Attorney Lindsay Fischer filed a lawsuit yesterday afternoon in El Paso County District Court challenging the city’s proposed issuance of certificates of participation to fund the proposed economic development agreement between Colorado Springs and the U.S. Olympic Committee.
The complex legal structure of the agreement calls for the city to raise up to $38 million by selling the Police Operations Center and Fire Station 8 to the city’s Public Facilities Authority, which would then issue COPs and pass through the proceeds to the city. The city would lease the two facilities for an amount equal to the annual COPs payments, and use the cash proceeds from the deal to fulfill its commitments to the USOC.
The money would be used to purchase and finish the building at 27 S. Tejon St. which is scheduled to become the USOC headquarters.
The city has contended that voter approval isn’t required because the sale-leaseback does not involve a long-term obligation, but rather an annual lease that City Council can vote to terminate or renew every year.
Fischer argues that the yet-to-be issued securities are not COPs, but de facto general obligation bonds, which require a vote of the people to be issued.
Fischer said that his lawsuit is based on the “use of the collateral, which in my view makes the label of COP wrong.”
Claiming that the city’s plan to, in effect, mortgage vital public safety facilities and turn over the proceeds to the USOC, a private corporation, is both morally and legally wrong, Fischer said that “the integrity of the legal process is first, the development of downtown is very important – but second.”
In his filing, Fischer wrote that, “The POC and FS-8 are public safety assets. This makes them essential assets …. Failure to fund (the annual COPs payments) would be a municipal disaster (since it would) terminate the rights of the city to use, occupy and operate these essential public safety assets.”
Therefore, Fischer continued, “Any future council will be required to fund the leasebacks annually from general fund revenues.”
The city’s longtime bond counsel, Bob Irwin of Kutak Rock, dismissed similar contentions by Fischer during council’s Aug. 11 meeting, when the USOC COPs were authorized.
“I’m very confident that these (securities) are COPs,” he said during the meeting. “We’ve handled 15 such deals, and we’re very familiar with their structure.”
If council has no choice other than to fund the COPs every year, Fischer argues, they are in fact multi-year obligations, and as such are bonds.
Since, under the EDA, the city must issue the proposed COPs before Sept. 25, Fischer has asked the court for accelerated disposition of the case.
“This issue would simply be: does the scheme, however labeled and documented, in fact require appropriations from the general fund by future councils?” he wrote. “If it does, is election approval required? The bottom line is … that these COPs represent form over substance and that substance controls and therefore an election is required. For this issue the plaintiff wants a judge’s decision. Neither more nor less.”
Vice Mayor Larry Small declined this morning to speculate about what the court might decide.
“You never know what the court’s going to do, but I think that (the city’s use of COPs) will be upheld,” he said. “But I never trust precedent because every filing is unique.”