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City staff and underwriters brief Wheat Ridge on bond tools, credit rating and remaining capacity
Summary
City staff and Piper Sandler briefed council on options for financing capital projects — certificates of participation (COPs), sales-and-use tax revenue bonds and general obligation bonds — reviewed Wheat Ridge's AA- rating and noted about $40 million of remaining authorization under the 2023 sales-tax ballot measure.
City staff and financial underwriters from Piper Sandler presented an education session on municipal finance at Wheat Ridge's March 2 study meeting, outlining debt instruments available to the city and the trade-offs of each.
Patrick and Andrew Ma (Piper Sandler) said the three common instruments for Colorado municipalities are certificates of participation (COPs), sales-and-use tax revenue bonds and general obligation bonds. Ma described COPs as popular because they typically do not require a voter-authorized bond election, but they generally require collateral and can carry different legal structures than bonds.
"COPs do not require a bond election," Ma said, but he and staff emphasized the trade-off: investors typically seek collateral or other protections because COPs function as annually appropriating obligations rather than multi-year pledges like bonds.
Staff reviewed Wheat Ridge's recent financings and capacity. The city issued Series 2024 sales-and-use tax revenue bonds (the "2J" bonds) totaling about $34.8 million in the first tranche, staff said, and reported an interest rate on that issuance of roughly 5 percent. The urban renewal authority issued tax-increment revenue bonds in 2021 totaling $42 million at about 4 percent. Staff said the February 2023 ballot authorized up to $75 million of bonding for the sales-tax measure; with one tranche issued in 2024, the city has approximately $40 million of remaining capacity it expects to consider issuing in 2027, depending on market timing and project needs.
Why it matters: presenters said Wheat Ridge's S&P rating of AA- has helped secure favorable borrowing costs and that issuing decisions should account for market conditions and the city's long-range capital plan. Piper Sandler noted market participants were pricing modest Federal Reserve cuts later in the year, which could support lower future borrowing costs.
Councilors asked how COP collateral works and what facilities can be pledged; Ma and local bond counsel explained purchasers evaluate the "essentiality" and value of collateral (city hall, police or fire facilities, or other assets) and that investors want recourse if annual appropriations lapse. Staff reiterated that COPs still require an identifiable revenue source to pay annual debt service and cautioned against assuming COPs are a way to avoid long-term fiscal discipline.
What’s next: staff said they will return to council when they have a recommendation about timing and structure for issuing the remaining authorized tranche and will continue coordinating with Piper Sandler on market conditions and credit considerations.
