ANTI-TAX BALLOT ITEMS FOR 2010
Document updated: February 18, 2010
The following is a list of the 3 anti-tax ballot items taken from the Colorado Springs Gazette article “Trio of anti-government ballot measures go too far, critics charge” in the December 4, 2009 issue.
I removed the full news story and the opinions shared. However, this is one of the better lists of the contents of the various proposals.
BALLOT PROPOSALS
AMENDMENT 60
•Restores TABOR tax limits “that have been violated, changed, or weakened” without voter approval. •Essentially revokes “de-Brucing.”
•Sets limits of four years for future “de-Brucing” actions.
•For school districts, cuts current mill levy rates in half over 10-year period. Revenue to be replaced by state aid.
•Allows petitions in all districts for elections to lower property taxes.
•Sets expiration dates for certain tax rate and revenue increases.
•Applies a ten-year limit on future property tax increases.
•Eliminates ability to extend expiring property taxes without an election.
AMENDMENT 61
•Requires local governments and other entities to get voter approval before borrowing money.
• Requires local governments to repay debt within 10 years and limits amount of debt they can issue. After the debts are paid off, reduces the tax rates of the local entities.
• Prohibits borrowing in any form by state government.
• Bans state from using financial instruments called ‘revenue anticipation notes’ and ‘certificates of participation’ for certain projects.
PROPOSITION 101
•Lowers state income tax rate from 4.63 percent to 4.5 percent, further reducing it to 3.5 percent over a10-year period.
•Sets yearly registration, license and total charges at $10 per vehicle.
• Eliminates FASTER fees.
•Exempts $10,000 in new vehicle costs from sales tax.
•Eliminates sales tax on rental vehicles.
•Ends charges and fees, except 911, on telecommunication customer accounts.
•Requires that any additional charges be considered tax increases.
An assessment of this proposal is that the loss of revenues would be to such a level that the State would not be able to afford to pay employees to handle the vehicle registration process.
Assessments of Impact from the BELL POLICY CENTER
AMENDMENT 60 and
Amendment 60 would eliminate the freeze on school mill-levy rates and undo all elections in which voters opted out of the Taxpayer's Bill of Rights for local governments.
…based on what we know so far, we can say that this measure would set stricter limits on property taxes than currently imposed by TABOR. It would cripple local governments in their ability to raise revenue by overriding all local de-Brucing elections; apply a 10-year limit on all property tax increases; and put in place a mechanism where taxpayers could petition for tax cuts on the ballot of every election. It would also require local school districts to cut their mill levy rates in half by 2020, with local revenue to be replaced by the state.
AMENDMENT 61
Published Date: November 17, 2009
Author: Jones, Rich
Proposed Amendment 61 would make sweeping changes in how the state and local governments can use and issue debt.
It would ban the use of any kind of debt by the state of Colorado. We believe Colorado would become the only state in the nation without the authority to issue debt.
It would limit the amount of debt issued by local governments, require all local debt be approved by the voters in a November election, and require local governments to cut their tax rates equal to the average annual debt payments as debts are repaid.
How it applies to state government
A strict reading of the proposed initiative indicates that the state of Colorado would be prohibited from issuing debt of any kind, including general obligation bonds, certificates of participation, revenue bonds, tax anticipation notes or borrowing by "any other name."
According the proponents, Proposed Amendment 61 would reinstate the ban on "debt in any form" contained in Colorado's 1876 constitution.
"This new ban is on any state entity ... getting any type of loan at all. ... It is not just ‘money' the state can't borrow; ‘items of value' (buildings, land, vehicles, equipment, funds, bonds, stocks, etc.) are included. ...The state may buy, but not borrow, even from itself – no more borrowing cash funds for the general fund, for cash flow in a fiscal year, for ‘balancing' budgets with next year's revenue, or for phony state emergencies. No borrowing, period! Not even one day! No more loopholes!" (1)
Colorado is prohibited from issuing general obligation bonds; however, the Treasurer's Office issues revenue anticipation notes to help the annual cash-flow needs of the state's General Fund and local school districts. In recent years, the state has used certificates of participation to fund buildings on the Anschutz Medical Campus, to fund capital construction projects at 12 college campuses throughout the state and to repair, renovate and replace K-12 schools with major structural problems throughout the state, improving the health and safety of Colorado schoolkids. None of those projects would be allowed if Proposed Amendment 61 passes.
