was assessed for sustainability opportunities. Projects were

reviewed for energy efficient improvements related to heating and cooling, lighting, waste management,

recycling, water quality, and conservation. These design and construction approaches have saved capital

operations, and maintenance costs.


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Where practical and possible, the Better Denver Bond Program has pursued opportunities to build and

design its major new vertical construction projects to achieve LEED certification. Project managers have

continued to identify opportunities to incorporate sustainability into their projects. New construction and

major renovation projects have aimed for a minimum of LEED Silver certification from the U.S. Green Building

Councils Leadership in Energy and Environmental Design (LEED) program.

The Denver Animal Shelter has received Platinum certification and the Museum of Nature and Science

Education and Collections facility has Platinum certification pending.

The Green Valley Branch Library, the Sam Gary Branch Library, the Central Park Recreation Center, the Police

Traffic Operation/Firing Range, the Museum of Nature and Science facility Phipps Exhibit Hall and other

facility renovation have each received Gold certification. The Eastside Human Services Building and the

Crime Laboratory have Gold certification pending.

Public ArtPublic Art Bond Projects Overview

Denvers Public Art Program was first established in 1988, directing1% of any projects over $1 million to be set aside for the inclusion

of artwork. The art program applies to new construction or

improvements to a building or structure, road, streetscape

pedestrian mall or plaza or park or any other project that includes

finished space for human occupancy that will be available for

public view. The Better Denver Bond Program has incorporated

public art into qualifying construction projects that are part of

the Bond Program. Each project has its own Selection Panel. The

Selection Panel ranges anywhere from 7 to 15 participants, including

community members, an artist, an arts professional, the projectmanagers, design team and a City Council representative.

Art is incorporated in a variety of ways in the projects: as a stand-

alone piece, an architectural feature of a building or facility, or

incorporated into landscaping. Approximately 30 bond projects qualified for inclusion in the Public Art

Program. In many cases art was envisioned to be integrated into the project structures or area grounds.

The number of bond-related Public Art Projects completed to date and the cost of these projects

17 bond projects have been completed, resulting in 28 original artworks. The total cost of these

projects: $1,223,782.

The number of Public Art Projects in the contracting phase: Currently 4 artists are in contracting, 8

artists are involved in active projects.

The number of local artists who have received commissions to complete these Public Art Projects

20 local artists out of 34 total have been commissioned for Better Denver Bond Program-related

Public Art Projects.


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Documents

Still Building a Better Denver with Borrowed Money