| Council Extends Centerra Public Debt Until 2040 Centerra asking council to extend public debt to 2040 to assist in refinancing see July 5 story (before the meeting) |
Loveland - July 7, 2010
Loveland's City Council voted 7-2 to allow McWhinney's Centerra Metro Districts to extend the maturity of new or refinanced
public bonds beyond the 25 year life of the MFA (Master Financing Agreement) and Urban Renewal Authority of 2029 until
2040. The resolution passed by council allows Centerra the opportunity to raise its debt ceiling by stretching out the maturity
date of future public bond issues beyond the current deadline which coincides with the 2029 end of the MFA signed in 2004.
The council vote represented a significant political shift by Mayor Cecil Gutierrez and Councilwoman Joan Shaffer whose
campaigns for public office were anchored in criticism against their opponents for approving massive public financing for Centerra
using phoney urban renewal declarations. Both voted to allow Centerra to stretch public financing out an additional 11 years
using those same phoney blight mechanisms and other "quasi-government" fees to repay the debt.
Background
McWhinney controls the Centerra Metro Districts and is likely in need of cash following the recent foreclosure of The Promenade
Shops at Centerra which left Key Bank and other private investors in Centerra stranded with a note for $113 million on The
Promenade Shops. The Promenade Shops at Centerra didn't attract any offers at the long delayed foreclosure auction even
when offered at a $35 million discount below what McWhinney and their partners borrowed to build the shopping center.
In addition, The Promenade Shops and surrounding amenities were constructed using significant public subsidies that like the now
defaulted private loan, have not yet been repaid. Due to the council action last night, Centerra may now refinance those public
debts to stretch-out repayment of monies used to subsidize the shopping center until 2040 -- long after the projected useful life of
the "public improvements" and the shopping center. Chupungu statue park, monument Promenade signs, landscaping and many
other "public improvements" intended to bump-up the value of The Promenade Shops were financed using proceeds from the
public bonds Centerra must now repay using diverted sales taxes and rebated property taxes that support the metro districts.
Contrary to what was reported to Loveland's council, McWhinney officials recently provided Larimer County information
indicating revenue for Centerra is declining. This is disconcerting because the District's bond debt repayment structure requires
the Centerra Metro Districts continue to grow in order to meet the escalating debt payments.
Alan Pogue, attorney for McWhinney, made the specious argument that the vote being requested of council simply allowed
Centerra to explore financing options that would need to be brought back to the city for final approval. While extending the term
of any new bonds requires council approval, the new bond debt agreement does not according to the MFA and is only reviewed
by the city attorney and city manager without any requirement to send the items back to council for approval. Loveland's council
provided Centerra the pre-approval for the only term they control (maturity date of the public bonds) before receiving any
information on the proposed interest rates, repayment schedule, collateral being offered to the bond trustees, bank guarantee or
derivative agreements used to enable swap agreements on adjustable interest rates bonds. While a number of municipalities have
outlawed such risky financial dealings, Loveland has taken a different approach.
The apparent lack of inquiry or fiduciary responsibility by council stems from the mistaken belief that Centerra's finances and
public bond debt cannot impact the financial credibility of the City of Loveland. According to one source within the city,
McWhinney already briefed each councilor in private or over the phone before the item was put on the council agenda thus they
didn't feel the need to discuss very many details in the public meeting. McWhinney downplayed the importance of the extension.
Councilwoman Carol Johnson did ask whether a default by Centerra would impact Loveland's credit rating but received a
tortured answer that it will but only "indirectly." Councilman Klassen than asked Alan Pogue, McWhinney's attorney, whether
this request was motivated by Proposition 101 and Amendments 60 and 61 restricting debt by public agencies that will be on
November's ballot. When Pogue said no, they would have requested it anyway, Klassen acted surprised and reminded Pogue
that reason was provided to Klassen in the information he was provided. Pogue promptly changed his answer claiming the timing
was accelerated due to the impending ballot measures. Despite learning that the information they received from Centerra wasn't
correct, both councilors voted in favor of extending the debt of Centerra to 2040 anyway.
The resolution passed on a 7-2 vote with only council members Kent Solt and Cathleen McEwen voting no.
Loveland's City Council voted 7-2 to allow McWhinney's Centerra Metro Districts to extend the maturity of new or refinanced
public bonds beyond the 25 year life of the MFA (Master Financing Agreement) and Urban Renewal Authority of 2029 until
2040. The resolution passed by council allows Centerra the opportunity to raise its debt ceiling by stretching out the maturity
date of future public bond issues beyond the current deadline which coincides with the 2029 end of the MFA signed in 2004.
The council vote represented a significant political shift by Mayor Cecil Gutierrez and Councilwoman Joan Shaffer whose
campaigns for public office were anchored in criticism against their opponents for approving massive public financing for Centerra
using phoney urban renewal declarations. Both voted to allow Centerra to stretch public financing out an additional 11 years
using those same phoney blight mechanisms and other "quasi-government" fees to repay the debt.