How it applies to local government
Local governments, including enterprises, authorities and other political entities, may borrow money or other items of value only if approved by the voters in a November election. All local borrowing will be considered bonded debt that must be repaid in ten years. Therefore, title and notice requirements under TABOR will be applied to local elections to authorize bonded debt.
Local governments currently use certificates of participation, lease-purchase and other forms of borrowing. These can be entered into without voter approval, and this initiative will make it more difficult for local government entities to use these mechanisms to borrow funds.
In addition, local governments would be required to cut their tax rates equal to the average annual amount they pay on their debt after the debt is paid off, even if the debt is not being paid with tax revenue. These are characterized as "voter-approved revenue changes," thus lowering the local TABOR revenue limit.
For example, Arapahoe County is spending about $1.6 million per year in COP payments for its new judicial complex. Once the COPs are paid off in 2017, it will have to cut its tax rates to reduce its revenues by $1.6 million annually. It has to do this even though the COPs are being paid with lease payments from the Arapahoe County Airport Authority.
Proposed Amendment 61 would also limit the amount that local governments could borrow to 10 percent of the assessed taxable value of real property in its jurisdiction. All amounts borrowed by the local government and all of its authorities would be included when determining whether the ten percent limit has been met.
Under current law, counties and municipalities can borrow up to three percent of the actual assessed value of real property in their jurisdiction. However, the proponents intend to limit the total that can be borrowed to 10 percent of the assessed taxable value of residential and non-residential property by applying the assessment rates to the actual assessed value of the property.
For example, under current law, Arapahoe County can borrow up to 3 percent of the actual value, as determined by the assessor, of the taxable property in the county. In 2008, the actual value of taxable property equaled about $65 billion and the 3 percent debt limit equaled $1.9 billion. If the limit in Proposed Amendment 61 is applied, the debt limit would equal 10 percent of the $7.8 billion total assessed taxable real property or $780 million.
PROPOSITION 101
Published Date: December 7, 2009
Author: Jones, Rich
Proposition 101 ("Concerning limits on government charges") is intended to drastically reduce a wide range of state and local taxes and fees in Colorado.
The first sentence of the measure reads, "This voter-approved revenue change shall be strictly enforced to reduce government revenue." Proponents say they intend for this language to be interpreted according to the provision in TABOR that defines spending limits. If so, then proponents clearly intend to repeal Referendum C, passed by voters in 2005, and impose a new, lower state spending limit moving forward. And just like before Ref C, this new limit would ratchet down state spending after recessions.
Proponents also intend the measure to impose new, lower spending limits in all cities and counties in Colorado.
Based on preliminary estimates from the Bell Policy Center, when fully implemented the provisions of Proposition 101 would reduce state income tax revenues by $1.2 billion per year (current value), state and local revenues from a range of sales taxes and vehicle fees by well over $1.1 billion per year (current value), and state revenues from telecommunications charges and fees by $4.5 million (current value) per year.
When fully implemented, the provisions of Proposition 101 would cut state revenue by at least:
- $1.2 billion in income tax revenues (rate reduced from 4.63% to 3.5%)
- $179 million in transportation revenues from elimination of FASTER fees
- $164 million in transportation revenues by cutting registration, license and title fees to $10 per vehicle
- $100 million in sales taxes from exempting $10,000 in vehicle value from sales taxes
- $22 million by eliminating sales taxes on rental vehicles
- $4.5 million in telecommunications fees by prohibiting all fees, except those to fund 911 services. Another $72 million that is used to subsidize telecommunications services in rural areas would be cut, but these funds go to a private escrow account and not the state.
Total equals $1.7 billion (current value)
When fully implemented, the provisions of Proposition 101 would cut local government revenue by at least:
- $500 million in specific ownership taxes by cutting them to $2 per new vehicle and $1 per used vehicle
- $100 million in sales taxes from exempting $10,000 in vehicle value from sales taxes (based on an average 3 percent sales tax rate for local governments)
- $22 million by eliminating sales taxes on rental vehicles (based on an average 3 percent sales tax rate for local governments)
Total equals $622 million (current value)
Totals do not include the loss of state and local sales taxes on leased vehicles because we were not able to gather the necessary data on vehicle leases to calculate this amount.
