The Golden city council has passed an ordinance allowing the city to modify its agreement with the bank that holds the loans for the Coors office building property it purchased last year so that the …
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The Golden city council has passed an ordinance allowing the city to modify its agreement with the bank that holds the loans for the Coors office building property it purchased last year so that the Golden Community Center and Golden Fire Station #4 can become the collateral for the loans.
Under the original loan agreement with BOKF, the value of the Coors office building property itself was used as the collateral. However, the city now plans to demolish the office building, so the city to put up other property of a similar value as collateral for the loan.
Under the city’s agreement with BOKF, the bank would be able to take possession of the community center and Fire Station #4, which is located along Heritage Road and serves the southern portion of the city, if the city were to default on its debt payments in order to operate them so to generate significant revenue to make the debt payments. For example, the community center could be operated by the bank as a private health club while the fire station building could be used for manufacturing.
However, Golden Finance Director Jeff Hansen told the council he was recommending the collateral substitution because it is “highly unlikely” that the city would default on its debt payments.
“I think it’s important to note that the city has an impeccable record historically of making its debt payments,” Hansen said. “So, this is really only an issue if we were to default and there is nothing to indicate the city would be in a position where that is a possibility.”
Hansen said the reason the Coors property would not be acceptable to the bank as collateral once the office building is demolished because the bank is only able to take possession of the collateral for generating revenue to pay the loans in the event of a default but cannot actually take ownership of it. That means the bank would be unable to sell the Coors property, which would be the only way to generate revenue from it.
Hansen also said the substitution means it is possible the city could lose the ability to run fire service out of Station 4 but emphasized that would only happen if the city defaulted on the loan. He also said the value of the fire station is about $2 million, which means the city will all in likelihood be able to pay down the loan enough to release the fire station as a collateral asset in the next two years. The city has reserves in other funds, including the general fund, which it can borrow against to pay the debt.
Hansen also said he does not have any concern that financial uncertainty surrounding the COVID-19 pandemic puts the city at any elevated risk of being unable to pay its debt. He said that’s because the city continues the city continues to receive sales tax revenue into the fund that is used to repay the debt and the city’s priorities for that fund are repaying debt first, maintaining existing facilities second and building new facilities third. He said the city also have enough funds in other funds to cover the debts, if necessary.
Councilwoman JJ Trout said the city has received comments from Golden residents who were concerned about putting up the community center and Fire Station #4 as collateral and councilors originally shared those concerns.
“We all were a bit concerned about using these two buildings but we talked through it came to the realization that it’s not a gamble because the chances of us not making payments is nominal so we all felt comfortable moving forward,” she said.
Hansen said that putting the substitution agreement in place doesn’t mean the city has to demolish the building at any point. However, he said doing so now makes sense so that the city will be in a position to demolish it when the time is right. Hansen said it makes sense for the city to demolish the building, which it has determined it does not make sense to use due to its age, sooner rather than later because the city incurs maintenance costs to keep it running and viable while it is still standing.
The city is also currently in the process of attempting to sell assets from the building, such as furniture, and Hansen said the city would need to have a collateral substitution agreement in place before it could remove the HVAC system or other parts of the building that would reduce its value.
“I think it’s very important that we try to recover from the building as much as we can and I don’t think the market is going to get better,” said Councilman Rob Reed. “Therefore I support the substitution.”
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