Article X, Section 20 of the Colorado Constitution (“TABOR”) Matters

Relevant Case Law:

Bickel v. City of Boulder, 885 P.2d 215 (Colo. S. Ct. 1994):  Appeal by plaintiff seeking declaratory and injunctive relief and the invalidation of several ballot issues proposed by the defendants. At issue are ballot titles and matters concerning approval of consolidated debt and tax increases, approval of unlimited general obligation bonds, exemption from future voter approval of tax rate increases, failure to include the text of the ballot issue in the election notice and failure to include in the election notice a proper estimate of the district’s first full fiscal year spending.  Quote: “Unlike the federal constitution which grants powers, state constitutions, including Colorado’s, are documents of limitation.”

Boulder v. Dougherty, 890 P.2d 199 (Colo. App. 1994):  Defendant claimed that equipment lease-purchase agreement and related instruments violated TABOR.  The court of appeals affirms the district court’s decision that the agreement does not violate TABOR.  Issue: Does the agreement create a multiple fiscal year direct or indirect district debt or other financial obligation whatsoever?  The defendant had agreed to purchase Certificates of Participation evidencing proportionate rights in the agreement, but then backed out, claiming that the agreement violated TABOR because (1) TABOR is worded as broadly as possible to include all multiple-fiscal year financial obligations, (2) the agreement is a multiple-fiscal year financial obligation, (3) TABOR supersedes prior case law to the contrary, (4) TABOR should be given the interpretation that most restrains growth in government, and (5) the promoters  of TABOR intended it to apply to lease-purchase transactions.  Case summarizes the pre-TABOR Gude v. City of Lakewood (636 P.2d 691 (Colo. 1981)) case (stating “to constitute debt in the constitutional sense, one legislature, in effect, must obligate a future legislature to appropriate funds to discharge the debt created by the first legislature’).  The Dougherty case is a case of first impression relating to lease purchase agreements in the post-TABOR era.  Quote: “Doughty also argues that any interest earned on the certificates of participation are being represented as tax free pursuant to the Internal Revenue Code which is true only if the Agreement constitutes an obligation of a state or political subdivision thereof.  This argument, even if correct, is of no assistance.  The Internal Revenue Code does not control the interpretation of the Constitution of the State of Colorado.  In addition, whether or not the interest income derived from the Agreement is tax free is a risk assumed by Dougherty, or any investor concerning which we express no opinion.  Whether the interest on this, or any similar, transaction is tax free will affect the financial benefit contemplated by all parties, but it has no impact upon our interpretation of the Colorado Constitution.”

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