The home stretch

2018 legislative session ends on May 9

home-stretch

With three working days left in the 2018 legislative session after today, compromise on a couple of huge issues is tantalizingly close. Politics, feelings, power plays, and good, old-fashioned strong-arm tactics could still change the final outcome.

Transportation

After the Senate unanimously passed SB 18-001, the House has taken its time working on a package that incorporates three main components necessary for a statewide transportation funding solution:

  1. A shot in the arm of one-time revenues for state and local transportation and transit
  2. A timeout on a referred bonding question, in order to allow a chance for a 2018 citizen initiative (Denver Metro Chamber/Colorado Contractors Association sales tax proposal) to make the ballot and pass
  3. A 2019 referred bonding question (if the 2018 effort is unsuccessful) that – if passed – leaves no part of the state behind. State and local transportation and transit will receive funding.

The key in the House has been working to calm fears that the funds necessary for one-time and ongoing funding will not impair education funding, and the House amendments appear to hit the mark. SB 18-001 now requires the establishment of a $335 million reserve account if a 2019 bonding measure is approved. This will ensure that the state’s new obligations to transportation will not impact other areas of the budget in the event of an economic downturn. The bill still has to get through the full House, where additional tweaks are expected. However, the goal of the sponsors is to work with the Senate sponsors and deliver a bill that the Senate will agree to and avoid a conference committee.

Municipal courts and public safety

The drumbeat continued in 2018 with multiple bills, mostly backed by the American Civil Liberties Union (ACLU), with which CML continues to work with to try to meet in the middle. Key bills include:

  1. HB 18-1353 that provides state funding toward the unfunded mandate created by the state with HB 16-1309. Municipal courts will apply to the Department of Local Affairs (DOLA) for the funds to reimburse the mandate for defense counsel at first appearance. A small portion of the funds will also go to the Office of Alternative Defense Counsel (ADC) to prepare for implementation of SB 18-203 (below).
  2. SB 18-203 has been perhaps the most challenging bill of the session on this issue because, once again, an ACLU-backed bill is tinkering with aspects of municipal court operations. The final bill will require defense counsel for indigent defendants in one of three ways – but will allow municipal courts to continue contracting with a public defender of their choice. The only requirement is an evaluation by ADC or the court’s choice of other methods. The funding mentioned above in HB 18-1353 will allow ADC to determine how much to request to fund the evaluations once required. Faced with certain passage of this bill, CML worked to provide as many options for courts as possible, rather than risk a massive unfunded mandate ending up on the books. Whether or not the process mandate is an infringement of home rule authority for those municipal courts in home rule municipalities is a matter for the courts, should any municipality choose to pursue it.
  3. HB 18-1404  deals with internal affairs investigations and the accessibility of those records to the public. The introduced version of the bill was particularly troubling. Again, faced with the prospect of bad bill making it through the process, CML worked with the sponsors and other legislators to amend the bill such that the League could remove opposition. The bill is in the Senate now, and there are still efforts to clean up a few points that need clarity.

PERA

The unfunded liability of the Public Employees Retirement Association (PERA), with 27 CML-member municipalities included in the Local Government Division, is somewhere between $32 – $50 billion, depending on the source. PERA has become unsustainable in its current state, and months of effort have culminated in SB 18-200 that passed the Senate and House with different solutions and is now in a conference committee. The atmosphere around this bill is markedly different from many others, as legislators seem to fully understand that the must come to a compromise this year to stop the bleeding.  The key issue for CML is protecting the CML municipal members and their employees from unnecessary additional contributions because the Local Government Division is poised to be fully funded much sooner than the others.  It appears the League will be successful in that regard, although attention to the conference committee process is necessary to ensure no problematic language gets stuck into the committee report.

Beer and Liquor

The conundrum described in a recent CML Legislative Matters blog is the subject of SB 18-243, although the solutions proposed are not unanimously supported.  SB 16-197 changed the landscape of alcohol beverage licensing forever, with the biggest changes yet to come on January 1, 2019. At that time, existing fermented malt beverage (FMB) licensees that are only allowed to sell 3.2 beer will be able to sell malt liquor – or full-strength beer. Whether they realized the significance of that provision when it passed in 2016 or not, Colorado’s retail liquor stores became very concerned about it after a required working group created by SB 16-197 failed to recommend a solution to the legislature the retailers wanted. While SB 18-243 contains some of the consensus recommendations of the working group, the version that passed the Senate and is now under consideration in the House has some distinct additions to those statutes.

