Enterprises Under Article X, Section 20 of the Colorado Constitution-part I

• Publication year: 1998
• Pages: 55
• Citation: Vol. 27 No. 3 Pg. 55

27 Colo.Law. 55 Colorado Lawyer 1998.

1998, April, Pg. 55. Enterprises Under Article X, Section 20 of the Colorado Constitution-Part I

---

55

Vol. 27, No. 3, Pg. 55

The Colorado Lawyer
April 1998
Vol. 27, No. 4 [Page 55]

Specialty Law Columns
Local Government Newsletter
Enterprises Under Article X, § 20 of the Colorado Constitution-Part I
by Amy Kennedy, Dee P. Wisor
Editor's Note

This is the first part of a two-part article discussing "enterprises" under the TABOR Amendment, Article X § 20 of the Colorado Constitution. Part II of this article will be published in the May issue

Article X, § 20 of the Colorado Constitution ("Amendment 1") was approved by Colorado voters and added to the Colorado Constitution approximately five years ago. Amendment 1 is a tax limitation, spending limitation, revenue limitation, and debt limitation that applies to all "districts," defined to include the state or any local government, excluding enterprises.1 Since Amendment 1 was added to Colorado's Constitution, there have been many challenges to actions governments have taken to comply with it. Some of these challenges have resulted in judicial clarification of the confusing provisions and undefined terms found in Amendment 1's text.

One area where there are still many unanswered questions is in the area of "enterprises" formed under Amendment 1. This article describes some of the court decisions relating to enterprise issues that have been rendered to date, discusses some of the enterprise issues that have yet to be settled by judicial action, and offers some thoughts about how some of the unsettled issues relating to enterprises may be resolved given existing precedent in other areas of the law.2

General

Pursuant to Amendment 1, an enterprise is exempt from all of the limitations of Amendment 1, including the limits on debt and spending. Section 2(d) of Amendment 1 defines an enterprise as follows:

"Enterprise" means a government-owned business authorized to issue its own revenue bonds and receiving under 10% of annual revenue in grants from all Colorado state and local governments combined.

An enterprise under Amendment 1 must satisfy each of the three components of the definition set forth above. This Part I addresses the requirement that the enterprise must be a government-owned business. Part II will address the second and third requirements, that the government-owned business must be authorized to issue its own revenue bonds and that the government-owned business must receive less than 10 percent of its annual revenue in grants from all Colorado state and local governments combined.

Government-Owned Business

In order to conclude that an enterprise exists under Amendment 1, it must first be determined that the activity in question is a "government-owned business." While neither "government-owned" nor "business" is defined in Amendment 1, the Colorado Supreme Court, in Nicholl v. E-470 Public Highway Authority,3 stated that in order to determine whether something is an enterprise for Amendment 1 purposes, it is necessary to decide whether it is both government-owned and a business, "given the ordinary meaning and understanding of these terms."4

The issue in the E-470 case was whether the E-470 Public Highway Authority ("Authority") was an enterprise. The Authority was created in 1988 when Douglas, Arapahoe, and Adams Counties entered into an establishing contract pursuant to the Public Highway Authority Law ("PHA Law").5 Other governments became participants in the Authority by subsequent amendments to the establishing contract. Under the PHA Law, governments can cooperate to form a highway authority, which then becomes a body corporate and a political subdivision of the state of Colorado. The PHA Law allows public highway authorities to be formed to finance, construct, operate, or maintain all or a portion of a beltway or other transportation improvement in a metropolitan region.

At the time of the E-470 decision, § 43-4-506 of the PHA Law also granted certain powers to an authority, including the power to issue bonds, assess and collect vehicle registration fees, impose sales and use taxes, and charge tolls for highway use.6 The Authority's primary sources of revenue are tolls from its existing roadway, the proceeds of a vehicle registration fee imposed in portions of Adams, Arapahoe, and Douglas Counties, and interest income. Although the Authority had the power to impose sales and use taxes under certain conditions, it had never attempted to use that power.

The Authority claimed it was an enterprise and so not subject to the limitations imposed by Amendment 1. The Colorado Court of Appeals agreed, but the Colorado Supreme Court held that the Authority was not an enterprise, determining that it was not a government-owned...