Our calculations for the amount of sales taxes reduced by the $10,000 exemption on the value of a vehicle are based on sales of new and used vehicles at Colorado franchised new vehicle dealers only. They do not include sales by independent auto dealers and private individuals.
Sam Mamet
Executive Director
Colorado Municipal League
This email was forwarded to the CAL Legislative Committee. It originally went to the Colorado Municipal League and was forwarded to us by Sam Mamet, the CML Executive Director.
From: Sherman & Howard Public Finance Advisory [mailto:
Sent: Tuesday, February 16, 2010 9:54 AM
To: Sam Mamet
Subject: Sherman & Howard Public Finance Advisory: Proposition 101 and Amendments 60 and 61 – What to do in 2010?
Proposition 101 and Amendments 60 and 61 – What to do in 2010?
Proposition 101 and Amendments 60 and 61 have been certified for the November 2010 ballot by the Colorado Secretary of State. Each of these initiatives would put significant new restrictions on the finances of the State of Colorado and its local governments. For more information on the impact of the initiatives if they are approved, please see Sherman & Howard’s webinar and related materials available by clicking here.
This Client Advisory describes some of the practical steps that governments may choose to take between now and November 2010 to be prepared if one or more of the initiatives is approved.
- A State level borrower or local government that has financing plans calling for new capital projects or planned refinancings in the next couple of years should consider revisiting those plans in light of the potential passage of Amendment 61. Obligations issued before the end of 2010 would not be subject to new significant financing restrictions that would be imposed by Amendment 61 if it is adopted. If a potential financing would require voter approval, governments should consider seeking authorization for that financing in 2010. This way, if Amendment 61 is approved, the government would have the option to complete the financing in the final two months of 2010 without the additional restrictions of Amendment 61.
If Amendment 61 is approved, the State and State-level authorities, enterprises, and other entities will be prohibited from virtually all financing activities. In addition, local governments:
- Would not be able to undertake a non-enterprise financing if all of its outstanding obligations, including general obligation bonds, revenue bonds, and obligations subject to annual appropriation, when combined, exceed 10% of the assessed value of the real property included within the government’s boundaries;
- Would only be able to undertake financings consisting of bonded debt;
- Could only enter into enterprise, lease-purchase, and urban renewal authority financings (among others) with voter approval;
- Could only issue obligations that mature in no more than ten years and are subject to prepayment at any time;
- Could only refund a prior transaction with voter approval, even if the refunding bonds carried a lower interest rate; and
- Would have to seek authorization for debt in a separate election question from a property tax increase that would be used to pay that debt if Amendment 60 also is approved.
- Any 501(c)(3) nonprofit organization or other private entity planning to utilize tax-exempt private activity bonds and any State or local issuer of private activity bonds should prepare to complete any transactions scheduled for the next few years in 2010, if possible.
As described above, Amendment 61 places significant new restrictions on borrowing that would take effect in 2011. Amendment 61 applies to “any loan” for “any reason.” Previous restrictions on governmental borrowing, such as those in Article X, Section 20 of the Colorado Constitution (“TABOR”), have been interpreted not to include private activity bond financings because the governmental issuer has no pecuniary liability to repay the bonds. However, the restrictions of Amendment 61 apply to a broader class of obligations than TABOR or any other law, and it is possible that these restrictions will apply to conduit financings as well.
- If a government has obligations with a final maturity in 2011 (including short-term obligations such as tax or revenue anticipation notes), it should consider preparing to prepay those obligations no later than December 2010 to avoid triggering a decrease in revenue if Amendment 61 is approved.
If Amendment 61 is adopted, governments will be required to reduce their tax revenues upon the full repayment of a financing in an amount equal to the average repayment cost of the financing. This reduction is required even if the obligation is not repaid with taxes. However, this reduction will not be required for obligations finally repaid prior to 2011.
- Any State or local borrower with outstanding interim financing should be prepared to convert to permanent financing prior to 2011.
Amendment 61 would prohibit any borrowing from continuing past its original term. Therefore, after 2010, any short-term financing such a construction loan could not be converted into a permanent financing with a later maturity date.
