Colorado pitches in with debt to upgrade stock show complex in Denver

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Colorado will help finance redevelopment of Denver’s National Western Stock Show complex with $132.5 million of certificates of participation expected to price Wednesday.

The certificates are part of the state’s contribution to a $1 billion project that includes investment from the City and County of Denver, Denver Water Utilities and Colorado State University. Proceeds of this deal are for CSU, the state’s agricultural college, which is building research facilities at the stock show complex and at its main campus in Fort Collins.

The state’s issue comes two years after Denver priced $425 million of voter-approved bonds that were shared between the National Western Center and the Colorado Convention Center downtown.

The 250-acre National Western Center in north Denver has been home to the National Western Stock Show and Rodeo for 111 years. From its first show in 1907, the event has grown steadily in attendance, with the 16-day event topping 700,000 guests in January.

“The National Western Center is the heart and soul of Colorado,” said Nick Taylor, director at North Slope Capital, financial advisor on the deal. “It’s been here for more than 100 years, so revitalizing it is very important to the state. The center reflects the state’s heritage and serves as a strong regional and national draw.”

Taylor expects healthy investor interest in the certificates, which Colorado issues in lieu of general obligation bonds. Constitutional restrictions do not allow the state to pledge its tax-backed general obligation.

“It’s the only kind of debt Colorado issues,” Taylor said. “I think investors are comfortable with that and are attracted to the state’s rating. It’s a very secure structure and will appeal to a wide range of investors.”

Rated Aa2 by Moody’s Investors Service and AA-minus by S&P Global Ratings, the COPs mature serially through 2033. The ratings on the certificates are a notch lower than Colorado’s issuer credit rating because debt service relies on annual appropriations from the General Assembly.

The COPs are coming in two series. The $50.9 million Series A is tax-exempt, while the $81.5 million Series B is taxable.

The Series 2018A&B COPs are secured by lease payments to be made annually from the state's general fund for use of the leased property consisting of Colorado State University's health education research center, equine veterinary teaching hospital, and diagnostic medical center. The state's obligation to make rental payments is subject to appropriation by the legislature.

Wells Fargo Securities is sole underwriter on the deal, led by vice president Ryan Poulsen. Colorado Deputy Treasurer Ryan Parsell is supervising the transaction for the state.

The 2018 deal will allow CSU to buy three parcels of land for the redevelopment at the National Western Center complex for a 152,000 square-foot Water Resources Center, designed for year-round use. CSU will split ownership and operations at the WRC with Denver Water, the public water utility for the Denver area. CSU is expected to contribute about $60 million to the WRC’s projected cost of $85 to $95 million. Denver Water will invest $25 to $30 million, according to the preliminary official statement.

With construction expected to begin in 2019, the Water Resources Center will be one of the first new buildings at the National Western Center and is designed to host year-round programs and water conferences for students, researchers and professionals dealing with water-related issues. The center will overlook the South Platte River, giving visitors more appealing access to the waterway as it makes its way through Denver’s industrial Globeville, Elyria and Swansea neighborhoods.

With future debt issues, CSU is expected to develop two other buildings at the center, including an equine sports medicine and community outreach building, and another educational facility. The university has committed $16.2 million toward design and construction of the buildings.

The total estimated cost for Phases 1 and 2 of the National Western project is $856 million, based on the master plan adopted in March 2015. The first two phases of the program include land acquisition, site remediation and initial infrastructure planning, new stockyards and an event pavilion, a new livestock center, a new equestrian center, river activation, improvements to parts of Brighton Boulevard, and improved integration with the surrounding neighborhood.

This week's deal was authorized by state House Bill 15-1344 in May 2015 to provide CSU with $250 million of COP funding, of which CSU anticipates applying $200 million toward its projects at the National Western Center campus.

The Western Stock Show Association has committed $125 million to the program, including the contribution of land. The City and County of Denver has committed up to $669 million for Phases 1 and 2.

A majority of that funding will come from Ballot Measure 2C, which extended Denver’s lodger’s tax. About $175.4 million is anticipated over 10 years from land and asset sales, capital and wastewater funds, federal grants and other sources.

Further funding will come from a $121.5 million grant awarded to Denver from the Colorado Economic Development Commission in December 2015, as part of a Regional Tourism Act submission. The RTA is a program that gives local governments a chance to fund unique, large-scale tourism projects that substantially boost out-of-state tourism.

In addition, Denver has budgeted between $2 million and 10 million from excise tax revenues annually for capital maintenance at the National Western Center as well as at the Colorado Convention Center.

Redevelopment of the National Western Center coincides with the state’s public-private reconfiguration of a 54-year-old Interstate 70 viaduct that bisects the stock show grounds. Plans call for the raised viaduct to be replaced with a below-grade freeway that will include managed lanes and a cover near the National Western Center that will allow development of a park atop the highway.

Construction of the 10-mile, $1.17 billion project is scheduled to begin this year and will take about four to five years to complete, creating an overlap with the National Western work.

To coordinate Denver’s bond-financed projects around the perimeter of the NWC and Central 70 developments, Mayor Michael Hancock created the North Denver Cornerstone Collaborative in 2013.

“We continue to work side-by-side with the community and the Colorado Department of Transportation so that Central 70 benefits our entire community – from those who rely on I-70 for their livelihoods to the neighbors for whom the highway has long posed a barrier,” Hancock said in a written statement.

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Primary bond market State of Colorado Colorado