In April, Denver Mayor Michael Hancock pitched a $400 million bond measure, saying it would help the city recover from the COVID-19 pandemic and invest in its growing backlog of infrastructure projects.
The idea that he would reverse the typical order of operations when it comes to such measures — that is, not giving a clear idea of what the money would go to — is unusual, economists told The Denver Post. They also questioned Hancock’s justification of using the massive borrowing package to rebound from the pandemic.
But the mayor and his top financial advisor defend the proposal, saying residents will have a specific list of projects before it’s passed to the city council. That group’s approval is required to place the measure on the November ballot. Plus, the two men said, millions in state and federal aid that came in during the pandemic hasn’t been enough and now is the time to invest in Denver’s backlog of infrastructure projects.
A list of possible projects — $4 billion worth — already exists, everything from new library parking lots and bike infrastructure to improvements to water detention systems and solar energy upgrades, Chief Financial Brendan Hanlon said. City officials are soliciting input from residents on which of those ideas will take priority for the bond proposal.
Bond measures like this are a tried and tested method to help Denver’s workers and businesses rebound from economic recessions and to create jobs, Hancock said.
“The mayor’s got it backwards,” argued Jack Strauss, the Miller Chair of Applied Economics at the University of Denver. “You have to say ‘This is what we need the money for and that’s why we’re borrowing it.’ He’s done the opposite: ‘I want to borrow this amount and you tell me what to spend it on.’”
The approach is unorthodox but not unprecedented, University of Chicago economics professor Justin Marlowe said, though he questioned how strongly the city can tie the proposal to the pandemic.
“If this is sold as COVID recovery and you just end up doing the same roads and bridges that have been in your capital project budget for years, then it’s hard to justify,” Marlowe said.
Hancock acknowledged that the list of possible projects does predate the pandemic, but said it’s things the city wants and needs.
Marlowe did acknowledge that the bond measure also could be used to help Denver transition into a so-called new normal, especially as companies allow more employees to work from home and the downtown landscape changes. Plus the time is right to borrow money, he added, because of strong population and job growth that’s expected to continue.
However, he questioned why it’s so large, considering many governments across the country didn’t lose as much revenue as they had predicted and are rebounding quicker than expected. But Hanlon said his loss predictions for Denver were accurate within a few percentage points: about $220 million in 2020 and he expects another $190 million shortfall in 2021.
Denver did receive $127 million in federal aid last year and will get another $308 million combined in 2021 and 2022, though that cash is meant to help local tenants, gig workers, people experiencing homelessness and businesses, so it can’t simply replace lost city revenue.
Denver has a good credit rating and interest rates are low, University of Michigan economics professor Don Grimes said, and using bonds to pay for new infrastructure and other needed improvements qualifies as good policy.
He cautioned, however, that offering stimulus checks with the bond money would be “dumb,” but Denver officials aren’t proposing to do that.
“If they do it the right way, it really can be capitalizing on an opportunity in just the right place in just the right time,” Marlowe said. “But that assumes a lot of things go the right way.”
The last bond measure that went to voters was in 2017, $937 million that went to transportation, health and cultural projects. Before that, there was $550 million approved in 2007. This will be a pattern, Hanlon said, as the city aims to propose large bond packages every decade. Hancock’s $400 million proposal shouldn’t interrupt that schedule, he said.
“When great interest rates meet great credit ratings, it’s a great time to invest,” Hancock said.
And if during the community engagement process a new idea emerges that isn’t on that $4 billion backlog list, Hancock told The Post he’ll consider it.
Hanlon said he expects the city will publish a specific list of project ideas by the end of June; they’ll need to be approved by the city council before they can appear on the November ballot.
Denver’s $400 million bond proposal is “backwards” without project list, economists say - The Denver Post
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