UPDATE JULY 
The council approved Centerra’s request to allow the debt obligations of any new bonds to extend past the current termination date of the MFA and Urban Renewal Authority of 2029.
Uncertain whether the escalating debt payments on Centerra’s Metro District debt can be repaid, Centerra is asking Loveland’s City Council to extend the period for debt out to 2040 instead of the current limit when the MFA (Master Financing Agreement) expires in 2029.
It sounds reasonable until you look past the view graphs to see what Centerra is really asking for is the ability to raise even more debt.
Given the fact Loveland has never conducted an independent audit of the Metro District nor hired outside experts to determine the city’s liability if the Metro Districts defaults on its debts as McWhinney’s Promenade Shops recently did, it may not be a prudent financial move to approve the request coming onto the council’s agenda this evening. see story
In addition, the V-NET matter is back before council after the city has tried in vein to collect nearly $1 million lost in a business incentive gone bad.
Any comments?
With all the apparent corruption going on, why isn’t the state or federal authorities investigating? Or are they?
So basically, they see the decline in revenue and knew it would be impossible to repay the debts on schedule so the debts are esentially recast over a longer period with lower payments? The city and its people are loosing money again thanks to an incompetent City Council. Does this sum it up?
Not really, that is a little harsh.
It appears as if the false premise that a default on the Centerra bonds will not impact the city is being accepted by a majority of the council. This mistaken conclusion leads to another equally mistaken assumption that the details or efficacy of the metro district finances are not really the city’s business.
This is unfortunate and completely inaccurate. It is the result of allowing the regulated to define the role of the regulators.
State law gives the city council an oversight role for municipal bonds for very specific reasons. Failure to take that responsibility seriously can cause harm not only to the institutional investors in the metro district bonds but also the entire City of Loveland.
Contrary to what council was told by staff the other evening, the Centerra audit for 2009 has not yet been received by the City of Loveland, according to the City Clerk. Therefore, no one in the city has seen an audited financial statement for Centerra’s Metro Districts finances since the 2008 audit.
Centerra (in previous audits) “owes” money to McWhinney as a result of “invoices” McWhinney provides the metro districts for work performed on its behalf. A former McWhinney employee said the district funds are referred to as the “slush fund” and the failure of Grand Station and subsequent lay-offs at McWhinney occurred about the same time Centerra bond’s unrestricted funds had been fully spent (about $60 million) since McWhinney is the primary beneficiary of the metro district monies.
The escalating debt obligations combined with a declining revenue is a recipe for disaster. It is really McWhinney and not the city that is insulated from a Centerra financial crisis thus pushing debt obligations into more bonds with payments further into the future serves their purposes very well but not the longterm interests of Loveland taxpayers.
The 2008 audit showed Centerra metro district revenues in the $8-9 million range while the debt obligation on the bond repayment (interest plus principle) will soon rise to over $9 million. Refinancing those bonds to low initial payments (like they did in both the 2004 issue and 2008 bond refinance) will buy them more time on repaying that debt.
Centerra is acting like a home owner who keeps taking out mortgages with low initial teaser interest rates only to refinance before those payments step-up to start repaying the principal and a higher interest rate not to mention the new debt creating by the refinancing fees. Limited by the maturity date of 2029 the game was coming to an abrupt end.
Centerra’s solution to that problem has the air of a Ponze scheme. Refinancing the existing bonds with another issue of bonds for even more money might help them continue developing in hopes their revenue can someday generate enough metro district income to repay the bonds. If they or the economy don’t keep growing, they will be in default. They can’t grow without taking on more debt and there goes the Centerra Ponze scheme.
All the City Council did Tuesday was allow Centerra to squeeze the public debt balloon they have thus making room for more borrowing now while extending the period of payback (length of the balloon) beyond the original 25 year life of the MFA and Urban Renewal Plan.
Drew, the city hasn’t lost any money yet only the banks that financed The Promenade Shops at Centerra have lost money. That is because the banks had a choice to opt out and cut their losses now. The public debt Centerra is issuing has only the oversight of Loveland’s City Council.
That is why buying the argument it cannot hurt the city thus their role is unimportant is such an unfortunate move by the council. Who do they think will pay for all the infrastructure upkeep and other obligations of the Metro Districts when the only revenue it generates has to go towards paying back hundreds of millions in debt accumulated while the buildings and infrastructure were still new and generating the highest possible return?
Remember, the debt will now need to be paid back once the ‘public improvements’ and commercial buildings are beyond their projected useful life for generating revenue.
What proof do you have that a failure of Centerra will have any negative impact on the city finances?
Yeah, I didn’t think so. You are full of shit.
The publishing of profanity on this site makes one fact undeniable: This blog is not professional and does not merit further consideration or respect.
I have a question. Whenever discussing the 40% of our city sales tax diverted to McWhinney/Centerra and 98% of the property taxes rebated to them they always argue that Centerra performs governmental functions the city doesn’t have to. So it justifies getting the taxes.
Now, when we talk about the bond debt they say if the Centerra goes under there is no cost to city even though their taxes (the 40% and 98%) is still going to the bond trustees and not the city or for the government functions they perform.
Who will maintain the streets, medians and perform all the other city services for a bankrupt Centerra?
Yeah, i thought so the city. Why are you guys such jerks? Not everyone in Loveland is as stupid or scared of your bosses as you are.
