Taxing arithmetic refigured
Kelly Sloan, The Business Times
Mesa County sales tax revenues will once again count in the calculation of state constitutional tax and spending limits.
But Grand Junction sales tax revenues will continue to be excluded from Taxpayer Bill of Rights (TABOR) limits.
The Mesa County Commission and Grand Junction City Council came to different decisions after reconsidering what revenue is and isn’t subject to TABOR as well as a Colorado Supreme Court ruling on the issue.
Whether or not there are legal grounds to continue to exclude county sales tax is beside the point, said Mesa County Commissioner Rose Pugliese. “The decision is more about doing what is right for Mesa County than simply determining if there was a legal excuse to remove this tax from the calculation,” she said. “As far as I’m concerned, this is what our constituents want. In the future, if Mesa County wants to keep additional funds for projects, the board must go to a vote of the people.”
But Grand Junction Mayor Sam Susuras said he’s yet to see evidence to convince him the city should reverse course. “After reviewing all of the information and talking to people and consulting with our city attorney, we came to the conclusion that there is nothing written in TABOR that says that ballot issues that were voted on before it went into effect are to be disregarded,” he said. “In my opinion, the city staff have done nothing wrong.”
The TABOR amendment to the state constitution approved by Colorado voters in 1992 restricts increases in government tax collections and spending to a formula that factors in population growth and inflation. Any revenues that are collected above limits must be refunded. And any increase in taxes must be approved.
Mesa County and the City of Grand Junction stopped including sales tax revenues in TABOR calculations in 2007, the only two jurisdictions in Colorado to do so.
At the time, Denver attorney Dee Wisor advised the county and city that Colorado case law allowed the exclusions because voters approved the county and city sales taxes prior to the adoption of TABOR and a second election wasn’t required.
Wisor referred to a 1995 Colorado Supreme Court ruling providing legal precedence for the exclusion of taxes approved by voters prior to TABOR. In Nicholl v E-470 Public Highway Authority, the court heard a case in which voters approved a vehicle registration fee in 1988 for the purpose of funding construction of the E-470 beltway. The court found that when voters authorized the fee, they “also authorized the authority to spend for that purpose whatever revenues it collected.” Consequently any increase in revenue is automatically considered to be approved by the voters and “need not be approved again,” the ruling stated.
Counter arguments point to wording in TABOR that explicitly refers only to “revenue changes approved by voters after 1991” and that the fee in the court case was project-specific in a way county and city sales tax revenues are not.
Confusion surrounds how the change to exclude county sales tax came about in the first place.
The Mesa County Commission in place in 2007 didn’t make an official decision to do so, and no records exist of any formal action by the county, although some have suggested an “informal” decision was made to accept Wisor’s advice and exclude the tax.
Janet Rowland, a member of the commission at the time, said she heard about the exclusion issue in local media reports. Since then, Rowland said she’s “racked my brain trying to figure out what they might be referring to.”
“Granted, it was six years ago. But if there was any discussion, it was very brief and vague,” Rowland said. “I would never have agreed to exclude sales taxes from TABOR limits.”
The City of Grand Junction stopped including sales tax revenues in its TABOR calculations based on the same advice from Wisor. At the time, the decision to make the change was made by Laurie Kadrich, then city manager, in consultation with Jon Peacock, county administrator at the time. Like the county commissioners, city council members didn’t approach the change with a formal vote, but were apparently advised of the change.
On May 20, the three county commissioners voted unanimously to include sales tax revenues in the TABOR calculation from 2012 forward.
On May 22, the city council voted 5-2 to continue the exclusion. Susuras joined with Bennett Boeschtenstein, Harry Butler, Jim Doody and Phyllis Norris in voting in favor of the measure. Marty Chazen and Rick Brainard voted against.
Chazen said he agrees with the county commissioners. “The sales tax should be included in the formula, as it was before 2007, in order to comply with the spirit of TABOR. When the people voted for TABOR, they knew what their tax pool was …. They were not thinking about specific votes made years before.”
Susuras and Chazen agree that as a strictly practical matter, the issue is moot for now. Over the past four years, the statute of limitation for TABOR retroactive refunding, there was no excess revenue to refund.
“The key point to note for the city is that in recent years it makes no difference, because averages are being driven by residential taxes, not sales tax,” Chazen said.
The same goes for the county, although some have noted the area economy was booming at the time sales taxes were excluded from TABOR calculations.
Meanwhile, other questions linger.
In December 2006, the commissioners approved changing the Mesa County Building Division to an enterprise, in turn establishing the building inspection fund as an enterprise fund for TABOR purposes. Under TABOR, enterprise funds are excluded from tax and spending calculations.
Rowland said the commission specified that the change start in 2007. She said she’s concerned records indicate building department revenues were excluded retroactively from 2005, contrary to the directions of the commission.
Pugliese said the matter is an “ongoing issue with respect to TABOR and something we need to keep looking into.”