The city is touting its success in selling $32.48 million in certificates of participation that will fund the U.S. Olympic Committee deal, which it claims is a price considerably below original estimates.
But as with any complex financial deal, the devil is in the details — and the deal might not be as sweet as the city is spinning.
“The debt service schedule provided to the City of Colorado Springs by financial advisers and underwriters will save some $9 million over the 30-year life of the certificates of participation issued recently to provide a downtown headquarters building for the United States Olympic Committee,” according to a news release.
And Mayor Lionel Rivera’s claim that the antcipated “$1.7 million a year payment … will end up being $1.5 million, well below the estimate,” appears to conflict with the final offering statement for the securities, which were issued Oct. 13.
In a “table of base rentals,” which breaks down the payments that certificate holders will receive into principal and interest components, the total payments during the 30-year term of the certificates amount to $64,649,203.
Payments for the first full year total $1.53 million, rising to $1.74 million after five years, and increasing by about $50,000 annually thereafter. The average payment during the 30 years, assuming “no optional redemptions prior to maturity” is $2.15 million.
Net proceeds to the city’s Public Facilities Authority from the sale of the certificates amounted to $31.47 million. In addition, the PFA paid issuance costs of $1.03 million, which included “rating agency fees, 2009 insurance policy premium, professional fees, reserve policy premium, underwriters’ discount, printing costs, and title insurance.”
Although the individual items were not broken out, the cost of issuance amounts to 3.26 percent of the net proceeds received by the PFA.
The city’s press release also stated that “the issuance of the COPs is one step in a complex, multi-party agreement in which the city’s Public Facilities Authority issues COPs and purchases the Headquarters Building at 27 N. Tejon St. for $18.8 million from LandCo Equity Partners LLC. The PFA will then lease the building to the city, which will sub-lease the top five floors to the USOC for $1 a year. The city will pay $2.7 million to complete the building’s interior by March 31, 2010.”
LandCo Equity Partners, the city’s partner in the original USOC deal, will retain ownership of the building’s first floor and basement.