It seems pretty obvious to me that we will be paying to maintain Centerra if it goes bankrupt (now maybe in 2020? but whatever taxes can still be collected will NOT go to the city but the bond trustees.
One more thing – sorry for posting twice in a row.
How can the city do an Urban Renewal on the blighted and dated Centerra shopping centers in 2020 if they will still have 20 years more to go before paying for improvements made in 2004.
Yeah, I didn’t think you had an answer.
Very clever…
One or two individuals who don’t like independent media (such as this website) nor the publishing of the truth will:
a) attack and even post profanity (“Me”) ;
b) complain about censorship if they aren’t published; or
c) complain about the profanity if it is published, in order to support their claim that the website is “unprofessional” (“Phil”).
Ya know, you’re not really all that clever, dude. The above sounds to me a lot like that Mike Hill guy who works for McWhinney.
But that attack-the-messenger stuff is just a diversion anyway. My personal thanks to the reporters here for providing the important news about what’s really going down. Seems to me that the City taxpayers ARE being put at risk by these high-stakes gambles, and maybe there just isn’t enough oversight by the City. McWhinney certainly makes it clear that they think the City is a partner in the Centerra boondoggle; so it seems to me the City should be more diligent.
Amazing! Do I understand this right that the funds for public entities like schools and emergency response, as well as 40% of the city sales tax, will continue to be diverted to Centerra for 30 more years? The promised “windfall” for schools and the city will not occur until my children are grown and Centerra is falling into disrepair, the mall long closed?
I am not surprised by Cecil’s flip-flop, honestly he may not have understood what was going on. I interacted with him and he seemed well-intentioned if not the brightest, and a politician to boot! Councilwoman Johnson has always supported the tax diversions, as have the rest of the old guard. About the only Republican elected I can think of who has stayed true to principle and common sense is Steve Johnson, who supported Randy Fisher’s bipartisan bill to prevent these types of tax diversion shenanigans from ever happening again. When government gambles, it puts the citizens’ welfare, tax dollars and public goods at risk.
Honestly I don’t have much hope for a city where people believe that bicycle racks downtown are a sign of “UN infiltration.” Hey, I know people of all political stripes who love to bike, its healthy for you and I’m tired of paying high health insurance premiums, and paying taxes for all these road widenings, because people refuse to take care of their health.
I don’t know what the answer is because Loveland seems to lack what every city needs in government: intelligent, ethical and moderate elected officials, and professional city management.
There is a lack of civility in public debate, where people seem to resort to name-calling, where citizens are woefully uneducated about how their government works, and where ad hominem attacks and appeals to the “cultural divide” mask shady financial transactions and help politicos avoid talking intelligently about issues. This is sadly the case in many a place.
I know it won’t be well-received on this forum, but Fort Collins is a great example of a city that has a few people on each extreme but overall is moving in the right driection. I know people here will say “it’s too liberal!” (Gee, a Republican mayor the whole time I’ve lived there?); “It’s anti-growth! (Gee, room to grow from 135,000 to well over 200,000 people, growing public transit, and allowing tall buildings downtown?) “It’s anti-business!” (Ever see which way the cars flow in the morning on 287? Or the level of tech employment in Fort Collins?) I’ve even heard Lovelanders say the Fort Collins schools are not good! (I don’t even know how to respond … sorry, guys.) Loveland would do well to learn from its northern neighbor.
The time of maturity for any new bonds issued has been extended from ending in 2029 to 2040. Eleven years by our math.
They didn’t modify the MFA or other agreements. Unfortunately, the council did not consider the full ramifications of the extension. State law allows for the Urban Renewal Authority to continue diverting property taxes past its life of 25 years should a natural termination cause bonds to go into default.
McWhinney’s strategy (along with the city’s complicity) of putting the item last on a long agenda while waiting until the last possible moment before the 3 day holiday weekend to post it paid-off.
Had the item gone through a normal timeline of notice and community reaction the outcome may have been different. Trying to bury a controversial item at the end of a long agenda the first work day after a holiday weekend is the type of stunt we thought ended with the last council.
Apparently we were wrong.
The longer I live in Loveland (11 years now) the more I begin to realize that many if not most of the people who get voted to the council don’t have the bona fides or the teachability to be there.
It is clear the Kodak and HP Executives who served on our council here 25 years ago to help Loveland grow into a city with exceptional public amenities and beautiful spacious and well planned neighborhoods connected by wide through streets are long gone.
What we have now on council is a hodgepodge of redneck construction people living off their parent’s accumulated wealth and urban liberals looking to develop more government subsidized housing (the reason they probably abandoned the “diverse” high crime areas they came from) which will slowly make Loveland a welfare magnet full of low-riders and gang members. they don’t have far to come from Greeley, Longmont and Denver.
I don’t like the Nebraska rednecks or the California liberals that crowd Loveland these days.
Take your pick. Too much sprawl and crowds without proper infrastructure to handle the traffic or even more crime and gangs moving here into the public housing projects while public art takes priority over fixing potholes.
Either way we lose Drew. The do-gooder liberals will make this town as ugly as Longmont with all the crime their social programs attract while the construction rednecks think Johnstown is a model for urban planning.
Where can I move to find the 1980’s Loveland I loved?