Every 4-10 years, Denver voters are asked to authorize GO (short for “general obligation”) bond programs that will fund capital improvement projects like parks, recreation centers, libraries, roads, bridges, and other infrastructure. Vibrant Denver is the latest GO bond package.
But what are general obligation bonds? They’re a mechanism for the city to take on long-term debt to fund large capital improvement projects using the property tax it already collects, rather than raising taxes. When Denver issues these bonds, it’s promising to use property tax revenue to pay back the bondholders, with interest, over the next few decades.
There are important benefits of using long-term debt to fund infrastructure. First, infrastructure is expensive! Taking on debt that will be paid over a longer period allows the city to tackle major infrastructure needs immediately, rather than waiting years or decades to save up the money for these projects.
Delaying infrastructure improvements for too long can become a problem not only because a crumbling bridge is dangerous, but because deteriorating infrastructure becomes more expensive to fix the longer you wait, while construction costs also tend to go up.
And, of course, GO bonds allow us to make major investments in our city without increasing tax rates for these large-scale projects.
But there are also some risks and drawbacks to be aware of when weighing which of these ballot issues you want to approve.
For one thing, debt accrues interest, so using bonds to pay for this construction can often cost twice as much over their lifetime (that’s why your ballot lists a “maximum repayment cost” for each issue). If voters reject any of these ballot issues, the non-designated property tax revenue would be used to pay off current debt more quickly, theoretically reducing those interest payments.
The inflexibility of GO bonds is also a risk: Our debt service payments become mandatory long-term obligations, which means that even if there are changes to city priorities or economic conditions in the future, or if a project goes over budget, the city still has to pay off the debt it committed to.
Mayor Mike Johnston has pledged that the Vibrant Denver projects will be completed within 6 years, and it’s always worth looking into the future to consider the long-term value of each bond issue on your ballot.
Remember, the Vibrant Denver bond package is not a tax rate increase. You are being asked to evaluate where existing tax revenue should be invested, and whether the return on that investment will actually build the kind of city you want to live in.
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