Boulder’s $1.2 billion municipalization gamble

The city of Boulder may be playing pretty fast and loose with its $214 million “debt limit” claim by asking voters to approve the city’s municipalization ballot issue 2E.

Why? Because nowhere in that ballot language does the city provide voters with complete or accurate information about the total amount of debt required to fulfill a muni takeover from Xcel Energy.

That $214 million figure is not a “debt limit” that it claims to be. It’s just the purchase price that would allow the city to condemn a bunch of old wires, utility poles, and transformers in and outside the city from Xcel Energy.

According to the city’s own calculations, somewhat difficult to discover in the volumes of puffery the city has issued for public consumption, $214 million is just the beginning of how much debt Boulder citizens will be responsible for repaying.

In other documents the city reveals it needs a $4.9 million short-term loan to get the muni scheme up and running. But that’s pretty small change because the city says it also needs an additional $90.4 million: “…as a one-time cost to fund the remaining capital costs necessary to start the utility, including the first two years of capital improvements and a fund for 6 months of operating reserves.”

That $214 million number Boulder voters may think will create a municipal electric utility doesn’t come close to doing so although voters may be led to believe it does because of incomplete information contained in the ballot language. The actual cost will exceed $300 million. But wait! There’s even more!

In future years, the city says it will need to fund an additional $101.4 million by initiating four separate bond issues over an 18-year period in order for the new muni to pay for “…upgrades to aging infrastructure …(and) to replace or upgrade a large portion of the distribution and transmission system.”.

Taken together, the actual amount of capital that’s required to begin and operate Boulder’s own electric utility, and make necessary upgrades and system improvements, exceeds $412.7 million. That’s nearly $200 million more than the “debt limit” being claimed in ballot issue 2E voters are being asked to approve this November.

Not only is the $214 million “debt-limit” claim deceptive, it doesn’t come close to providing a full picture of things because the city never includes the cost of borrowing those millions of dollars.

The only way Boulder can become a municipal utility is to sell bonds as it does for other community capital costs. The city says it has a AAA bond rating, and they do for the local water utility, but they can’t make a claim that any new bonding for the muni will attain such a positive rating because they have no history of operating one.

In fact, in another document, the city says it hopes the new muni debt might achieve an A or BBB bond rating. Lower rated bonds are more risky as well as being more expensive, and the city has no idea how much it will ultimately need to pay in interest to bondholders.

The city makes a “best guess” for the initial $214 million bonds, claiming it will carry a 6.5 percent interest rate for 30 years. The additional $90.4 million will carry an estimated interest rate of 5.5 percent, as will those four additional bonds. But that’s just a guess, and interest rates may be much higher in future years. So the actual amount of interest to be paid over the various 30-year bonding periods is entirely unknown.

Taking the city’s own calculations and forecasts into account the amount of capital borrowed plus interest and other costs comes to well over $1.2 billion! If the city’s estimate of acquisition or stranded costs is too low, those additional borrowed funds might result in total indebtedness of $1.5 billion or more.

Boulder’s desire to create its own municipal utility is an expensive and a highly risky proposition. Unfortunately, the city hasn’t been entirely forthcoming in providing voters with complete information concerning all the costs. If voters believe the total amount required for creating its own electric utility is limited to just $214 million, as ballot issue 2E suggests, they are being entirely misinformed and even misled.

Creating a municipal utility may turn out to be a good idea. It could also turn out to be a huge and expensive mistake as no one can accurately predict the future.

Bob Greenlee is a former member of Boulder’s city council and served one term as mayor. He can be reached at

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