"However, I want to share with you some concerns I have," Gallagher continues. "Let me say at the outset, though, that I am not objecting to the issuance of the bonds and the moving forward with the Stapleton development. Rather, I am concerned about what I believe to be the unnecessary risks and exposure the city is now acquiring as a result of the agreement reached to authorize the issuance of the bonds."
One thing that bothers him, Gallagher says, is a $24.5-million payment to the city is not guaranteed by Forest City Enterprises, the developer of Stapleton, but rather is an obligation an entity it created, Stapleton Land LLC, a single-asset entity.
"I believe this leaves the city unnecessarily vulnerable and tends to mitigate the 'value' of the benefit," according to Gallagher. "While we all trust that there will not be any kind of default or problem, should there be, the city has only limited recourse. I find this very troubling."
Gallagher also is concerned about the subordination of the city-retained taxes.
"This seems to me to be an unnecessary risk for the city and I question why we could not have come to agreement with all parties without the city accepting this level of risk," Gallagher says. "And while I am assured that from a practical standpoint the risk is minimal, it is a risk nonetheless and I don't know why it was necessary for the city to agree to it. And if the city is to accept this level of risk, there should have been a greater benefit to the city for accepting that risk. If we are going to accept the risk of being in ninth place for payment, we should be entitled to commensurate benefit to offset that risk."
Gallagher also says he has a "sense" that DURA-financed projects are not meeting their projections, causing him further worry.
DURA executive director Huggins says she will send Gallagher a breakdown of projections and actual returns. All of the projects are able to make debt payments, but many are not doing as well as initially hoped because of the slow economy, she says.
Huggins, however, denies the city isn't getting a good deal with the $275 million in bond issues. She says the deals were structured in the most advantageous way possible.
Gallagher says he is just doing his job as auditor.
"I take very seriously my role in protecting the interests of Denver's citizens and the financial well-being of the city," Gallagher says. "I raise my concerns because I am the eyes and ears of the citizenry and it is my fiduciary responsibility to do so."
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