To help the local economy through the COVID-19 pandemic and its aftermath, Denver is considering accelerating infrastructure projects funded by bond money.
"If you can infuse dollars into the industries supported by infrastructure, you can help do two things: You can head off any contraction in those industries and, instead of reducing jobs, you’ll be able to preserve them," says Brendan Hanlon, the city's chief financial officer. "It provides a little bit of a safety net. And in some cases, you might be able to grow or expand other industries."
In particular, Hanlon and his team are eyeing accelerating projects funded by the $937 million, ten-year Elevate Denver program, which was authorized by a ballot initiative passed by voters in 2017 and still has close to $800 million in unspent money and bonds earmarked for infrastructure projects.
"We think it's a fantastic idea from a lot of angles, but the biggest one is to keep that employment base working and keep that part of the economy out of the unemployment line," says Michael Gifford, president of the Associated General Contractors of Colorado. "It's not like you can take those bond funds and spend it on some other purpose."
In 2019, the City of Denver indirectly employed approximately 4,900 construction workers through sub-contracting for the Elevate Denver projects; the average wage for those workers was around $30 per hour, city officials say.
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This tactic of accelerating bond projects has been used before — just over a decade ago, when Colorado's construction industry shrank by 40 percent. "This concept has its origins back [in] the Great Recession," says Hanlon, who was working for the city then, too. Denver voters had passed the Better Denver bond program in 2007, and then-Mayor John Hickenlooper's administration sped up projects funded by that program to inject money and jobs into the economy.
"Hickenlooper really worked on accelerating those projects as a way to keep serious construction employment in the Denver area, which produced income tax, sales tax, property tax and people having money to spend on all those consumable areas," explains Gifford.
Like the Better Bond ballot measure, Elevate Denver listed specific projects that the voters approved, and funds generated from those bond sales can only be allocated to those areas, such as the transportation network and cultural facilities.
So even though Hanlon's team at the Department of Finance is projecting a revenue shortfall of $180 million for 2020 — 12 percent less than the projected $1.485 billion the city had expected in its general fund — current and future funds from bond sales related to Elevate Denver can't be used in other areas or for other programs.
Elevate Denver bonds have already helped fund such projects as the Denver Art Museum's multi-year-long expansion, which received an injection of $35.5 million from the program. Renovation projects related to transportation infrastructure, Denver Health buildings and Denver Public Library structures have also received money from the Elevate Denver Bond program.
City staffers are currently "working on identifying projects that can be accelerated," Hanlon says. The goal is to find "shovel-ready" projects that already have all other aspects of the project in place, except for the actual construction.
"It takes some work. In order to accelerate a project, you have to make sure that you have performed all of your design work for whatever you’re going to be building," says Hanlon. That also means the necessary property has already been procured and that members of the community have been engaged through a formal process.
"One of the things that we don’t want to lose during this period is the public input," he adds. City officials say that they've already started switching to virtual forms of public engagement, since they can't hold the usual sessions at places like recreation centers.
The Department of Finance is currently working on an action plan regarding potential acceleration of bond-funded infrastructure projects; it expects to finish that over the next few weeks.
"It's still too early to promise any specific projects that we're going to accelerate," says Kiki Turner, a spokesperson for the Department of Finance, who notes that some projects that are currently in progress, as well as future projects that will receive funding from the next round of bond sales this year, could be potential candidates for acceleration.
"These funds are there, and that's a pretty rare and fantastic opportunity for infrastructure at a time when all of our spending has to be very, very thoughtful," Turner says.
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While bond-funded projects have the benefit of having secure financing going forward, the city is facing a major challenge in balancing a budget that now has an anticipated revenue shortfall, largely caused by a decrease in sales tax revenue caused by the response to the coronavirus pandemic. Right now, Denver is looking at possible 7.5 percent budget cuts across departments. But even with those cuts, officials anticipate having to dip into reserves for about another $100 million to help balance Denver's budget.
On an annual basis, Denver finance officials aim for reserves that equal approximately 15 percent of the budget; the city ended 2019 with reserves equal to 18 percent of the budget. Taking $100 million from those reserves will leave the city with about 12 percent of the current budget in reserves.
"We're trying to leave ourselves enough room to navigate," Hanlon says. There could be a second wave of COVID-19 infections, for example, and in any case, that $180 million projected shortfall could get smaller...or larger.
"It falls in the middle," he notes. "It is neither the best case nor the worst case."