The League has managed to negotiate out some problematic language and is neutral on the legislation. Language CML asked for that ensures no new FMB licenses can be within 500 feet of a school (or at a distance less than that, if determined by the municipality) is included in the bill. It is also the subject of an “insurance policy” bill to be introduced today and pushed through in the event that SB 18-243 falters.

In the last few days, the bill is now a battle of Goliaths from various aspects of the alcohol beverage and retail industry.  Once the final outcome is known, the League will fully evaluate where liquor licensing in Colorado is headed and how municipalities may be impacted

When the dust settles…

All of the remaining bills alive, as well as logs of those bills CML supports and opposes, are on the CML website’s current legislative session page.  Shortly after the session ends, CML will publish a newsletter article alerting members of legislation that passed is already or will soon be effective. In early June, a full compendium of all the laws enacted affecting Colorado municipalities will be published and available on CML’s website.

Until then and any time, feel free to contact any of the advocacy team members on bills or issues in which you have an interest or on which you have questions.

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Keeping Colorado mussel free

musselHB 18-1008 recently passed a key hurdle by passing out of the Senate Finance committee on a 4-1 vote. A product of the Water Resources Review Committee, the legislation  helps to ensure continued funding of Colorado Aquatic Nuisance Species program (ANS) and protection of the state’s lakes and reservoirs. The program was first implemented in 2008 to prevent the introduction of zebra and quagga mussels by inspecting watercraft before they enter our waterways.

Due to the volatility surrounding Colorado’s severance tax revenue in recent years, the Colorado Division of Parks and Wildlife determined that using this revenue as it primary funding source left the program vulnerable and unable to confront the very real dangers an infestation might cause. The Mussel-Free Colorado Act provides a stable funding source of $2.4 million for the ANS program every year by requiring boat owners to purchase an ANS stamp ($25 for residents and $50 for non-residents).

After quagga mussel larvae were discovered in Green Mountain Reservoir in Summit County last summer, the Colorado Department of Natural Resources, state legislators, and local governments across the state acquired a heightened sense of urgency regarding the safety of our waterways and water infrastructure from these invasive species.

Zebra and quagga mussels are not native to the nation’s rivers, lakes and reservoirs and are considered our most serious aquatic nuisance species threat. They cause enormous problems for municipal water infrastructure by attaching to, clogging and impairing water storage, treatment and distribution systems.

Thus far, Colorado’s reservoirs have been able to resist a mussel infestation thanks largely to this vigorous inspection program. In states where infestations have occurred, controlling the damage that mussels inflict on municipal infrastructure becomes a permanent and expensive part of normal operations costing millions of dollars annually.

Without this important program municipalities and municipal water providers will be placed in the very difficult position of risking an infestation in its reservoirs or closing them off to recreational boaters entirely. With the recreational boating community contributing over $800 million to Colorado’s economy each year and much of those dollars going directly back to cities and towns in close proximity to these reservoirs – neither is a good option.

Fortunately, HB 18-1008 has received broad bipartisan support in both chambers of the general assembly with both parties acknowledging the importance of this program. CML will continue to support the legislation going forward and expects to see the legislation on the Governor’s desk in the next couple of weeks.

Use specific ownership tax for state transportation funding? Forget it.

We’re lucky in Colorado. There has always been a sense over time of doing things together between the state and municipalities. Home rule is respected, and the ability of city and town leaders to make decisions in their own communities to advance their own best interests is a cherished value.

This partnership is especially reflected in state-shared revenue relationships.

We are a fiscally decentralized state. Municipalities raise far more revenue locally and receive much less in state shared revenues. However, there are some significant examples where the state does step up to the plate to aid cities and towns, and the Highway Users Tax Fund (HUTF) is Exhibit “A” in that regard.

The state shares the gas tax and various motor vehicle registration fees with municipalities and counties on a formula basis. In 2018, we expect this amount to be around $144 million. This sharing arrangement has been in place for decades and rarely has been questioned. There is also a set aside for Colorado Department of Transportation (CDOT) transit grants, municipalities may use their HUTF proceeds for multi-modal projects, and the General Assembly has authorized regional sales and property taxes for transit. In the area of aviation, the state shares a portion of the aviation fuel tax with municipal airports.

It is an admirable system which has stood the test of time. Once again, it is time to “pay the piper” with additional transportation and multi-modal funding both for CDOT and for municipalities.

