Amendment One: Government by Plebiscite
| Publication year | 1993 |
| Pages | 292 |
| Citation | Vol. 22 No. 2 Pg. 292 |
1993, February, Pg. 292. Amendment One: Government By Plebiscite
On November 3, 1992, the voters of Colorado approved Amendment 1, commonly known as the Taxpayer's Bill of Rights ("TABOR"), which adds a new § 20 to Article X of the Colorado Constitution. Because it transfers many tax and spending decisions from elected representatives to the voters, TABOR is probably the most significant government reform measure approved by Colorado voters since municipal home rule was approved in 1902.
TABOR so drastically changes existing notions of representative government and governmental finance that it is likely to be subject to interpretation and litigation for some time. It is uncertain whether and to what extent existing precedent concerning local government will continue to apply. The purpose of this article is to summarize TABOR's provisions, raise interpretive problems and offer guidance where possible.
TABOR limits taxes, spending, revenue and debts. It provides that "[i]ts preferred interpretation shall reasonably restrain most the growth of government."(fn1) TABOR was generally effective December 31, 1992. Its provisions, which are self-executing and severable, supersede conflicting state constitutional, statutory and charter provisions, along with other state and local provisions.
In advising clients about how to implement TABOR, lawyers should understand that the principal enforcement mechanism is individual or class action suits which have the highest civil priority of resolution. Successful plaintiffs are allowed costs and reasonable attorney fees, but the same is not true for a defendant unless a suit against the defendant is ruled frivolous. Revenue collected, kept or spent illegally during the four full fiscal years before a suit is filed must be refunded with 10 percent annual simple interest from the time of the initial conduct.(fn2)
The initial question for any lawyer who examines TABOR is which governments are covered. The term "district" is defined to include the state or any local government, excluding enterprises.(fn3) The term "local government" is not defined in TABOR, nor is it defined elsewhere in existing constitutional provisions. It is not clear what is meant by the term "local government" or how broadly it will be construed. It can be argued that some entities which are created by the state, but which do not have any power of taxation or significant police power, are not local governments. This may mean that an urban renewal authority or housing authority would not be covered by TABOR. The term local government does not appear to include any independent for-profit or nonprofit corporation. However, if the local government exercises too much control over the corporation, it may be part of the local government.(fn4)
Enterprises are excluded from the provisions of TABOR. An enterprise must meet three separate tests on an annual basis.(fn5) First, the enterprise must be a "government-owned business." Certainly, water, sewer and electric utilities, golf courses and airports should be considered businesses. However, it is not clear whether other functions performed by government, such as recreation or street functions, are businesses. These functions have traditionally been exercised by government entities, but there are also private entities which provide these services. Additionally, the business must be government-owned. While it is clear that a city water utility is government-owned, there is some concern that a single-purpose entity---such as a water district--- cannot be a government-owned business. A suggested analysis would be that the special district is the government that owns the water utility which is operated by the district. This analysis would treat multiple-purpose entities (such as municipalities) and single-purpose entities (such as special districts) similarly.
The second part of the enterprise test is that the government-owned business must be authorized to issue its own revenue bonds. There is some concern that this means the enterprise must be an independent entity---such as the Denver Water Board---with a separate governing body and authority to issue revenue bonds in its own name. However, this places form over substance and would lead to an increase in the growth of government bureaucracy. If the governing
The third part of the enterprise test is that the business must receive less than 10 percent of its annual revenue in grants from all Colorado state and local governments combined. The term "grants" is not defined. There is an argument that a single-purpose special district can be an enterprise even if it levies property taxes which amount to more than 10 percent of its annual revenue. The basis of this argument is that the property tax does not constitute a grant from a government. However, if the district is analyzed as a government which owns a business, as suggested above, it is consistent to say that the government levies the tax and any transfer of tax revenues to the business is a grant. This would avoid treating enterprises of a special district differently than enterprises of a general purpose government, such as a city. If a government utility or other enterprise meets all three parts of the enterprise test, it is not subject to any of the TABOR limitations. However, the government owner remains subject to such limitations.
Effective November 4, 1992, districts must have voter approval in advance for
any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase for a property class, or extension of an expiring tax, or a tax policy change directly causing a net tax revenue gain to any district.(fn6)
It may be argued that "causing a net tax revenue to any district" modifies the entire sentence. However, until interpreted by the courts, it is probably prudent to assume that the phrase only modifies "tax policy change."
The most immediate problem for a...
To continue reading
Request your trial