By Nicole C. Brambila | Denver Gazette
In a motion to dismiss filed Friday in response to a lawsuit, Denver Public Schools (DPS) defended its use of lease-purchase agreements — a financing method critics say sidesteps required voter approval for public debt that could leave students without access to their schools if the district defaults.
“This allegedly unlawful ‘scheme’ is actually a common and completely legal method of financing projects for public entities in a manner that is authorized by statute and has been repeatedly ratified by Colorado courts,” DPS officials said in their filing.
As previously reported by The Denver Gazette, DPS has quietly taken on hundreds of millions of dollars in long-term debt through a controversial financing tactic that sidesteps the state’s constitutional ban on assuming debt without public approval.
State law does permit school districts to use “lease-purchase agreements” without voter approval, but only if the payments come from general or capital reserve funds and are subject to annual appropriation, in this case by the board of education. Public records show at least some of the lease payments tied to Certificates of Participation (COPs) appear to have been made from a fund with bond proceeds, raising questions not only about compliance with state law and the constitutional exemption these transactions rely on, but also whether this could run afoul of federal securities regulations.
District officials countered in court documents that the lease payments are appropriated by the board annually.
“DPS does not pay for COP-related obligations from its bond redemption fund,” court documents say.