Republicans block pot-tax fix in Colorado Legislature’s special session

By   –  Reporter, Denver Business Journal

Colorado state Senate Republicans killed a second attempt Tuesday to re-establish a tax that could cost special districts some $6.9 million this fiscal year and then adjourned what might have been the least productive special session in the history of the state Legislature.

The final gavel, which came down at 2:23 p.m., ended two official days and several unofficial weeks of wrangling over whether the Legislature could fix an error it made in Senate 267 — the omnibus bill from the 2017 regular legislative session that boosted transportation funding, reduced business personal property taxes and freed up room under the state’s revenue cap by turning the hospital provider fee into an enterprise fund.

The error occurred when the bill inadvertently eliminated the ability for special districts to levy sales taxes on retail marijuana — a change that most affected the Regional Transportation District, which is slated to lose $6 million through June 30 because of it.

Legislative Democrats, with the backing of Gov. John Hickenlooper, offered two bills during the two-day special session that sought to clarify that special districts do have the ability to collect sales taxes on that uniquely Colorado project.

They pointed to projected losses at RTD; the region’s Scientific and Cultural Facilities District (about $600,000), which helps fund such attractions as the Denver Zoo and Denver Museum of Nature & Science; and other smaller districts around the state. And they said that Colorado residents were in jeopardy at some point in the future of losing access to buses or to community arts organizations.

But Republicans shot back time and time again that the Taxpayer’s Bill of Rights (TABOR) in the state Constitution prevented them from re-instituting a tax without a vote of the people, even if they had killed off that tax unintentionally.

The Senate Transportation Committee quickly killed one bill Monday that sought to fix the error. And after a second bill passed the House Tuesday by a vote of 37-25, with state Rep. Dan Thurlow of Grand Junction the only Republican to cross the aisle to support it, that bill went also to Senate Transportation, which ended its path on a 3-2 Republican-led party-line vote.

As the abbreviated session ended, some Democrats in particular reacted strongly to the outcome. Rep. Paul Rosenthal, D-Denver, called the failure to pass a bill “unconscionable.” And Rep. Diane Mitsch Bush, a Steamboat Springs Democrat who resigned at the end of the session to prepare for a run for the 3rd Congressional District seat now held by Republican Scott Tipton, labeled the outcome “an assault on rural western Colorado,” which also has several transit authorities that are losing money.

“The voters want to be checked in with before raising taxes, and they want us to work together,” said House Majority Leader K.C. Becker, the Boulder Democrat who sponsored the bill that died on Tuesday. “I don’t think when people passed TABOR, they meant to tie the hands of legislators in a way that would stop them from fixing mistakes.”

But Republicans declared that their duty to defend the constitutional amendment superseded any loss of funding to the districts, especially as neither RTD officials nor SCFD leaders could point to any cuts in services that are likely to come because of the reducing tax revenues.

What’s more, several asserted that the fact that Hickenlooper called this session demonstrated how tax-dependent some community organizations have become and said it should serve as wake-up call that many politicians have no desire or ability to rein in such spending.

“That half of 1 percent (the amount of RTD’s budget that will be cut without the $6 million it is losing) was so important to them that they had to send troops down to deal with it. That decrease could not be made up with efficiencies,” said state Rep. Tim Leonard, R-Evergreen. “The more the taxpayers heard ‘glitches’ and ‘fixes,’ the more it solidified that the only way to control politicians and taxes is to do it inside the Constitution.”

‘They did nothing wrong’

Hickenlooper said after speaking at a corporate ethics conference put on by Denver company Convercent that he was very disappointed, calling the session “needlessly ideological” and saying that TABOR should not have been a real factor in the discussions, especially in comparison to the fate of the special districts.

“They did nothing wrong, and this is $600,000 a month out of their budgets,” Hickenlooper said. “It became a political tool. It’s wrong. Everybody acknowledges this was a mistake.”

Despite the harsh words that were said in committee rooms and on the House floor, though, legislative leaders agreed to keep working toward a solution by the start of the 2018 session. What that solution could be, however, remains very much up in the air.

Senate Majority Leader Chris Holbert, R-Parker, said he feels the most appropriate answer would be for the special districts to go back to the voters in 2018 and ask if they can reinstate the tax on recreational marijuana.

Both RTD and SCFD leaders seemed to blanche at that suggestion during committee discussions, however, with SCFD general counsel Alan Poguepointing out that it cost roughly $1 million for the eight-county metro-area taxing district to ask voters in 2016 to extend the 0.1-cent regional sales tax that funds arts and cultural facilities through 2030.

Sen. Ray Scott, R-Grand Junction, suggested that the transit funds could be reimbursed through a $68 million settlement that Volkswagen has made with the state over its emissions cheating scandal. It is unknown, however, if Hickenlooper has a plan for that money already.

Sen. Rachel Zenzinger, D-Arvada, said she was concerned that rejection of the bill was a way to punish RTD, which has come under criticism for legislators for what they see as misappropriating its budget.

Sen. John Cooke, R-Greeley, suggested several times during Tuesday’s committee hearing that the district should charge riders for using the free 16th Street Mall bus or eliminate the route altogether to save money.

Senate President Kevin Grantham, R-Cañon City, and House Speaker Crisanta Duran, D-Denver, both said over the past two days that they want to reconsider the issue in January, though it is likely to be just one of many big issues that confront legislators during the 2018 session. Grantham said, for example, that reform of PERA, the state’s public-employees retirement plan, must take top priority next year.

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