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Transportation

Amid budget crunch, Colorado nets much-needed windfall for road projects with strong debt sale

The market for bond-like debt has shrugged off the pandemic crisis, allowing the Colorado transportation agency to avoid draconian budget cuts

With Pikes Peak looming in the distance, traffic flows along Federal Boulevard in Westminster on May 13, 2020. (Andy Colwell, Special to The Colorado Sun)
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For once, some good budget news.

Colorado received a $111 million premium on a debt issuance of $500 million, thanks to strong investor demand for state-issued debt.

As a result, budget writers say that $100 million in planned cuts to the Colorado Department of Transportation over the next two years — and some additional cuts likely to come — will be at least partially offset by an investment market that has largely shrugged off America’s broader economic malaise.

“We’re not going to be making any more progress (on transportation) than normal — but we’re not sliding backwards either,” said Sen. Rachel Zenzinger, an Arvada Democrat who serves on the Joint Budget Committee, in an interview.

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The “certificates of participation” — authorized in 2017’s Senate Bill 267 — are a form of debt in which the state effectively takes out a mortgage on government-owned buildings in order to fund construction projects. Investors purchase the certificates, much like they would government bonds, with the assurance that the state of Colorado will repay them over time with interest.

Lawmakers initially authorized $1.88 billion in total certificates to fund transportation projects, issued in four installments.

The first $500 million sold in September 2018 and likewise brought back an additional premium to the state, selling for $545 million. The second installment was required to go to market before June 30 of this year, and Colorado State Treasurer Dave Young was preparing to issue them in March — just days before the pandemic caused the market to crash.

Three months later, the delay appears to have worked in the state’s favor. With a $500 million face value, the certificates sold for $611 million, to be repaid over 20 years at 2.13% interest. The treasurer’s office said $559.8 million will go to CDOT’s transportation project account, and $49 million will go to a construction fund earmarked for rural Colorado. The remaining $1.1 million covered issuance costs.

It’s not all upside for roads as lawmakers delay ballot measure

But what comes next for state transportation has inspired a mix of hope and despair.

As proposed, next year’s budget would be the first since the 2018-19 fiscal year in which transportation won’t receive any significant money from the state’s general fund, which is the discretionary pot of tax dollars that pays the bulk of state government operations. Under the proposed budget, the CDOT’s cash fund revenue would decrease next year by 9%. The $136 million drop is largely due to the end of scheduled general fund transfers from 2018’s Senate Bill 1. To make matters worse, the proposed spending plan doesn’t account for what could be a precipitous drop in gas tax collections from public health orders efforts that have kept people in their homes and off the roads.

Lawmakers also plan to delay a 2020 ballot measure that would have asked voters to issue $1.3 billion in transportation bonds until November 2021, the second straight year the referendum has been deferred.

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Zenzinger, the Arvada Democrat who has long pushed for additional transportation funding, lamented that the state failed to raise additional revenue for roads during the decade-long economic expansion that the coronavirus brought to an abrupt end.

“It’s disappointing,” she said. “And now we are so far behind. I look at all the other services we had to cut within our budget — and people are hurting. I think we missed our moment to be able to ask the voters to raise revenue.”

In recent years, multiple ballot efforts to generate money failed. Competing efforts to raise money for roads with and without a tax hike were both rejected by voters in 2018. And Proposition CC failed by a wide margin in 2019.

Transportation advocates look to federal level for help

Nonetheless, some transportation advocates are hopeful that the economic crisis could bring opportunity. 

Sandra Hagen Solin, a spokeswoman for the Fix Colorado Roads advocacy coalition, said the conversation is shifting to the federal level with a loftier goal in mind: “How do we use transportation investment as a means to recovery?”

Even before the present crisis, President Donald Trump has advocated for $1 trillion in infrastructure spending, but the effort has never gotten serious consideration from Congress because of Republican opposition. More recently, congressional Democrats and Trump have pushed for a new round of economic stimulus in response to the pandemic, but the Democratic House and Republican Senate remain far apart.

Still, Solin says that early conversations with the state’s congressional delegation have been encouraging. “Time and again in recessions past we’ve seen that there is bipartisan recognition” that transportation projects can stimulate the economy and create jobs, Solin said. “We’re very optimistic that something will come about sooner than later.”


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