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File #: DIR 2016-042    Version: 1 Name:
Type: Discussion/Direction Item Status: Continued
File created: 6/14/2016 In control: Town Council
On agenda: 6/21/2016 Final action:
Title: Discussion / Direction: Additional Information on TABOR Alternatives
Attachments: 1. Results of Online Poll, 2. Online Form Submissions, 3. Feedback from May Growth Open House, 4. TABOR Update from May 3 Town Council Meeting

To:                     Honorable Mayor and Members of Town Council


From:                     David L. Corliss, Town Manager



Discussion / Direction: Additional Information on TABOR Alternatives




Executive Summary


Town Council in 2014 directed staff to manage Town finances to keep revenues within Colorado Taxpayers Bill of Rights (TABOR) limits to the extent possible. Staff has done so since that time; yet, the Town still ended 2015 with a TABOR surplus of $714,580.


Because 2015 revenues have exceeded TABOR limits, Town Council has until the end of 2016 to carry out one of two choices: 1) Refund the surplus in some manner, or
2) Ask voters to keep the money to spend on local services.


Town Council initially discussed these options on May 3 and directed staff at that time to solicit public input regarding the options. The purpose of tonight’s item is to present Council with the feedback received, as well as with additional information developed regarding the options for resolving the surplus. Staff is asking for further Council direction tonight regarding the resolution of the surplus and is recommending proceeding with providing refunds via credits on utility bills.




Due to favorable economic conditions and increased Town revenue, the Town exceeded its TABOR revenue cap for 2015 by $714,580, according to preliminary 2015 year-end financial information. Various factors have contributed to the surplus, including strong sales tax growth and contributions for the construction of the North Meadows Extension and Philip S. Miller Park. In fairness to the budget process, it’s important to disclose that all eligible revenue received during 2015 ultimately contributed to the TABOR surplus.


Myriad options exist with regard to Council pursuing either refunds or voter approval to retain the revenues, each with different potential impacts. Council has considerable discretion and latitude in determining what is reasonable in these regards, with the TABOR standard for refunds being: “Subject to judicial review, districts may use any reasonable method for refunds … including temporary tax credits or rate reductions. Refunds need not be proportional when prior payments are impractical to identify or return.”


Public Input


Following the May 3 Town Council meeting, staff set out to solicit public input regarding some of the options available to Council, which include:


                     Providing Castle Rock Water customers a one-time credit on their utility bill

                     Issuing checks to eligible Castle Rock taxpayers

                     Asking voters to keep the surplus to help fund solutions for transportation concerns

                     Asking voters to keep the surplus to use for services like police and fire protection


Feedback was solicited at one growth open house and two budget open houses, as well as online. The alternatives for providing feedback were advertised in various manners, including on the Town’s website and social media accounts; in the Castle Rock News-Press; and in the Your Town Talk water bill newsletter.


Reviewing the feedback, it is somewhat difficult to state a consensus. Responses to the online poll (Attachment A) were fairly evenly split between those wishing for retention and those wanting a refund. An open-ended online form (Attachment B), meanwhile, indicated a preference for the Town retaining the money. Similarly, opinions of those at a May growth open house (Attachment C) regarding those two options were fairly evenly split. (No formal feedback was provided at the budget open houses.)


The feedback collected was not statistically validated, meaning that it may not be a true representation of sentiments across the entire community. If pursuing retaining the funds, a vote would be required - the outcome of which may or may not support a retention, especially since opinions on the topic appear to mostly be split. If a vote requesting a retention failed, the resolution of the surplus would default to a refund. Given this dynamic, and the range of opinions provided by the public, pursuing a refund could be considered to be the most efficient course of action.


Refund Information


With regard to refunds, there are two major components for Council to consider:

1)                     Method: How, and to whom, would the refunds be issued?

2)                     Means: From what fund(s) would the refunds come, and what, if any, impacts would that cause?


Refunds could be issued in a number of ways. When Town Council discussed the TABOR issue on May 3, generally two options were discussed: checks, and utility bill credits.