Background
McWhinney controls the Centerra Metro Districts and is likely in need of cash following the recent foreclosure of The Promenade
Shops at Centerra which left Key Bank and other private investors in Centerra stranded with a note for $113 million on The
Promenade Shops. The Promenade Shops at Centerra didn't attract any offers at the long delayed foreclosure auction even
when offered at a $35 million discount below what McWhinney and their partners borrowed to build the shopping center.
In addition, The Promenade Shops and surrounding amenities were constructed using significant public subsidies that like the now
defaulted private loan, have not yet been repaid. Due to the council action last night, Centerra may now refinance those public
debts to stretch-out repayment of monies used to subsidize the shopping center until 2040 -- long after the projected useful life of
the "public improvements" and the shopping center. Chupungu statue park, monument Promenade signs, landscaping and many
other "public improvements" intended to bump-up the value of The Promenade Shops were financed using proceeds from the
public bonds Centerra must now repay using diverted sales taxes and rebated property taxes that support the metro districts.
Contrary to what was reported to Loveland's council, McWhinney officials recently provided Larimer County information
indicating revenue for Centerra is declining. This is disconcerting because the District's bond debt repayment structure requires
the Centerra Metro Districts continue to grow in order to meet the escalating debt payments.
Alan Pogue, attorney for McWhinney, made the specious argument that the vote being requested of council simply allowed
Centerra to explore financing options that would need to be brought back to the city for final approval. While extending the term
of any new bonds requires council approval, the new bond debt agreement does not according to the MFA and is only reviewed
by the city attorney and city manager without any requirement to send the items back to council for approval. Loveland's council
provided Centerra the pre-approval for the only term they control (maturity date of the public bonds) before receiving any
information on the proposed interest rates, repayment schedule, collateral being offered to the bond trustees, bank guarantee or
derivative agreements used to enable swap agreements on adjustable interest rates bonds. While a number of municipalities have
outlawed such risky financial dealings, Loveland has taken a different approach.
The apparent lack of inquiry or fiduciary responsibility by council stems from the mistaken belief that Centerra's finances and
public bond debt cannot impact the financial credibility of the City of Loveland. According to one source within the city,
McWhinney already briefed each councilor in private or over the phone before the item was put on the council agenda thus they
didn't feel the need to discuss very many details in the public meeting. McWhinney downplayed the importance of the extension.
Councilwoman Carol Johnson did ask whether a default by Centerra would impact Loveland's credit rating but received a
tortured answer that it will but only "indirectly." Councilman Klassen than asked Alan Pogue, McWhinney's attorney, whether
this request was motivated by Proposition 101 and Amendments 60 and 61 restricting debt by public agencies that will be on
November's ballot. When Pogue said no, they would have requested it anyway, Klassen acted surprised and reminded Pogue
that reason was provided to Klassen in the information he was provided. Pogue promptly changed his answer claiming the timing
was accelerated due to the impending ballot measures. Despite learning that the information they received from Centerra wasn't
correct, both councilors voted in favor of extending the debt of Centerra to 2040 anyway.
The resolution passed on a 7-2 vote with only council members Kent Solt and Cathleen McEwen voting no.
| Ballot Measures Influence on Centerra Debt One argument Centerra has made to encourage a favorable vote from Loveland's council to extend the period of indebtedness for future Centerra bonds is that Colorado Proposition 101 and proposed Colorado Constitutional Amendments 60 & 61 will detrimentally impact Centerra's ability to incur new debt and may threaten existing revenue. Here is a summary of the three ballot measures prepared by Larimer County opposing them while forecasting significant problems for local and state governments if passed by Colorado voters. Also, here are the websites of groups supporting each of the same three ballot measures. Amendment 60 Amendment 61 Proposition 101 |
| Colorado State statute allows for an extension of urban renewal plans when unpaid Metro District debt could be in default by the expiration of the Urban Renewal plan after 25 years. Allowing Centerra to stretch bond debt beyond the life of their MFA (master financing agreement) and Urban Renewal Plan may become a de-facto extension of Centerra's tax diversion subsidies until the year 2040. (36 years instead of the original 25 years). 31-25-107. Approval of urban renewal plans by local governing body.. (f) Notwithstanding the twenty-five-year period of limitation set forth in paragraph (a) of this subsection (9), any urban renewal plan, as originally approved or as later modified pursuant to this part 1, may contain a provision that the municipal sales taxes collected in an urban renewal area each year or the municipal portion of taxes levied upon taxable property within such area, or both such taxes, may be allocated as described in this subsection (9) for a period in excess of twenty-five years after the effective date of the adoption of such provision if the existing bonds are in default or about to go into default; |
| Rich Shannon, former VP of McWhinney, Centerra Manager, watches Loveland council meeting Tuesday July 6, 2010 |