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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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.

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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

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.

2016 legislative session – not quite done

Legislators left May 11 but session actually ends on June 10

It is always interesting to read the final review of any legislative session written by legislators, lobbyists, and associations very soon after the final gavel falls. For legislators, their work is done, for the most part, and the campaign season (for many) kicks into full swing. For others, assessments are due to members, constituencies, and clients – and all begin writing reports right away.

That includes CML.  Lobbyists quickly compiled an article for the most recent CML Newsletter quickly summarizing “immediate attention” items have already been signed into law or that will become law upon the signature of Gov. John Hickenlooper. In addition, CML will publish online the 2016 Laws Enacted Affecting Colorado Municipalities once all legislation has been signed or vetoed. Finally, the CML advocacy team will spend time with our members assisting with inquiries about new laws and briefing members at sessions at the CML Annual Conference later this month.

However, all of this reporting and activity trying to let people know what happened often ignores that the legislative session is not over under the final vote has been cast.  Gov. Hickenlooper has the final vote, and the League asked him to cast it in favor of municipalities on two critical issues.

Municipalities in control of municipal streets

The governor has already vetoed HB 16-1231, which was both expected and appreciated. The bill would have implemented a total ban on the use of red light cameras as a public safety tool. The legislature wanted to act like a city council and take away the right of local citizens and their elected leaders to govern local themselves on local issues , and Gov. Hickenlooper correctly and thankfully said “no.” He stated that “the bill [denies] communities the right to decide for themselves based on their own traffic safety needs.”

Still one more vote to cast against a costly unfunded mandate

Both the Denver Post and the Pueblo Chieftain – and CML plus a whole lot of municipalities – have urged the governor to prevent a costly and unnecessary unfunded mandate on municipal courts by vetoing HB 16-1309. The key issues of opposition are in the editorials, as well as CML’s veto request, but essentially the legislation is based on the false premise that Colorado municipal courts are intentionally trying to jail indigent and homeless people or trump the right to counsel of all defendants in court.

These spurious accusations are as inaccurate as they are offensive, especially to dedicated municipal judges and court administrators, and the “solution” offered by HB 1309 is a costly unfunded mandate on municipal courts. It would require an attorney to be paid to be on standby in every municipal court on the offhand chance a defendant requested an attorney for an advisement (first appearance). It far exceeds the constitutional allowance for “reasonable time” to assign a defender, if one is requested. Without state funding to implement the requirement, it violates state law and the Taxpayers Bill of Rights prohibiting unfunded mandates.

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An otherwise productive session

While the fate of HB 16-1309 will not be known until June 10, at the latest, all but one other bill supported or opposed by CML have been acted upon. The goal is to defeat 100% of oppose bills and pass as many support bills as possible. Depending on the outcome of this week, between 92-100% of the bills CML opposes will have been defeated and nearly 70% of the bills CML supports will be enacted.

Fiscal Fair Play: Road & Bridge Mill Levy

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.

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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.

Real dollars

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.

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