Truth Test: Mayor's ad ignores bond risks

In Denver-- you're seeing ads for Bonds $900 million worth. Mayor Michael Hancock wants to fix up a bunch of stuff in the city. and has his face on a TV ad asking you to vote yes. Politics guy Brandon Rittiman did what he does with political ads -- putti

KUSA - Believe it or not, 2017 is an election year in Colorado. In Denver, the voters are going to decide whether to take out more than $900 million of bonds.

The mayor wants that money to fix up a bunch of stuff in the city and he wants it badly enough to lend his face to a TV ad asking you to vote “yes.”

It's such a big package of things the city wants to fix that they needed seven different ballot questions (and a made-up word) to sell it to you.

“It's our Denver-Structure,” Mayor Michael Hancock says. “And measures 2A thru 2G will repair all of it!”
 

A yes vote on each of those seven ballot questions would approve bonds to improve parks, police stations, roads, Denver Heath, the Zoo, and more.

Broadly speaking, the ad does a fair job of describing what the money would be used for.

You can browse the actual list of specific projects, broken down by which ballot question (2A-2G) would pay for specific items.

CLAIM: “Because it's a bond, tax rates stay the same.”

 

VERDICT: OVERPROMISE

It certainly is the city’s plan to avoid raising taxes, but it's an overpromise to present it as a guarantee.

The city government wants permission to borrow $937 million to fix a bunch of stuff. And just like your home loan, they have to pay it back with interest.

In the end, the full cost with interest could reach almost $1.7 billion in the coming decades.

The city finance department says it can afford that because it paid off some old debt and because property values in Denver are way up. The higher property values means the city's property tax brings in more money without needing to raise the rates.

But here's the thing: what goes up can come down.

If property values fell from where they are today due to a big market correction or worse, the next great recession, the city would have less property tax money. If that happened, it’s possible the city could be forced to raise tax rates to pay back these new bonds.

To reduce the risk of that, the city finance folks say they designed this plan so that they could afford pay off the debt even if there is a slowdown in property values.

“We believe that a $937 million bond program can be paid back even if the economy dipped, without having to increase the bond mill levy rate,” said city finance spokeswoman Courtney Law.

Law says the city designed this bond package so the city could afford to pay it back as long as property values to go up at least 2 percent every other year.

That’s a conservative target when you consider the actual numbers. Property values averaged 6.5 percent annual growth for the past five years and 5.6 percent over the last 16 years, according to the finance department.

Still, if property values turned flat (or down) there is some risk the city would need to raise taxes to cover the new debt.

The ad makes it sound like there's no risk involved, but there is in fact some risk, however small, of taxes going up.

BOTTOM LINE: There's nothing new about borrowing money to pay for expensive stuff, but this ad glosses over the fact that any big borrowing plan comes with some amount of risk.

THANK YOU: To a viewer named Dennis, for asking us to Truth Test this ad.

© 2017 KUSA-TV


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