DALLAS - Nearly a year after local citizens got a chance to invest in Denver's new Justice Center, institutional investors will be offered the remainder of the debt as the Mile High City goes to market with $174 million of general obligation bonds.
Tomorrow's negotiated deal represents the fourth and final tranche of debt for the $286 million complex that will include a courthouse, jail, parking garage, and post office.
The bonds, approved by voters in 2005, will carry ratings of AA-plus from Fitch Ratings and Standard & Poor's and Aa1 from Moody's Investors Service.
Piper Jaffray & Co. will be senior manager on the deal with JPMorgan, Morgan Stanley, and Denver-based HarvestonsSecurities Inc. as co-managers. First Albany Capital Inc. serves as financial adviser on the deal.
First Albany replaced Piper Jaffray as the city's financial adviser last year, allowing Piper to bid for the underwriting services.
"As former financial adviser for the city for many years, they were very familiar with the project," said Denver debt administrator Margaret Danuser.
Insurance was never considered for the bonds, and the troubled outlook for bond insurers was not a factor, according to Danuser.
"It's a double-A-plus credit, and there's already been a lot of preliminary interest," she said.
Indeed, Denver has already tested the waters with an offering of $8.8 million of $500 zero-coupon mini-bonds to local residents. Mayor John Hickenlooper launched the sale last April with a "James Bond"-oriented publicity stunt.
The issue was the city's fourth and largest mini-bond sale, coming 17 years after the first $4.1 million in 1990. Mini-bonds were also sold in 1992 and 1999.
"The 2007 Denver Justice Center mini-bonds program - available only to Colorado residents - was the most successful in the city's history with a response of more than twice what we expected," Hickenlooper remarked at the time.
For buyers in the 33% combined federal and Colorado tax bracket, the mini-bonds provided a taxable-equivalent yield of 7.09%. Like the mini-bonds, tomorrows muni bonds will be double tax-exempt in Colorado.
To make the new Justice Center palatable to voters in 2005, city officials sought to assure the public that the building would not be an eyesore on one of downtown's major gateways, Colfax Avenue.
The special committee originally picked one architect for a courthouse and another for the jail in 2006 as officials debated whether to choose a modern or traditional design. New York-based architect Steven Holl was chosen to design the courthouse, and Hartman-Cox Architects of Washington, D.C., was hired to design the jail with Denver's OZ Architecture. But the city dropped Holl, claiming his designs were over budget.
Danuser said the justice center will fit cosmetically with the neighboring U.S. Mint and the City and County Building a block to the east.
"The renderings are gorgeous," Danuser said. "And it will relieve overcrowding and inefficiencies."
Proximity to the City and County Building that contains Denver's state and city courtrooms was critical because inmates must be shuttled from the jail for court appearances, officials said. The jail will also be on the corner opposite the Denver Police Department, which also provides one of two city-county jails.
Denver's other jail on Smith Road near the former Stapleton International Airport site, is several miles from the courthouse. The city at one time considered moving the courts closer to Smith road, but attorneys whose offices are downtown strongly objected, Danuser said.
The Rocky Mountain News Building, built in 1985 on the site of the new jail, is now gone, but demolition was delayed by the relocation of the remains of two former editors interred in the walls of the building.
"We had a devil of a time finding the next of kin to find out what they wanted to do with the ashes," said Bob Gibson, the city's financial management director.
The News, which has been in a joint operating agreement with the Denver Post since 2001, shares a new building with the Post four blocks east of its old home on West Colfax Avenue. The new building is the 12th home for the News, which was Denver's first business and first newspaper, opening on the banks of Cherry Creek in the gold rush year of 1859.
Tomorrow's sale will be the last of $379 million approved by voters in 2005. Last November, Denver voters approved $550 million of general obligation bonds for a variety of projects, but none of that debt has been issued.
With a population of 575,294 in a metropolitan area of 2.7 million people, Denver is landlocked by its suburbs. But the city continues to grow, in large part because of continuing development of the former Stapleton International Airport into mixed residential and commercial uses. The former Lowry Air Force Base east of downtown has also seen redevelopment in the past decade.
Sales taxes, which provided more than half of the city's general fund revenues in 2006, grew a strong 7.7% in 2005 but dropped to a 1.9% increase in 2006. Unaudited figures show sales tax revenue grew 4.3% in 2007, according to Standard & Poor's.
"Even during the earlier period of sales tax declines, city property tax revenues (9.9% of revenues) held up strongly, as redevelopment continues at the former Stapleton Airport," Standard & Poor's analysts noted. "The city's true property valuation for the 2007 tax year increased 11% to $74.3 billion under a biennial revaluation, while per capita market valuation remains a high $129,234."
With the economy weakening again, Denver could see its revenues taking a hit, analysts say. However, Fitch commends the city for its fiscal practices.
"The impressive containment of a structural imbalance in the city's finances, during the last recession, points to sound financial stewardship," Fitch analysts wrote. "However, the four-year period of recovery for its main revenue source was notable for its length and poses vulnerability for future economic slowdowns." q