Finding the right funding solution

No one at the Capitol disagrees that something needs to be done; the challenge is crafting an appropriate solution.

We came awfully close last session with a bi-partisan bill crafted by Senate President Kevin Grantham, R-Cañon City, and Speaker of the House Crisanta Duran, D-Denver. It would have raised significant new dollars through a referred state sales tax increase more than doubling the amount of money each city and town is currently getting under the HUTF formula; and municipalities could have used the money for all sorts of local needs in transportation. Unfortunately, it did not pass.

At the moment there are a number of proposals being floated under the Gold Dome and by various interests outside the Capitol through the initiative process. Many are well intentioned. However, there is the law of good intentions and the law of unintended consequences. There is one glaring example that needs to go away, and quickly.

Using the Specific Ownership Tax is the wrong approach

According to a recent story in the Denver Business Journal, there are groups with which we are familiar circulating the idea of tinkering with the specific ownership (SO) tax for statewide transportation funding. They have recently been doing some statewide polling. The SO tax is assessed on motor vehicles annually based upon value and age. It is treated as a property tax, and it is generally distributed back to property taxing local governments (municipalities, counties, special districts, and schools) based upon the percentage each local government collects in property taxes as a percentage of all property taxes collected in that particular county. It has been a critical source of local revenue since 1937, and local governments can use the revenue for whatever purposes they deem.

taxbenefits

To those outside special interest groups enamored with this idea, we say, “drop it.” SO tax is a local government revenue source in lieu of a property tax – and for various local governments like school districts, a very important local revenue source. To raise it and use it for some other purpose breaks with a time-honored a state and local partnership as it relates to the SO tax.

Messing with the SO tax is a non-starter – certainly for municipal interests, and we think for other local governments, as well. It will be difficult enough to find a statewide solution without unnecessarily expending effort on tapping an inappropriate source of revenue. As it is said at the under the golden dome, “to be continued.”

CML Executive Director Sam Mamet and CML Legislative & Policy Advocate Morgan Cullen contributed to this blog

Modernizing Colorado 811

A significant stakeholder effort that began shortly after the 2017 legislative session led to the recently introduction of SB 18-167 to modernize Colorado’s 811 Call-Before-You-Dig Program. The program was created to prevent personal injury and property damage resulting from unintentionally harming underground facilities and utilities during excavation.

Due to a number of extenuating circumstances, there has been a concerted effort to transform Colorado 811 into a true one-call program in recent years. Currently, Colorado is the only state in the country that does not have a notification program that alerts all relevant facility owners when a locate request has been received.

SB 18-167 would eliminate Colorado’s tiered membership provisions after a two-year phase in period, to ensure all facility owners are receiving locate requests directly from 811. The bill would also create a 12-member safety commission with broad oversight and enforcement authority over the 811 program.  The commission would be composed of representatives from local government, facility owners, excavators and the CEO of the Notification Association.

CML sees a number of upsides to the current proposal, including the improved public safety and enhanced protection of municipal infrastructure. However,  we have also shared concerns about how this new safety commission would oversee municipal utilities and the cost of the transition for some of our member municipalities.

Last fall, the Colorado Association of Municipal Utilities (CAMU) objected to the prospect of a municipality being regulated by a state designated safety commission that they assert would have been an unconstitutional delegation of authority reserved to home rule municipalities and their respective utilities. Other municipalities have raised concerns that the changes would inundate their offices with an overwhelming number of locate requests that could cost municipal utilities hundreds of thousands of dollars per year.

To address these issues, CML has advocated for exemption language in the bill to exclude municipalities from the commission’s oversight authority in exchange for a requirement that they implement their own set of enforcement guidelines. We are also in the process of negotiating an amendment to give the safety commission a more prominent role in increasing the efficiency of 811 and implementing new policies that will help save facility owners and excavators valuable time and money over the long-term.

SB18-167 recently passed the Senate Transportation Committee on a 4-1 vote and will have to go through the Senate Finance and Senate Appropriations Committees before it goes before the full Senate.  CML will continue to monitor the legislation, on which the League is now neutral, and ensure that the final result will be positive for Colorado’s cities and towns.

Broadband for…some, if you’re lucky!

If you lived in an “average area” of the United States in 2011, you would have been thrilled to get broadband download speeds measuring 10Mbsp.  According to the FCC in 2011, that was the average broadband speed in the US.  By 2014, the average increased to 31Mbps.  Four years later in 2018, the FCC defines the minimum speed for broadband at 25Mbps down and 3Mbps up.

