To: Honorable Mayor and Members of Town Council
From: David L. Corliss, Town Manager
Title
Discussion/Direction: 2021 TABOR Revenue Proposed Expenditures
Body
________________________________________________________________________________
Executive Summary
At the election on November 2, 2021, voters of Castle Rock considered the following question:
“Without creating new taxes or raising current taxes and solely to pay for the following:
• Police;
• Fire protection;
• Emergency medical services;
• Roads and other transportation purposes, including, but not limited to, the Crystal Valley/I-25 interchange,
Shall Castle Rock be authorized:
(I) to retain and spend all Town revenues, including, but not limited to, grants and contributions from other governments for interchanges and other transportation projects, in excess of the constitutional limitation on Town fiscal year spending for the next ten fiscal years, beginning with the 2021 fiscal year; and
(II) to retain and spend an amount of Town revenues in excess of such limitation for the 2031 fiscal year and thereafter up to an amount equal to the highest total Town revenues for any fiscal year from the 2021 fiscal year through and including the 2030 fiscal year, adjusted each year as provided for by Article X, Section 20(7) of the Colorado Constitution?”
Voters approved the measure:
Yes/For: 12,735 (52.77%)
No/Against: 11,396 (47.23%)
Due to favorable economic conditions and increased Town revenue, the Town exceeded its TABOR revenue cap for 2021 by $14,641,727, according to 2021 year-end financial information. Various factors have contributed to the surplus, including strong sales tax and housing growth and open space shareback funds from Douglas County for park improvements. In fairness to the budget process, it’s important to disclose that all eligible revenue received during 2021 ultimately contributed to the TABOR surplus.
The purpose of this memo is to present staff’s recommendation for retaining and spending 2021 TABOR revenue. In developing recommendations for the Town Council to consider in accordance with voters’ approval, staff notes these funds are “one-time” money and not recurring revenues. Therefore, it would be appropriate to avoid initiatives that generate continuing expenses (e.g. staff does not recommend hiring additional staff with these funds, because that would obligate additional expenditures in future years).
Discussion
Most Town revenues are included within the Town’s TABOR revenue limit. Major exceptions to this include revenues in the Town’s business-like “enterprise” funds, including its water- and development-related funds. Any federal funds the Town receives are also exempt, along with revenues specifically exempted by voters. For Castle Rock, revenues the voters have exempted include growth-related transportation impact fees paid by new development; building use tax revenues, which is the sales tax paid on construction materials; and .75% of the Town’s 4% sales tax, which is used for transportation purposes. Unless they are otherwise explicitly excluded, most other Town revenues count toward the Town’s TABOR revenue cap, including all impact fees besides those paid for transportation.
Given the factors that contributed to the Town’s 2021 TABOR surplus and voters’ approved uses of the funds, staff is proposing transferring funds from three tax- and impact fee-receiving funds into the TABOR Fund to retain and spend as voters approved. The proposed funds and amounts:
General Fund $8,500,000
Transportation Fund $5,641,727
Fire Capital Fund $500,000
TOTAL $14,641,727
Staff proposes using the funds in the following manner:
Funding for construction of Fire Station 156 $6,000,000
Funding for space buildout at Police Headquarters $2,000,000
Funding for wildfire mitigation initiatives $1,000,000
Funding for road/transportation purposes $5,641,727
TOTAL $14,641,727
The Town Attorney has reviewed the proposed sources and uses of funds, and they are in compliance with the voter-approved ballot question.
To provide a bit more detail about the proposed expenditures, Fire Station 156 is planned to be constructed in 2025 near Castle Oaks Drive and North Rocky View Road. The current anticipated construction cost is $6.9 million. The space buildout at Police Headquarters, meanwhile, will turn the former evidence area into office space, now that CRPD’s evidence is being stored at the Douglas County Sheriff’s Office. The project will help accommodate for future personnel growth and will also make accessibility improvements throughout the facility.
Given that fire stations and police space additions generally are funded through growth-related Fire and Police impact fee revenues, staff believes it appropriate that the $8,000,000 expended for these purposes be repaid to the TABOR Fund over time from the Fire and Police capital funds. Those payments could provide the TABOR Fund with ongoing revenues for up to 20 years, which could be used for voter-approved purposes, including to purchase fire and police equipment presently funded using General Fund tax dollars. This approach could free up resources in the General Fund that might allow for a minimal amount of additional staff to be added in the Fire and Police departments, with the understanding that those positions would need another funding source once the repayments are complete.
To expand on the wildfire mitigation initiatives, CRFD’s recently adopted Community Wildfire Protection Plan recommended mitigation on 400 acres of Town open space adjacent to private property, which would cost an estimated $2 million overall. So, the $1 million proposed would cover roughly half of the needed mitigation. Realistically, staff believes $100,000 worth of mitigation work could be undertaken annually, so this proposal would get the community through 10 years of mitigation efforts.
The $5.6 million proposed toward road improvements is envisioned to be allocated based upon needs, similar to how existing road maintenance funds are prioritized. Full details of the intended use of these funds will be presented with the Proposed 2023 Budget.
In reviewing various scenarios for both funding sources and uses for 2021 TABOR revenue, staff believes this proposal to be the best recommended source and use of these voter-approved funds.
Budget Impact
If Council concurs with staff’s recommendation, staff would prepare an amendment to the 2022 Budget to transfer the amounts recommended herein from the General, Transportation and Fire Capital funds into the TABOR Fund.
Staff Recommendation
Staff recommends transferring 2021 “excess” TABOR revenue funds from the General, Fire Capital and Transportation funds as outlined into the TABOR Fund. Staff further recommends using TABOR Fund toward the following projects: the construction of Fire Station 156; to build out additional space at Police Headquarters; to provide for wildfire mitigation; and to provide for road maintenance.
Proposed Motion
“I move to approve using 2021 TABOR revenue as approved by voters in the November 2021 election for police, fire, emergency medical services and roads and other transportation purposes, as presented by staff.”
Alternative Motions
“I move to approve this item as recommended by staff with the following conditions: (list conditions).
“I move to continue this item to the Town Council meeting on _____ date to allow additional time to (list information needed).”