The Commerce City Council met in a special session last Thursday to hear a presentation on options for financing large projects as well as to hear a second reading on two new city measures.
Mayor Wyman Williams and councilperson Jean Klaus were not in attendance. Mayor Pro Tem Dr. Gene Lockhart led the proceedings.
Council members received a presentation from Jim Sabonis with Hilltop Securities. In the current city budget, the property tax rate of $0.82 is nothing new, as the rate has remained mostly unchanged since 2010. However, the city is allocating $0.21 of that rate for debt services, the highest amount since 2016. This extra money being used to pay off bonds and other debt items was the impetus behind the presentation, as Sabonis explained the city could use those extra funds to finance multiple projects, including a new animal shelter.
It was announced at the meeting that the city expects to receive a grant worth $55,000 from the U.S. Department of Agriculture that can go toward a new shelter, with the city being made to foot the remaining $115,000 of a potential new site. But there are two options to consider.
The first option is to take out a Tax Anticipation Note, which is described as a short-term debt security for an immediate project that will be repaid with future tax collections. Commerce City Manager Darrek Ferrell explained that with a tax note, financing fees can be expected to incur extra costs of up to $20,000, which cuts into the amount borrowed.
A second option would be to apply taxes to a revenue bond. This would not incur any additional financing costs and the money would be paid by revenues from the city’s utility fund.
Also discussed was taking out a Certificate of Obligation to repair city streets. A street survey was recently completed to gauge which streets needed work the most.
Also known as a CO, a certificate of obligation is a financing method that does not require voter approval. Traditionally used in emergency situations, such as after a natural disaster for repairs, COs can be supported by property taxes or by revenues.
The presentation modeled a CO worth more than $2.4 million that would be repaid over a period of 20 years. The money would be used to fund street repairs following the release of findings from the recent survey.
No action was taken as this was simply a discussion item, but the council could decide to move forward with either of these options at a later meeting.
During the presentation, it was also stated that the city currently has $14,477,881 of outstanding debt tied up to eight debt items, which include six COs dating back to 2006.
Commerce also carries an “A+” bond rating. Much like an individual’s credit score, bond ratings signify how likely cities are to repay their “credit” or debts. In the Fitch rating system, The “A+” rating is tied for the highest the city of Commerce has ever been and is the fifth-highest on the Fitch scale. This allows the city to receive more favorable interest rates. Sabonis said during the presentation that Commerce “is a city we use as an example for the use of debt allocations,” stating that the city has been able to secure financing on multiple items with a zero percent interest rate,
Also at the meeting, the city heard the second readings of two items that were first past at a council meeting last Tuesday.
An ordinance was passed amending the makeup of the city’s Animal Shelter Advisory Committee. Currently, one law enforcement officer is required to serve on the committee, but the new ordinance removes the officer from the board and replaces them with a community member. The ordinance also broadens the scope of who can serve on the committee, allowing for county employees to serve as well as city of Commerce employees.
Also passed was a slight alteration to the city’s Drought Contingency Plan, adding language about usage of water during drought conditions.
The Commerce City Council will next meet in regular session at 6 p.m. on Dec. 17.