B&B bond akin to getting advance on allowance | SummitDaily.com

B&B bond akin to getting advance on allowance

Summit Daily/Reid Williams Breckenridge town manager Tim Gagen and finance directors with the town spent copious amounts of time trying to determine how to best fund the town's half of the $9 million B&B Mines purchase. A general obligation bond will be paid back through future open space sales tax revenue generated by an existing half-cent sales tax.

BRECKENRIDGE – If there’s one message the Breckenridge Town Council wants voters to understand April 6, it’s that approving a $4.5 million bond to buy the B&B Mines land north of town will not result in a property tax increase.

The ballot question only seems to read that way.

“That’s the way TABOR (the Taxpayers Bill of Rights) makes us write it,” said Breckenridge town manager Tim Gagen. “If you read the ballot question, it says, ‘Are you allowed to raise this debt. Can you raise ‘x’ amount of funds through a property tax, if …”

The list that follows says the town can only implement a property tax if open space fund revenue fails to come in as expected, which town leaders fully expect to happen.

“It’s like getting an advance on our allowance,” Councilmember Greg Abernathy said.

Other reasons the town would resort to a property tax is if town officials can’t come up with an alternate revenue source or can’t work out a deal with the county.

The county is a 50-50 partner in the deal. Officials there have been setting aside money for more than three years in anticipation of purchasing the B&B property. They will come to the table with their full share.

“We believe that will never become a reality,” Gagen said of the property tax. “But you have to write it this way for TABOR.”

The land is comprised of five parcels in the Swan River and French Gulch drainages. Obtaining it from B&B Mines will ensure it will be preserved for its open space, visual, natural, cultural, historical and recreational uses.

Town officials have done everything to err on the side of conservatism. First, they negotiated a price with B&B officials. The land was appraised at $11 million, and cleanup was estimated to cost $2 million. B&B knocked that $2 million off the price tag, essentially agreeing to pay for the cleanup.

Town financial officials also are assuming debt will be paid back at 6 percent, even though current rates are hovering in the 3.5-percent to 3.9-percent range.

They are borrowing more than they need, and not taking into account grant money that has already been dedicated toward the purchase. And they’ve opted to go with general obligation bonds, which have lower interest rates and are more secure than other funding sources. They are also looking at a state loan program that features an interest rate of 1.5 percent.

All those conservative measures, Gagen said, should result in the town paying off the 20-year bonds in eight years.

Other options to raise money could include selling Transfer of Development Rights, which the town “banks” when a backcountry landowner transfers some of his or her rights into the core of town and sunsets, or eliminates, the rest.

Another option – one that would only be used as a last choice – would be to sell up to five parcels of developable land in the area. The town and county are purchasing land for an average price of $5,000 an acre. Each developable parcel could easily bring in $200,000 to $500,000.

The half-cent sales tax that is dedicated to purchasing and maintaining open space parcels brings in more than $1 million a year. Even with debt payments for the B&B parcel, that should be more than enough to allow the Breckenridge Open Space Advisory Commission (BOSAC) to continue obtaining land in the ensuing years.

If voters opt against the ballot question, there still could be ways – albeit, more difficult and possibly more expensive – for the town to come up with its share of the $9 million purchase price.

The town could issue a Certificate of Participation – essentially a mortgage – on some land or buildings it already owns. The town council mortgaged town hall to purchase Cucumber Gulch. The disadvantage of this is that such funding sources have higher interest rates and they tie up the town’s assets.

Another option could be going to the county to work out a deal. Perhaps, Gagen said, the county could front the town’s half of the payment and the town would pay the county back. Or the town could agree to take on more management and operational expenses of the lands.

“Neither of us want to walk away from the deal,” Gagen said. “Because the plan and the open space tax had such tremendous support, we think the community will agree this (the general obligation bond) is the best way to accomplish this and preserve open space and still fund other stuff.”

So far, various outdoor recreation groups have thrown their support behind the ballot question.

“The feeling is good,” Gagen said. “But we still got to get people out to vote.”

Jane Stebbins can be reached at (970) 668-3998, ext. 228, or jstebbins@summitdaily.com.

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