TABOR baby-daddy Douglas Bruce weighs in on Denver's secret tax "diversion scheme"
Over $80 million in fees has flowed from the Wastewater building
The June 9 Westword feature "Down the Drain" examined how Denver officials are using funds designated for the improvement and maintenance of the city's storm-water drainage system to pay for various non-storm expenses.
The investigation found that more than $80 million dollars in "storm drainage fees" collected from property owners over the past three years has been spent outside of the Wastewater Division to pay for things such as snow removal, street sweeping and alley paving. Of this, $42.5 million in storm fees have gone to foot the bill for the construction of a new state-of-the-art facility for the Public Works Department that has scant, if any, association to the storm or waste-water system.
As an "enterprise fund" business run by the city, the storm water fees are exempt from TABOR requirements that politicians gain voter approval before raising taxes or issuing bonds. Westword did the math and found that storm water fees in Denver have increased 211 percent since 2001. Recently revived political blog Dear Denver called such "tricky accounting" practices a "secret tax" that shifts costs to property owners as a way to avoid the political pain of budget cuts and raising taxes.
Now cantankerous tax cutter Douglas Bruce -- author of the 1992 tax limitation amendment that, along with Amendment 23, has forced governments in Colorado into a budgetary vice grip -- has decided to weigh in on the legality of Denver's TABOR loophole. Apparently, he just returned from a vacation to China. (Not the red one, hopefully.) Here are his thoughts via e-mail:
Diversion of funds makes the enterprise illegal because it is not a "business" but a front for laundering general fund spending. The supreme court has ruled in the E-470 case* that enterprises cannot impose taxes. Also, it ruled that a fee is exempt from TABOR only if the money is earmarked for a specific purpose and not transferred to another spending pot.
The Denver Drainage Diversion scheme, as well as Wastewater and other enterprises, violate both legal standards. They are cash cows for other purposes. Their rates are de facto taxes and should return to their 1992 level. People are wising up to the fee v. tax abuse, as with the car registration "fee" doubling this year.
*Nicholl v. E-470 Public Highway Authority, 1995