Face The State Staff Report
A court date has been set in a heated lawsuit that could have a dramatic impact on the way Colorado lawmakers attempt to raise property taxes in the future.
The legal action stems from legislation signed into law by Gov. Bill Ritter last year. A key provision in Senate Bill 199 changed the mill levy formula in state statute, which resulted in a net property tax increase for most Colorado homeowners and business owners. The new law mandates that in the state's 100 school districts where mill levy rates were scheduled to go down, they must remain at current levels.
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In December, a group of plaintiffs filed suit against the Colorado Department of Education, claiming that the provision violated the state constitution’s Taxpayer’s Bill of Rights, which requires a vote of the people for “any tax policy change resulting in a net revenue gain.” The lawsuit was brought forward by the Independence Institute, a free market think tank, and was joined by the Mesa County Commissioners and a number of aggrieved property owners.
The State Board of Education, claiming that CDE is the wrong agency to be targeted, has asked the court to be removed as a defendant. Meanwhile, Ritter has sought to intervene as defendant. A Denver District Court hearing has been set for May 5.
State Board of Education member Bob Schaffer, R-Fort Collins, believes Ritter has a lot at stake in the courts’ pending decision, having approved a property tax hike over the objections of the state’s attorney general.
“He has a clear interest in proving the attorney general wrong,” said Schaffer. “While the massive tax increase bill was passing, the legislature and governor understood that they were likely in violation of the law and the constitution
Legislative analysts estimate the provision will bring cost taxpayers an additional $3.8 billion through 2017. Original 10-year revenue increases were estimated at $1.7 billion. The new money generated will increase the local share of school funding, allowing for more state spending on other programs.
“The state budget should not be balanced on the backs of the working poor, small businesses and the elderly living on a fixed income, without at least giving them a chance to vote on the issue,” said Mesa County Commissioner Janet Rowland.
“I’m not sure why the Governor wants to be sued,” she added. “We do have a very strong case. Perhaps he is worried.”
But Schaffer believes Ritter already was locked into his decision.
“I think the Governor would intervene no matter what, because he has an executive interest in resolving the question in favor of government and against the taxpayers,” he said.
One legal analyst insists Ritter acted tactically in the best interests of trying to stop the suit.
“Because CDE is somewhat independent of the Governor, he would have difficulty dictating their litigation strategy, and he could do that more ably if he is a party and has his lawyer at the table,” said Jason Dunn, former deputy attorney general and an attorney in the Denver office of Brownstein Hyatt Farber Schreck.
If the court denies CDE’s request to be removed from the suit, Schaffer says the state board would be faced with three options: “to fight it and to invent an argument before the court that the massive property tax increase on middle-class homeowners is somehow constitutional, to stipulate and to agree that it is indeed unconstitutional,” or “to do nothing.”
According to Dunn, Ritter’s legal briefs have conceded that the provision was a “tax policy change.” He sees the lawsuit opponents’ case hanging on the argument that local “de-Brucing” elections in 175 Colorado school districts already fulfilled the constitution’s popular vote requirement.
But Dunn pointed out that most instances of the local ballot language specifically sanctioned districts to keep extra revenues “without raising taxes.”
“Those elections were not pitched to voters as, ‘Later, can we change your mill levy?’,” said Dunn. “Those elections never contemplated anything like this.”
Rowland said the same was true in her school district.
“The language from the Resolution that was approved by the Mesa County School District 51 School Board, which ultimately authorized placing the question on the ballot, was clear that it applied to non-tax revenue and would in fact not raise taxes,” she said.
Dunn believes the plaintiffs’ case is strong, but believes the results are less certain if the case reaches the state’s highest judicial body.
“The Supreme Court has shown great distaste for TABOR,” he said. “It’s hard to predict what will happen at that level.”