BASALT, COLORADO — The tiny town of Basalt, which lies between Carbondale and Aspen, is facing a difficult choice over a long-term mistake in interpreting the Taxpayer’s Bill of Rights (TABOR). According to the town’s legal consultant, Dee Wisor, a Denver attorney and expert witness on TABOR, the town owes residents a refund for taxes illegally collected due to a misunderstanding of how TABOR works.
TABOR is a constitutional amendment passed in 1992 that, among other things, requires voter consent for new or increased taxes and debt, as well as limiting government revenues to a formula of population growth plus inflation. Under TABOR, governments in Colorado are required to refund excess revenue back to taxpayers, or get voter approval to keep it.
In 1994, two years after TABOR was enacted, Basalt residents voted 220 to 42 in favor of lifting TABOR revenue limits, thus allowing the town to keep any excess revenues it brings in over the regular revenue restrictions in TABOR. Numerous taxing authorities in Colorado have asked voters to do this to avoid having to pay out refunds when revenues exceed expectations.
Basalt set its mil levy at 6.151 as its TABOR baseline in 1994.
Since then, in an attempt to save taxpayers money, Basalt has floated the mil levy up and down to try to maintain an even level of service in both good and bad economic times. The mil levy was never allowed to exceed the TABOR baseline and it fluctuated to as low as 2.56 in 2010 and as high as 5.957, today’s rate.
A Feb. 6 PowerPoint presentation given at the town hall says that the mil levy adjustments resulted in a savings of $5.4 million for taxpayers over 25 years.
Former Basalt Mayor Rick Stevens told Complete Colorado that Basalt was trying to manage the town responsibly and keep taxes as low as possible.
During the budget process for the 2019 town budget, newly-hired financial planners thought they had discovered a problem. According to town Finance Director Christy Hamrick, lowering the mil levy is permissible, but increasing it at all requires a public vote.
For 25 years nobody in the town, including Basalt’s auditing firm, believed this to be the case. They assumed that so long as the mil levy did not exceed the TABOR baseline, floating the rate up and down was permissible.
The town retained Wisor to analyze the legal issues. He advised the town that it had indeed violated TABOR and owed taxpayers a refund for the last four years of revenue acquired at a mil levy greater than 2.56.
Current calculations put the refund amount in the vicinity of $1.8 million.
Mayor Jacque Whitsitt told Complete Colorado by email, “Even though the decreases during the strong financial times saved the citizens money, we are taking a conservative approach to address violations of TABOR.” Whitsitt says the town recently sold some town real estate that “will decrease our current debt and balance the upcoming debt for the repayment.”
The current plan is to issue Lease Certificates of Purchase (LCPs), which means selling city property, potentially including the town hall, to private investors and then leasing the facilities back. Using LCPs means the town doesn’t have to go to voters to approve taking on new debt, but which still has to be paid back with interest through taxation. This also means the town ends up having to lease what was its own property into the future.
Two ordinances about the issue were proposed on first reading at the July 23 Town Council meeting. The first ordinance authorizes the refund, the second authorizes the “sale and subsequent leasing of certain town property” to pay for the refund.
“The flip side of a refund is three million dollars in debt,” said Councilman Bill Infante.
Stevens says this is imprudent.
“We’ll pay everybody what we owe them and put a debt on their shoulders that we have to recover,” Stevens told Complete Colorado in an interview Tuesday.
The town has sufficient reserves and other funds available to pay the refund in full without incurring any debt, says Stevens.
Whitsitt said in her email, “Most of the town’s other debt will be retired in the next couple of years leaving us on solid ground for the future.”
“There’s a 1% sales tax fund that generates about $1.9 million a year that’s for parks, open space and trails [POST] that’s like the Holy Grail. All they would have to do is put that question on the ballot and have the voters agree to temporarily reallocate that 1% to other purposes,” said Stevens. “Sixty-seven percent of our money comes from sales tax. With the growth and tourism our sales tax revenues go up every single year.”
Saying that the town has already purchased almost all of the land for public use it needs, Stevens said, “The POST cookie jar has $3.9 million in it now. And you can’t touch it. It’s ridiculous.”
“There were a lot of reasons in the past to do it, but we don’t really need it anymore, we need to fund other things,” Stevens continued.
Stevens says that the upcoming ballot issue to reset the mil levy to 6.151 is essential to Basalt’s financial future and has to be done, but at the same time he doesn’t understand why the city council would choose to incur new debt and sell city assets when asking voters at the same time they vote on the mil levy to temporarily reallocate POST funds to the refund would solve the problem.
Second reading of the two ordinances, where they may be passed, will take place at the August 13 council meeting.