S&P revises Denver's outlook to negative ahead of GO sale

Denver expects to head to the municipal bond market next week with $410 million of general obligation bonds after the city council gave final approval to the sale on Monday and the outlook on one of the city's triple-A ratings was revised to negative.

Ahead of the Feb. 18 competitive offering, which is the first to tap into $950 million of debt authorized by Denver voters in November, S&P Global Ratings revised its outlook to negative from stable on the city's AAA GO rating and AA-plus rating for various certificates of participation and lease-secured obligations.

"The negative outlook reflects the one-in-three chance that we could lower the rating in the next two years if the city's budget environment remains pressured and dependent on budget amendments and use of reserves to close annual budget gaps," S&P said in a report.

In a statement, the city said the importance of strengthening reserves was highlighted in its fiscal 2026 spending plan "by providing a budget that is less than our conservatively projected general fund revenues."

"This strategy is in place to intentionally build a healthy reserve closer to 15% of our expected revenues," the statement said. "Denver's fiscal rules require a replenishment plan upon use of reserves and we are on track to comply with that rule."

The upcoming bonds were rated triple-A with stable outlooks by Fitch Ratings and Moody's Ratings. Fitch upgraded its rating on approximately $789 million of Denver's outstanding dedicated tax revenue bonds to AA from AA-minus.

The five-part bond Vibrant Denver proposition voters passed on Nov. 4 earmarked $441.42 million for transportation and mobility, $174.75 million for parks and recreation, $30.1 million for health and human services, $244.43 million for city infrastructure and facilities, and $59.3 million for housing.

The upcoming bond issue is structured with an estimated $217.5 million of tax-exempt bonds carrying a final maturity no later than August 2050 and $192.5 million of taxable bonds with a final maturity no later than August 2045, according to the bond ordinance.

HilltopSecurities is the deal's financial advisor, Kutak Rock is bond counsel, and Ballard Spahr is disclosure counsel.

Denver last sold GO bonds in 2024 with a nearly $269 million triple-A-rated issue, which tapped voter-approved debt authorization from 2017's $937 million Elevate Denver program and 2021's $260 million RISE Denver program.

The city ended fiscal 2024 with nearly $1.05 billion of outstanding GO bonds, according to its annual financial report.