Treasury

Public Finance & Debt Issuance

Long Term Liabilities

In addition to assets owned by state and local governments, governments also have financial liabilities - i.e. money owed over a period of time. Because of various state constitutional requirements, Colorado is considered a low debt state, since it borrows little money compared to other states.


Capital Financing:

State and Local governments frequently borrow money from the private sector to undertake large capital projects - e.g. to build a bridge, a prison, or a museum. The government then makes regular payments for the asset over the term of the borrowing, which include the principal amount borrowed, plus some amount of interest. Although the state pays interest, debt-financed capital projects can be cost effective if costs associated with waiting to build (e.g. loss of opportunity, increased operating expenses from facility demands, or increased construction costs) exceed the interest rate. In addition, debt-financed capital assets can promote tax burden equity as the asset is being paid for over the entire time during which the benefits of the asset are being enjoyed, and not all-at-once by taxpayers in one given year. There are many ways in which state and local governments can borrow money, for example general obligation bonds, revenue anticipation notes, or certificates of participation.

  •  General Obligation Bonds: Colorado's constitution prohibits the state from borrowing money with a general promise to repay. These bonds, called general obligation bonds, are guaranteed largely by the taxing authority of the government. Local governments in Colorado can issue general obligation bonds with voter approval. For example, Colorado school districts, if they receive the approval of their voters, can issue general obligation bonds to build or renovate schools; these bonds are repaid from school district property taxes.

  • Tax or Revenue Anticipation Notes: Tax revenue anticipation notes represent money borrowed by a government on the pledge that it will be repaid over time from a specified revenue source. The Treasurer's Office issues tax revenue anticipation notes to help the annual cash flow needs of the state's General Fund or that of local school districts. Those notes are repaid within the same fiscal year (or repayment resources are placed in escrow). The state's constitution prohibits multi-year fiscal obligations without voter approval, which includes tax revenue anticipation notes with a repayment period longer than a year (except those issued by government-run businesses, called enterprises). The voters of Colorado approved the issuance of transportation revenue anticipation notes for the construction of highway projects in 1999.

  • Certificates of Participation: A lease-financing mechanism where the government enters into an agreement to make regular lease payments for the use of an asset over some period, after which the title for the asset transfers to the government. Since the government can decide, at any time, to discontinue the lease, COPs do not constitute a multi-year fiscal obligation and so can be issued without voter approval. In 2005 the state issued about $197 million in COPs to construct new buildings on the Health Sciences Center and Fitzsimmons campus as well as about $130 million for the construction of a new correctional facility.

Other long term liabilities:

Governments, and agencies or authorities of the government, can use debt financing to fund obligations other than capital construction, for example, College Invest has issued over $1.1 billion in bonds to finance student loans.


Other long term liabilities are not related to the issuance of debt by the government. For example, the state also owes money for employee benefits that are accumulating, but are not yet due. In this case, annual payments toward the liability are made so that the state will have enough money to pay the benefits when they come due.


Major recent debt issuances:

  
  • In 1999, Colorado voters passed Referendum A, allowing CDOT to issue Transportation Revenue Anticipation Notes (TRANs) for a five-year period (which ended in FY 2004) to speed up completion of the Strategic Transportation Projects. A total of $1.487 billion in bonds was issued during that five-year period. (see CDOT 2006 Annual Report for a list of all issuances and costs).

  • In 2003 the General Assembly authorized about $197 million in Certificates of Participation to finance the construction of buildings at the University of Colorado at Denver and Health Sciences Center as well as about $130 million for the construction of a new prison. Those COPs were issued in December of 2005.

Debt of state primary government for fiscal year 2006:

NOTES, BONDS, AND CERTIFICATES OF PARTICIPATION

AT JUNE 30, 2006

Anticipation Notes &

Certificates of

Borrowed Cash Used For:

Revenue Bonds

Participation

Fleet Vehicles

$ 44,367,131

Capitol Parking Structure

8,395,790

State Buildings

1,740,000

State Fair Buildings and Facilities

$ 1,270,580

Prisons

130,336,362

Fitzsimons Medical Buildings

196,352,540

Higher Education Auxiliary Facilities

1,107,298,054

55,828,192

Highway Projects (Anticipation Notes)

1,418,445,040

Highway Department Buildings

20,031,724

Student Loans

1,195,916,156

Total

$3,722,929,830

$457,051,738



Other resources:

Visit the websites below for more information on bonds, revenue notes and COPs. Included are links to information about debt issued by the state or state agencies. In addition, there is also linked information on debt issued by authorities created by the state, which are not a part of the state's primary government, and some of which are not required, for public reporting purposes, to report to the state.


STATE DEPARTMENTS AND AGENCIES:

College Invest


Colorado Department of Corrections (information about the Department's recent COP issuance can be found in the state's Comprehensive Annual Financial Report, page 106)


The Colorado Department of Revenue lists all the state agencies and authorities authorized to issue tax exempt bonds.


Colorado Department of Transportation


University of Colorado (information from the Office of the Treasurer of the University)


Colorado State University (information in their financial statement)


COMPONENT UNITS OF THE STATE:


Colorado Water Resources and Public Development Authority (The Authority's Annual Report, see p. 92 for listing of all bonds; information is also available in the state's Comprehensive Annual Financial Report, p. 109)


University of Colorado Hospital Authority (information about the Authority's debt is available in the Comprehensive Annual Financial Report, page 110)


OTHER STATE CREATED AUTHORITIES ISSUING DEBT:


Colorado Housing and Finance Authority (information from their financial statements)


E-470 Public Highway Authority (information in their financial statement)