Revenue slated for municipal roads often redirected into county budgets
When the concept of fiscal fair play is discussed at the local government level, one of the main issues that arises is “double taxation.” This occurs, for example, when residents of municipalities are taxed at both the county and municipal level in order to provide the same public services.
This occurs most clearly with local transportation funding, where counties have the authority create a special, countywide “road and bridge mill levy” collected from property taxers from taxpayers in municipalities and those in unincorporated areas. Decades ago, the state recognized that municipal taxpayers could be taxed twice if a county diverted all road & bridge revenue to projects in unincorporated areas, which would require the municipality to tax residents once again to fund municipal road and bridge needs.
With its recognition of double taxation, the legislature directed that half of the road & bridge mill levy revenue collected from within a municipality should be returned to the municipality. Yet, as Colorado’s cities and towns struggle to fund street and bridge repairs – one of the top fiscal issues facing municipalities – this important source of transportation dollars has faced often dramatic reductions.
The legislature left open a loophole for counties to unilaterally reduce the shareback to municipalities by reducing the mill levy. Counties are then able to backfill their county road and bridge funds with other revenue, such as specific ownership taxes, while using the “saved” revenue for other purposes. While technically legal, it is patently unfair – and it is time for the legislature to once again intervene.
A 2014 CML review of 55 Colorado county road and bridge mill levies over the previous decade showed 34 counties have decreased their road and bridge mill levies when comparing the levies in 2014 from their respective high points between 2004 and 2014. Only seven mill levies were higher in 2014 than during the previous nine years.
Some of the decreases have been dramatic. Jefferson County cut its mill levy in half, which slashed $11.3 million from municipal budgets. The El Paso County road and bridge levy today is just 20 percent of what it was in 2005. In real dollars, the loss to municipalities in El Paso County totals nearly $5 million. Moffat County and Montrose County have simply eliminated the road and bridge mill levy altogether.
The diversions occur without municipalities being consulted and having a voice in the decision or whether and to what extent municipal revenue should be pledged by the county to other purposes. Ironically, this is the same argument used by counties against urban renewal projects, which occur after significant municipal investment (with no risk to county coffers) leads toward anticipated revenue. In the case of road and bridge, the examples a show that actual dollars are being collected from municipal taxpayers and diverted to other purposes right now, in spite of legislative intent.
Time to close the loophole, restore fairness
The decisions made by counties to reduce their road and bridge mill levies are made without any say in the decision by affected municipalities or even giving municipalities a seat at the table to talk about the impacts of such decisions. As a result, taxpayers in municipalities are on the hook to ante up again if they want to see potholes filled, streets maintained, and bridges remain safe.
This unequal treatment, allowed by a loophole in the law, should be rectified by the General Assembly in the same spirit it clamored to create fairness in the urban renewal process in 2015. The refrain then was that one level of local government should not be able to make decisions with the taxes of another level of local government without consent or remuneration.
On this concept, the legislature and governor have spoken. To that end, the Colorado Municipal League will support legislation set to be introduced this week that will restore the equity originally envisioned by the General Assembly decades ago. It will ensure property taxes remitted by taxpayers in incorporated areas make it back to the municipality for their road and bridge needs.