- A government that has outstanding variable rate debt secured by a letter of credit or standby bond purchase agreement that will expire before the debt is repaid should consider extending the term of the liquidity facility or converting the debt to a fixed rate during 2010 to avoid a potential inability to execute a new liquidity facility if Amendment 61 is approved.
As described above, Amendment 61 places significant new restrictions on borrowing that would take effect in 2011. Because these restrictions would apply to “any loan” in “any form” it may not be possible for a borrower to obtain a new letter of credit or standby bond purchase agreement to replace an existing liquidity facility after 2010 without treating the new obligation as a loan under Amendment 61. If that is the case, a new liquidity facility could be prohibited for State level borrowers and subject to new restrictions for local government borrowers. Depending on the terms of a particular borrowing, the inability to replace a liquidity facility can have very negative results for the issuing government. Generally, the outstanding bonds will be purchased by the expiring liquidity provider and will then bear interest at a “bank rate” that is significantly higher than the current rate on the bonds. In some situations, the bonds will also mature more quickly than the government will be able to pay, and the other restrictions of Amendment 61 may prevent the government from refinancing the bonds.
- If a local government is considering asking its voters for a property tax increase as a sustainable source of revenue as part of its long term plans, it may be worthwhile to submit the election question for that increase in 2010.
If Amendment 60 is adopted, any property tax increase after 2010 must expire within ten years. A property tax increase election that is properly conducted under TABOR in 2010 will not be subject to the ten-year limitation that will take effect in 2011 if Amendment 60 is approved.
- Local governments that are considering submitting a property tax increase to their voters this year should be aware that the dollar amount listed in the election question may become a limit for all future years, and should size the dollar amount accordingly.
Amendment 60 would cause the expiration of property taxes “exceeding the one annual fixed, final, numerical dollar amount first listed in their tax increase ballot title.” Under the Colorado courts’ current interpretation of TABOR, local governments may authorize a property tax increase of a certain dollar amount for the first year that may subsequently grow in future years based upon the growth of the assessed valuation of the local government. For example, a tax increase question can authorize an increase of property taxes by $100,000 in the first year and by whatever amount is generated in future years by a mill levy of 5 mills. In that case, if 5 mills generates more than $100,000 after the first year, governments may generally retain the entire amount without regard to the $100,000 limit in the first year. Amendment 60 would change this law so that no government could collect an amount greater than the dollar figure listed in the election question.
- Local governments should be aware that any election to retain property tax revenues above the TABOR limit (often called “debrucing” elections) approved in 2010 or before would be voided by Amendment 60.
Amendment 60 states that “Starting in 2011…prior actions to keep excess property tax revenue are expired.” Therefore, even a property tax debrucing that occurs in 2010 will likely be considered a “prior action” in 2011 when Amendment 60 would take effect and would be voided if Amendment 60 is approved.
- A local government that submits an election question to its voters seeking the extension of an expiring property tax in 2010 should consider using the full tax increase mechanism in TABOR to decrease the likelihood of the extension becoming void if Amendment 60 is approved.
Under current Colorado law, an election to extend an expiring tax is not a “tax increase” for TABOR purposes, and therefore the election need not comply with the TABOR provisions relating to tax increase elections. However, Amendment 60 would cause the expiration of property tax rates approved after 1992 without following the TABOR procedures for tax increases, which may include property taxes that have previously been extended without following those procedures.
- Local governments that rely upon property taxes or fees charged against property and which have unelected boards should consider whether it would be advisable (and whether it is possible under law) to change their boards to an elected board in 2010.
Amendment 60 also states that unelected boards may not impose mandatory fees or taxes on property. Otherwise, the government will be unable to collect any mandatory fees or taxes beginning in 2011 if Amendment 60 is approved.
- If a special district wishes to submit property tax or debt questions at a spring election, it should consider doing so at the May 2010 election, as this may be the last opportunity to do so if Amendment 60 or Amendment 61 is approved.
Under current Colorado law, special districts generally hold their regular elections in May of even-numbered years. Special districts may submit tax and debt increase questions to their voters at those elections. Amendments 60 and 61 would change this to allow property tax and debt questions only at November elections.
Sherman & Howard has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the Firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal
representation.
© 2010 Sherman & Howard L.L.C. February 15, 2010
1