Q. The Routt County Board of Commissioners voted Tuesday to pay for a new judicial facility by means of a certificate of participation instead of asking voters for a tax increase. Can you explain what a certificate of participation is and how using it rather than a tax increase impacts the overall financing of the project?
A. Certificates of Participation are financing tools used to finance capital projects in the public sector. They are used in lieu of floating bonded indebtedness by using either general indebtedness, guaranteed by the general taxation ability of an entity, or revenue indebtedness guaranteed by specific revenues of an entity.
COPs are similar to the concept of leasing an automobile. The leasing company owns the object and it is leased for the purpose designed. In the case of COPs for the justice center, the county will not be obligated to repay the COPs, but will lose the right to use the facility if the payments are not made. Because the county is not obligated to repay the COPs, a TABOR election is not required.
Leases usually have a minimal buyout at the expiration of the lease period. COPs usually cost a little more over the life of the indebtedness. These increased costs are both in an increased interest rate as well as increased bond insurance costs and other underwriting costs.
These additional costs are generally the result of the fact that the borrower -- the county in this case -- is not legally obligated to repay the COPs.
In the case of the proposed justice center, the increase in financing costs should be less than an average of $8,650 annually over the proposed 20-year period, assuming a $5 million indebtedness.
Q. Under this financing method, roughly how much money will be taken from the county budget annually, and where do you predict the budget will be cut to generate those funds?
A. Under the certificate of participation method of financing, we feel that debt service on the $5 million will be about $387,600 annually. We also believe that the additional operational costs of the facility will run about $131,140.
The two costs together add up to increased costs to the county for the justice center of $518,740 annually. The commissioners concurred that those increased costs could be funded through current operational revenue sources, changes in expenditure patterns, or a combination of both.
Q. Do you foresee this having a noticeable impact on the county's ability to provide services to residents?
A: We have not identified specifically where those funds will come from. Rather, the commissioners felt we could find those funds without materially affecting existing services. The use of these funds, however does limit the county's ability to react to new issues or needs for services.
Q. What is the timeline for starting construction on the new facility?
A. Based on the court order to complete the justice center by Sept. 30, 2006, construction was originally scheduled to begin in May 2005. The commissioners' decision to use COPs rather than seek a mill levy increase may allow that start date to be moved up.
We would also have to keep in mind Routt County winters in any decision to move forward the start date.
Q. What about a name for the new justice center? Has that been discussed by the Board of Commissioners, and is that something you may seek public input on?
A. I was leaning toward naming the facility either the Ellison, Monger, Stahoviak Center for Justice or the Doucette Justice Center.
In all seriousness, the commissioners have had and will continue to have discussions with our steering committee regarding decisions on the facility. The Committee is leaning toward something simple, using Routt County and then either "Justice Center" or "Judicial Complex."
The commissioners will continue to use the steering committee as a community sounding board for different facets of the project.