And then there is SB 18-002 – legislation that is meant to simply repurpose a large portion of the money collected on your phone bill to provide landline statewide and instead use it support private investment in modern broadband in rural Colorado. The sponsors are Sens. Don Coram, R-Montrose, and Jerry Sonnenberg, R-Sterling; and Speaker Crisanta Duran, D-Denver, and Rep. KC Becker, D-Boulder. There is no doubt about their resolve to crack the grip CenturyLink has had on the high cost support mechanism (HCSM) to make that money available for broadband. Unfortunately – with so many telecom lobbyists circling in chummed waters – the bill includes more than just HCSM money for broadband.

To be fair, the competition test and the process for determining an unserved area in current statute – thanks to the 2014 deregulation legislation that was supposed to open the floodgates to broadband deployment by the private sector – are much improved in SB 2. In addition, the bill came out of the Senate with a more immediate and more significant transfer of HCSM revenue for rural broadband grants

Now for the “not so good part.” Various elements of the telecom industry have stated they want to build modern broadband as soon as possible in a fair process that will help rural Colorado inch closer to parity with urban areas of the state. Inexplicably, an industry-backed amendment uncouples the statutory definition of “broadband network” with the FCC minimum speeds of 25Mbps down/3Mpbs up.

The result is that the Broadband Deployment Board may be required to give grants for broadband network deployment at speeds that are on par with the 2011 average speed. CML agrees with Colorado Counties, Inc. that this change is “effectively moving the state backwards with respect to establishing adequate service.”

As SB 18-002 moves through the House, the question will be whether or not the goal is to assist the private sector in building sustainable rural broadband networks that are forward-looking or just to subsidize rollout of networks reflecting the best that 2011 has to offer in 2018 and beyond. As local governments and private providers know all too well, the challenges that face rural Colorado make implementation of fast, reliable broadband more challenging than in urbanized areas.

Some have criticized the goal of 25Mbps as building a “Cadillac” network – easy to say when most of the folks saying that have 250Mbps or faster from their Denver Metro area providers. Perhaps a better comparison is 10Mbps as a 1976 Ford Pinto…when maybe folks should at least get a 25 Mbps 2014 Chevy Cruze.

No matter what, SB 2 needs to pass to ensure that HCSM revenue is available to private providers to get Broadband Deployment Board grants to bring better broadband to unserved areas of Colorado. Colorado communities will be watching very closely to see if the all the stated good intentions turn into fiber in the ground and fast, modern broadband for all.

PERA reform: One size fits most

PERA_Logo

The hardest part about pension reform is explaining it to the majority of public and private sector employees that are not guaranteed a specific retirement income in their retirement years. Trying to fulfill obligations of billions of dollars may not compute to those that sweat over their 401(k) or 401(a) performance, stress over whether they can kick in another percent or two to a 457 or IRA, and often wonder what they will have in their retirement years.

There is, however, one incontrovertible fact. Similar to a credit card, the balance due has to be paid to employees that enter retirement having faithfully participated in a pension plan and played by the rules in place. Unlike a credit card, bankruptcy for a public pension is not an option. Obligations have to be paid.

At this point, it matters less how the Public Employees Retirement Association (PERA) got to the point it is at now than it does how PERA moves forward on two fronts. One, how does PERA chip away and eliminate its unfunded liability? Two, what – if any – changes will be made going forward? The first question is the most urgent at this time because every day that goes by exacerbates the unfunded liability. Simply put, the grand reforms in 2005, 2006 and again in 2010 that were supposed to stem the losses were not enough.

If those unfamiliar with pensions were lost before, then trying to explain how each division of PERA is calculated separately might finish them off. People explaining that it would currently take as much as 78 years to fully fund the State and School Divisions of PERA rarely mention that the Local Government Division (LGD) timeframe is more like 45 years. Neither of these fall within PERA’s laudable goal to have all divisions fully funded in 30 years, but it illustrates that the LGD is in a much better situation than PERA’s other divisions.

Before the legislative session, both PERA and Gov. John Hickenlooper proposed plans to fully fund PERA in 30 years. While elements of the plans varied, the result for the LGD was full funding in 18 years under PERA’s plan and 19 years under Hickenlooper’s plan. The takeaway is that the LGD can be afforded a lighter touch than the other divisions and still meet the goal of full funding in 30 years.

