To secure about $300 million in federal loans for redevelopment of Denver’s Union Station area, the city must assume “moral obligation” for the loan package, backstopping it with general-fund dollars in the event that tax receipts fail to cover debt payments, officials said.
The exposure of Denver’s general fund would be limited to $8 million a year for as long as 30 years on one of the two federal loans being sought, city finance chief Claude Pumilia told members of the Denver City Council’s FasTracks committee this week.
Pumilia apologized for the effort to quickly push an ordinance through the council to approve the moral obligation, but he said action was urgent if the Denver Union Station Project Authority is to stay on schedule and meet loan requirements of the U.S. Transportation Department.
The project authority now estimates that redevelopment of Union Station will cost a total of $480 million, down about $20 million from an earlier forecast.
The station area will be the hub of RTD’s transit network, which is to be greatly expanded by construction of six new FasTracks train lines.
The authority — a collaboration involving Denver, the Colorado Department of Transportation, the Denver Regional Council of Governments and the Regional Transportation District — has corralled about $180 million so far but needs the $300 million in low-interest federal loans to cover the project’s full costs, Pumilia told council members.
“Accessing the (private) capital market for that sum of money is not possible today,” he said.
Union Station development already is behind schedule. Project authority officials say they need to quickly nail down the federal loans so construction can begin in earnest by early April.
The City Council’s FasTracks committee overwhelmingly supported the request that Denver take on the obligation of backing one of the federal loans. Only council member Jeanne Faatz objected.
“I don’t want to do it,” Faatz said of the city covering debt payments in case the “worst happens.”
“I’m not willing to say ‘go into the general fund,’ ” she said. “This is not a basic city service.”
But Carol Boigon, another member of the council’s FasTracks committee, backed the proposal for the city to take on the loan obligation. “This project is important to the future of the city,” she said of Union Station’s redevelopment.
The full City Council is expected to vote next Tuesday on the moral-obligation ordinance.
Pumilia said it is extremely unlikely that Denver’s general fund would be tapped for the Union Station project.
Instead, tax revenue generated by new private development surrounding the transit project should be sufficient to cover debt payments, he said.
“Only 44 percent of total projected taxes are required over 30 years to repay the loan without a call on the city’s moral obligation,” Pumilia said.
Bill Mosher, the commercial real estate executive selected to run day-to-day operations of Union Station development, said the project authority lowered the amount of money held in contingency funds to help achieve the $20 million in savings on the project.
As part of the savings, the authority reduced the budget for rehabilitating the historic Union Station structure to $15.2 million from $17 million.
Jeffrey Leib: 303-954-1645 or jleib@denverpost.com
