National bond nosedive felt in Colorado
September 5, 2011
Denver — (AP) — A nationwide nosedive in government borrowing this year hasn’t spared Colorado.
Municipal bonding through mid-August in Colorado was down more than 30 percent from the same period last year, according to George K. Baum & Co., a prominent Denver underwriting firm that tracks bonding across the state.
The total is down more than half from the same period in 2008, or about $6.3 billion that year to about $2.6 billion this year, according to a George K. Baum analysis.
Nationally, the municipal bond market is experiencing its largest decline in two decades. That means many citizens may have to wait longer for bond-funded repairs to aging streets, water pipes or schools.
The downturn is being felt in places like Colorado Springs, where Colorado Springs Utilities issued six variable-rate bonds in 2009 and 2010 totaling more than $672 million.
The utility, which provides electricity, water and natural gas to some 400,000 people, issued the bonds to continue a water pipeline project from Pueblo called the Southern Delivery System. The total included a $273 million bond late last year to purchase full ownership of the gas-powered Front Range Power Plant.
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This year, Colorado Springs Utilities has issued just one bond, and it doesn’t plan any more. That bond totaled $167 million and was issued to restructure debt, not to expand.
“We wanted to take advantage of these historically low interest rates, but there are no plans for anything additional,” said Nancy Brisco, the utility’s manager of treasury and finance.
Market analysts attribute some of the national municipal drop-off to a natural slowdown after last year’s rush to issue bonds before a federal stimulus program expired.
The Build America Bonds program was a stimulus act creation that expired at the end of 2010. The special bonds paid taxable interest to investors — unlike the tax-free bonds municipalities usually use — but were popular with local governments because the U.S. Treasury Department subsidized their borrowing costs.
“Our anticipation of that favorable bond program ending, that was one component” of getting bonds through in 2010, Brisco said. “We consciously issued about two years — or maybe a year and a half — of bonding to take advantage of that.”
Another reason for the national dropoff, local governments say: Their budgets are stretched so thin, they’re not willing — or able — to use scarce tax dollars for debt repayment.
Business owners that have relied heavily on government spending in recent years, much of it fueled by the stimulus, are worried about the government drop-off.
At a forum of women business owners last week, the owner of an Aurora engineering firm told House Democratic Leader Nancy Pelosi that her industry is wondering how to cope with the sudden drop in government spending on infrastructure.
“The stimulus spending, it has kept our entire industry afloat,” said Kristy Schloss, owner of Schloss Engineered Equipment, which makes water-treatment equipment.
Asked if she’s noticed the slower municipal bonding in Colorado, Schloss replied, “absolutely.”
“Infrastructure spending is one of the big areas that’s getting cut,” Schloss said.