By Amber McIver-Traywick

The Surveyor

December 4, 2018

Voters said no to a rec center, but town board could still vote yes to make it happen

In November Berthoud voters said no to ballot issue 3J which asked residents to approve the sale of $30 million in bonds that would have a repayment cost of $59 million and was slated to support recreation amenities for the town, including the construction of a recreation center. Now the board of trustees, that last September voted 4-3 to include 3J on the ballot, will consider pursuing a different method of funding for the town to go ahead with building the recreation center without voter approval.

In a packet of information about a special town board meeting that will take place tonight, Tuesday, Dec. 4, at 6:30 p.m. at Berthoud Town Hall, the board will hear from Kyle Thomas, a representative from George K. Baum, a Missouri-based investment banking firm, about the town’s option to pursue what’s called a Certificate of Participation (COP). According to the agenda provided by the town, COPs “do not create a long-term debt obligation for the town, but that could still generate the revenue necessary to construct the proposed improvements.” This type of municipal funding does not require voter approval as it is not considered a long-term debt.

According to the Colorado Department of the Treasury, Certificates of Participation are a lease-financing mechanism where the government enters into an agreement to make regular lease payments for the use of an asset. In this case the “asset” is a recreation center, which would be leased over a 30-year period, after which the title for the asset transfers to the town government. Since the government can decide, at any time, to discontinue the lease or stop paying for the recreation center, COPs do not constitute a multi-year fiscal obligation and so can be issued without voter approval.

The information packet for Tuesday night’s meeting lays out benefits and disadvantages of such an agreement with the “pros” being cited as quick financing, locking in an interest rate and construction contracts, and the ability to begin work almost immediately on a recreation center. Disadvantages of the COPs are a higher interest rate on the COP compared with a general obligation debt; this means the total for the project will cost the tax payers more than what the bond presented to voters in ballot issue 3J would have. There is also the risk the town may lose its accumulated equity in the leased property  if  the board at some point in the future decides not to appropriate moneys to make lease  payments for a subsequent fiscal period and returns the leased property to the investors, which would in-turn decrease the town’s credit rating. What also might be considered a “con” for residents is there is no cap on the amount the board could potentially approve.

Trustee Maureen Dower, in a phone interview, when asked about her initial thoughts on the COPs said, “It would have been a nice option to be able to consider way back when we were first looking at putting stuff on the ballot,” she continued, “With this (COPs) I don’t know enough about it at this point to be able to say whether I would support it or not. The will of the voters is something that is not easily discerned by the way that they voted on the different options and so again I think that that is something that is not for me to decide by myself. This is something that needs to be a discussion with the other members of the board with the new information.”

Trustee Pete Tomassi responded via email by saying, “I’m against using COPs for luxury items (recreation amenities) for a few reasons.” He then went on to list voters rejecting 3J and COPs not requiring voter approval, among other concerns.

Organization in support of 3J funded by board members and George K. Baum & Company

Kyle Thomas, the representative of George K. Baum & Company, will be presenting information about the COPs tonight. The company currently holds the bonds for the town’s wastewater and water plant upgrades, and sponsored the survey which the town conducted during the summer of 2018 to get Berthoud resident’s feedback on which recreation master plan had the most support.

Ballot issue 3J was approved to appear on the November ballot by the town board in September by a 4-3 vote; Trustees Paul Alaback, Maureen Dower, Jeff Hindman and Brian Laak cast votes in favor of the measure. Trustees Pete Tomassi and Tim Hardy, and Mayor Will Karspeck voted against.

An organization called Kids & Community, campaigned in favor of the 3I ballot measure, which asked voters to support a one percent sales tax increase to go toward recreation that was passed by voters, and the failed 3J ballot measure. Although the board of trustees voted to include 3I and 3J on the ballot at a meeting on the evening of Sept. 11, paperwork for Kids & Community was filed with the town on Sept. 10, the day before the board vote took place. The documents filed with the town clerk for campaign finance purposes required by the State of Colorado show donors included Mayor pro-tem Hindman and Trustees Laak, Dower and Alaback. A donation of $468.75 was also listed as coming from George K. Baum & Company.

Although there was no final agreement made between the town and George K. Baum & Company, they were potentially slated to utilize the company if voters had agreed to 3J. The practice is legal and this isn’t a new tactic for the company. Several instances have been reported across multiple states, including elsewhere in Colorado and California, where the company gave assistance in obtaining voter approval for proposed bonds they would then underwrite.

Trustee Pete Tomassi raised concerns to town representatives, including the board, and contacted the Surveyor about Kids & Community pertaining to what he says were false information presented on mailers sent out to voters and the website for the organization that has since been taken down. In a recent interview Tomassi said, “I’m of the opinion the voters of Berthoud were misled by the claims of the issue committee (Kids & Community),” and that, “The fact that trustees, who voted to put 3I and 3J on the ballot, were the chief financial underwriters of an organization that grossly misled the voters is, to say the least, problematic.”

Town administrator Chris Kirk, in an email received by Surveyor staff on Tuesday, said the survey work completed by George K. Baum & Company about the recreation plan was not put out for public bids but that the opportunity to finance the COP, should the board decide to pursue it, he assumed, would be selected through a, “competitive process.”

Residents unable to attend meetings can stream them live by clicking on the “Berthoud Trustee Web Stream” link at berthoud.org/government/board-of-trustees/trustee-meeting-videos.