In 2012, Pueblo was awarded the first Colorado State Sales Tax Increment Regional Tourism (RTA) grant. Pueblo had competed for the grant with plans to expand its convention center, build a new garage, and house the Professional Bull Riders’ Association’s new training center in the expanded site. The community turned the project over to PURA for completion. Colorado required PURA to start the project within 5 years, stating that issuing debt would qualify as a project start. In February 2017, with the clock nearing zero, PURA contacted Ehlers for guidance in completing this critical step as the financing process had stalled under the previously selected financing team.
PURA engaged Ehlers for debt issuance & management services. Ehlers stepped in and quickly assessed the situation, organized community staff and processes, and analyzed options for structuring the bonds. Since this was the first award by Colorado of this newly designed RTA grant, it had some unique characteristics. The State’s Office of Economic Development defined the State Sales Tax Increment as a percentage of the sales tax collected within the boundaries of the City of Pueblo, Colorado over a base revenue that was calculated in the same area between May 1, 2011 and April 30, 2012. It further defined the percentage to be received as 24.7% of incremental sales tax revenues through 2022, dropping to 3.3% in 2023 through 2036. The bonds were structured to amortize early given the reduction in revenues. With debt coverage ratios of 1.30x, Ehlers felt the URA could obtain a credit rating for the issuer, but Standard & Poors disagreed, citing concerns about the recency and stability of this new tax stream. Undaunted, we advised the client to issue bonds without a rating.
PURA issued $17,030,000 in Revenue Bonds on July 11, 2017 via negotiated sale with a TIC of 4.6335%. To date, these are the only bonds issued using the Regional Tourism Act incremental state sales tax revenues. The facility opened in April 2019. Ehlers is presently helping the URA investigate financing options for Phase II of the RTA projects.
*Deb Hinsvark was initially the lead municipal advisor on this project. She has since retired.