There are 27 municipalities that are members of the PERA LGD – from Colorado Springs, Boulder, and Pueblo to Alma, Eckley, and Rico. Some of the municipalities are also in Social Security – an extra contribution required for the town and the employee. The impacts of increased contributions on both the employer and the employee are worthy of larger discussion, but they are significant. The League stands firm that if they can be minimized, then they should be minimized.

To that end, CML will advocate for proportional treatment of the Local Government Division in any legislation proposed this session:

  1. CML and PERA Member Municipalities support the goal of passing legislation in 2018 that will allow PERA to achieve 100% funded status in all divisions in 30 years or less with the following inclusions:
    1. Oppose any additional employer contribution in the Local Government Division.
    2. Support the governor’s proposal that employee contributions for new employees in the Local Government Division should be the same as current employees
    3. Support a reduction of the proposed additional employee contribution for employees in the Local Government Division
  2. CML and PERA Member Municipalities retain the discretion to oppose fixing in state statutes an automatic ratchet-up contribution mechanism that would:
    1. Unnecessarily create another automatic trigger affecting budget and revenue (i.e. TABOR, Amendment 21, Gallagher)
    2. Create budgetary impacts when local governments would be focused on reducing new costs in the budget to avoid layoffs or program cuts
    3. Bypass the legislative process that should rightfully be part of any potential increase in the expenditure of taxpayer dollars

Setting PERA on the path to good fiscal health is imperative to all Coloradans. Doing so in a fair and equitable manner to each current member and retiree is equally imperative, and applying the necessary prescription to heal the Local Government Division on its own merits is the only appropriate cure.

Spend it all now or protect rural Colorado? We can do both

The allure of “found money” is almost too much to resist. The $20 you find in your jacket pocket is money you never expected to have so what’s the harm in blowing it?

That is nearly the narrative that is beginning to play out at the Statehouse in a session that is not even a week old yet. But first let’s rewind:

  • SB 17-267, over the veryMake It Rain strong objections of many Republicans, changed the hospital provider fee (HPF) program to an enterprise, thus removing the revenue from that counting against the state’s TABOR revenue limit.
  • In addition to a multitude of other deals cut in what became a Christmas tree bill, Republicans secured a $200 million reduction in the state’s TABOR cap. They actually wanted to reduce the TABOR cap by an amount equivalent to that of the HPF money – over $800 million. That becomes important.
  • The mechanics of the federal tax relief bill, the Tax Cut and Jobs Act (TCJA), will actually cause an increase in state income tax collections – new revenue that counts against the state’s TABOR limit.

Luckily for those that argued for the nearly $1 billion reduction in the state’s TABOR limit, the “deal” only reduced it by $200 million. Even with the new income tax revenue from the TCJA, the state is still almost $570 million under its TABOR limit. Found money!  And now everyone in the Statehouse is clamoring to spend it…transportation, K-12, health care, and others.

They are all worthy causes, but is it really “found money”?  Is it wise to spend it – or more significant, is it wise to make long term fiscal commitments with it? By FY 19-20, the room under the TABOR cap is cut nearly in half. It does not take an economist to figure out that, barring a recession, Colorado will be right back up against the TABOR limit soon enough.

That presents a massive threat to rural Colorado. Past is prologue, and when the state exceeded its TABOR limit in 2015, the legislature wasted no time in appropriating severance tax revenue that mitigates energy impacts in local communities and supports state water and environmental programs. When it happens again, severance tax revenue is now the only stream that will be in the bullseye, thanks to SB 267.

One might argue the state could use some of the surplus to repay some of the $400 million siphoned from local governments’ severance taxes from 2008-2013 that kept the state budget afloat during the recession. Like the much larger K-12 “negative factor,” municipalities still view that as borrowed money that rightfully should be restored. The diversions nullified over $1 billion in jobs and infrastructure in rural Colorado, where Gallagher has bludgeoned local budgets and the economy has not thrived like the Front Range.

So perhaps it is time to stop and take a breath. Before trying to lock in multiyear bonding commitments for transportation that limit the state from protecting severance taxes in future years or spend down all the “found money” on other programs, it might be wise to look at solutions that protect rural Colorado.

The General Assembly can start by referring a question to the voters to debruce severance tax revenues. Unlike SB 267, the revenue would not go to an enterprise program, but the state would be off the hook for counting revenues that can swing wildly up and down from year to year. The catch is that the state can never divert the money and the tax structure remains unchanged – otherwise the debruced status of the funds goes away.

Removing that bullseye from key water programs and rural Colorado should be the first step in figuring out how to spend “found money” – not the last.