State sued over tax-rate freeze
Law to freeze property tax rates to raise money for schools called tax hike
DENVER - A conservative think tank sued the Colorado Department of Education Thursday in an effort to overturn a property tax-rate freeze signed into law this year by Gov. Bill Ritter.
The Independence Institute, which filed the class-action lawsuit on behalf of five property owners throughout the state and the Mesa County Board of Commissioners, argues that the freeze is a property tax hike enacted illegally without voter approval. It asks the Denver District Court to declare the action a violation of the state constitution and to refund property owners who overpaid their taxes because of it, along with 10 percent interest.
The 2007 School Finance Act contained a provision that froze property tax rates in 142 school districts and reduced them to a specified level in the 33 districts that were paying the highest mill levies. Had the act not been signed by Ritter, mill levies would have continued dropping in most of the districts.
Independence Institute President Jon Caldara said he filed the lawsuit because it violated the Taxpayer’s Bill of Rights provision that Colorado residents must be allowed to vote on any proposed tax hikes. The Colorado Department of Education, listed as the defendant, will collect $114 million more in taxes next year than it would have were the law not passed, he pointed out.
“The purpose of this is not to get into a debate over whether the money would be spent well,” Caldara said at a news conference. “The question is: Do we respect the Colorado Constitution?”
The bill’s sponsor and Ritter’s spokesman disputed the charge, noting they received legal opinions from the Office of Legislative Legal Services and the governor’s legal counsel that the move was not a tax hike, despite a contrary opinion from Attorney General John Suthers. Because of that, Suthers’ office will not defend the state in the lawsuit.
Sen. Sue Windels, D-Arvada, and press secretary Evan Dreyer noted that 175 of the state’s 178 school districts had held elections since 1994 in which voters agreed to freeze the tax rate to raise more money for schools. The three districts that have not done so, which include Colorado Springs District 11 and Harrison District 2, are not affected by the law.
Windels and Dreyer added that they do not plan to set aside any money in the 2008-09 budget in case the law is overturned. The extra $114 million is slated to solidify the State Educational Fund, which helps to pay for school operations without taking money from other programs.
“We should not be bullied by people who just want to play games with the lives of our kids,” said Windels, chairwoman of the Senate Education Committee.
Attorney Richard Westfall argued in the lawsuit, however, that the districts that removed the revenue cap intended to be able to receive federal grants and state funding that they couldn’t keep under TABOR, not keep property tax rates from falling. He pointed to a Denver ballot question that used the term “with no new tax and no increase in any mill levy or other tax rate” and to resolutions from several school districts that stated the extra revenue they sought to keep was from sources other than taxes.
Senate Minority Leader Andy McElhany, who said he supports the suit, agreed. The Colorado Springs Republican pointed to Cheyenne Mountain School District 12 and noted that the excess revenue that officials there wanted to keep when they passed their ballot question was from parking fees and sports admissions, not property taxes.
Westfall said he hopes to fast-track the lawsuit to have it decided before any of the new tax revenue can be spent in the fiscal year beginning July 1. Bills reflecting the property tax rate freeze will go out to landowners in January and are due by April 30 if they are paid in one lump sum.
Dreyer questioned the timing of the action, saying that by waiting until seven months after Ritter signed the law into place, the Independence Institute seems more intent on making this an election issue in 2008.
All but one of the 41 Republicans in the General Assembly last session voted against the freeze, and all but a handful of Democrats backed it.
CONTACT THE WRITER: (303) 837-0613 or ed.sealover@gazette.com
