DALLAS — Facing the risk that voters might curtail state and local debt issuance in two months, Colorado issuers are sizing up the cost of three November ballot issues and hastening bond deals before the measures have a chance to pass.
In Vail, the town council is trying to put together a $12.3 million tax-increment financing for a parking garage and other facilities in the Lionshead resort community before November.
Two of the ballot measures — Amendments 60 and 61 — could reduce issuers’ ability to issue debt. Vail’s bonding capacity would drop from the current $26 million to about $8.5 million, according to town officials.
In addition, if the measures pass local governments could only issue debt with a maximum maturity of 10 years, rather than the 20 years Vail is currently contemplating. Amendment 61 would also require a public vote before any debt issue, even one-year tax anticipation notes.
The third ballot measure, Proposition 101, would reduce vehicle registration fees to $10 for all vehicles, regardless of size or weight. The ballot item also would eliminate taxes on phones, pagers and cable utility bills.
While the ballot measures, if approved, would not take effect until Jan. 1, local governments are anticipating a last-minute flood of deals if the measures do pass, said Dee Wisor, attorney at the Denver law firm Sherman & Howard and bond counsel to Vail.
“There’s concern that after the election there’s going to be a rush to market and that there’s going to be pressure on ratings,” Wisor said. “I have some clients who are queuing up to do these deals after the election but before the end of the year. But if the ballot issues don’t pass, they probably won’t do the deals this year.”
Vail also wants to take advantage of the lowest interest rates in 40 years, Wisor said. And it wants the economic boost that would come with starting the projects as soon as possible. Under current law, the town commissioners, acting as the Vail Reinvestment Authority, do not have to call an election to issue the TIF bonds. If Amendment 61 passes, they would have to get voter authorization if they were to issue the debt after Jan. 1.
Vail’s defensive posture on its financing is mirrored throughout Colorado as all bond issuers anticipate what opponents of the ballot measures call a “taxpayer-induced recession.” In towns and school districts across the state, finance officers are submitting reports on the impact of passage.
The Colorado Hospital Association estimates the three measures would permanently remove $4.2 billion of taxes from state and local government’s annual budgets, with $3.3 billion specifically cut from the state budget.
For the state, Amendment 61 would ban all borrowing, even revenue anticipation notes used to smooth cash flows to school districts.
The Colorado Department of Transportation estimates that Proposition 101 would cut its revenue by a third or $277 million annually.
According to a report issued last week by Piper Jaffray & Co., Proposition 101 alone would reduce state revenues by $1.7 billion, including a $1.2 billion cut in income taxes.
“This comprises 15% of the state’s $7.9 billion in 2009-10 general fund revenues,” the report noted. Local revenues would drop by $622 million, according to the Bell Policy Center think tank in Denver.
Amendment 60 would cut property taxes for non-debt-related expenditures of schools in half by 2020 and require the state to replace lost revenue estimated at $1 billion or 12.6% of the general fund, according to estimates from Sherman & Howard. Amendment 60 would also require public utilities, state universities and other government enterprises such as municipal golf courses to pay property taxes for the first time.
“Most utilities have not calculated the value of their properties, and therefore do not know the relative amount of taxes that would need to be paid,” according to Piper Jaffray. “The percentage impact on each individual utility will vary tremendously and ultimately will be governed by rate covenants, as delineated in bond indentures, and political will.”
“Any one of these referendum initiatives could dramatically alter the existing operating paradigm for the state and local governments,” the report noted. “If they all pass, challenges will abound for fiscal officials of the state’s counties, cities, school districts and authorities.”
Alarmed by the dramatic impact the three initiatives would have on finances, local leaders, newspaper editorialists and business organizations have vigorously opposed the measures. Coloradans for Responsible Reform, the coalition leading the fight against the three measures, has raised more than $4 million and operates a sophisticated website that is updated frequently.
Representatives of Colorado Counties Inc., the Colorado Association of School Boards, the Colorado Municipal League, and the Special Districts Association of Colorado, met to discuss the measures and agreed to oppose them in a united front.
Proponents of the measures — reportedly associated with renowned tax-cutter Douglas Bruce, author of the 1992 Taxpayer Bill of Rights amendment — have raised about $10,000 and not campaigned or advertised in support.
Meanwhile, the commissioners of El Paso County in Colorado Springs, whose members once included Bruce, voted to oppose the measures.
The National Taxpayers Union expressed support for the measures in a letter posted on the proponents’ Web site.
“Rising taxation is swallowing up more of Coloradans’ hard-earned incomes. Property taxes in Colorado have risen $4 billion since 1992,” the letter read.
“On top of that, the state has been able to borrow money and incur huge amounts of liabilities without a popular vote by calling it something other than debt. In addition, Coloradans have had to pay taxes on cars, cell phones, and pagers.”
Relying on volunteers, the Colorado Tax Reform group that gathered the required signatures to put the issues on the ballot is putting out its message through its modest website.
“Politicians constantly seek ways to tap more from your wallet,” the group writes in defense of Amendment 60. “Government controls the process. It can tax you on inflated values. It invents new fees and other ways to increase its take. It ignores Taxpayer’s Bill of Rights (TABOR) rules. It limits your ability to vote on taxes. It offers misleading ballot titles and passes increases without voter approval. Your home, business, and other property are stationary targets.”
Claims that school districts will lose funding are untrue, the proponents say, because the state will make up the shortfall.
The lopsided campaign finances and organizational support in favor of opponents do not fully allay fears in a year of Tea Party ascendancy and anti-incumbent fever. The Republican candidate for governor, Scott McInnis, received backing from party regulars but lost to Tea Party favorite Dan Maes. The Tea Party’s Ken Buck also won an upset in the Senate primary against Lieut. Gov. Jane Norton. The insurgent party’s overarching theme is opposition to government and taxation.
Wisor noted that the TABOR amendment won voter approval in 1992 after previous failed attempts and that the voter mood then was comparable to today. The anti-tax amendment appeared on a November ballot that included the populist Ross Perot running for the presidency.
While opponents have conducted private polls, the results have not been reported. With the Labor Day holiday over, media polling is expected to begin.
Opponents of the measures are aiming to get the message across to voters that the issue is more than just a tax cut.
“I think it’s one of those things that if you ask people the simple question, 'Do you want lower taxes?’ the majority of people are going to say 'yes,’ especially in these times,” Wisor said. “But I also think that if you say to the voters 'did you know that you’re going to lose this many jobs or you’re going to have this many potholes?’ they’ll look at it differently. This is going to require a robust campaign.”