Staff does not recommend the option of issuing checks. First, no registry exists of Town residents, so a process for registering eligible recipients would have to be established and administered. Following that process - and, likely, an accompanying appeals process - checks would have to be issued. For the Town to issue a check, each eligible recipient would have to be set up as a vendor with the Town.


The Town generally issues about 5,000 checks per year to outside vendors. To accomplish a refund by check, more than three times that amount of checks likely would need to be issued before the end of 2016. Present staffing resources would not allow for that volume of checks to be issued, meaning additional temporary staffing accommodations would need to be made in order to issue checks. Additionally, there would be a cost for printing and mailing the checks. It is due to these administrative costs associated with issuing checks that staff does not recommend this option.


Providing a one-time utility bill credit to Castle Rock Water customers is a far more efficient way to accomplish a refund. A couple of alternatives are available with that option:


1)                     Credit the refund amount to customers active in the water billing system as of the refund date; if Council provides direction to move forward with this option tonight, the refund could be accomplished on customers’ September water bills


2)                     Credit the refund only to those customers active in the water billing system as of the refund date who were also active customers as of December 31, 2015; this would require some manual processing of information which could delay the refund beyond September and which is expected to cost up to $1,000


In early June, the Town had about 19,365 utility billing accounts, roughly 17,700 of which are residential. The remainder are a mix of bulk, commercial, irrigation only and multifamily. Council can opt to issue refunds to any customer class(es) of its choosing. If Council elected to proceed with the first option above, and to apply the refund to all accounts, the refund would be just shy of $37 per account; this amount likely will decrease slightly by the September billing cycle, as new accounts are added.


As of December 31, 2015, the Town had 18,715 utility billing accounts, 17,308 of which were residential. Of those accounts, 630 were in the developer or title company’s name, while the property was awaiting transfer to its owner. These accounts would not match the current account information, and thus would be excluded from receiving a refund if the second option above is chosen. Additionally, the comparison of 2015 to 2016 account information is likely to find other accounts that were active on December 31, 2015 that are not active today, due to transfers in service. This means the universe of recipient accounts could be closer to 18,000, for a refund of $39 per account, if refunds are provided to all account classes under the second option.


If Council chooses to accept staff’s recommendation and issue refunds via utility bill credit, staff would need specific direction as to the following decision points:

                     Should refunds be given to active customers as of the refund date, or only to those customers who were also active as of December 31, 2015?

                     Should refunds be given to all customer classes, or to only certain customer classes, such as residential?


The below chart showing a range of estimated refund amounts current to June’s customer list might be helpful in Council’s decision-making. Amounts between these two amounts are possible if Council elects to provide refunds to a particular set of customer classes, and not simply either all classes or only the residential class.



All 2016 active accounts

All 2016 accounts also active in 2015

Residential 2016 active accounts

Residential 2016 accounts also active in 2015

Refund amount






It’s important to note that the majority of the Town’s multifamily water accounts have mastered meters, meaning individual units do not have Castle Rock Water accounts. Similar to the dilemma associated with issuing checks, the Town has no way of knowing who currently resides in the individual units, nor whether they were also residents during 2015. Individuals living in those units, estimated to be about 1,500 units, would not receive the refund credit due to the water account being master metered.


Additionally, only about 1,200 of the Town’s roughly 3,700 licensed businesses have a physical presence in Town. (About 650 of these 1,200 businesses are within homes.) Depending on the alternatives chosen by Council, some Town-licensed businesses would not receive the refund credit, depending on their physical location.


All told, the potential universe of residential and business recipients is just shy of 24,000, which would provide for a refund of about $30. However, it is not practical to get refunds to some potential recipients due to the way the water accounts are structured. A dispute process is planned to be established so that those believing they should have received a refund and did not can apply to the Town for a refund.


Financial Information


Staff believes it is most appropriate to charge the refund and associated expenses to the General Fund. The refund amount is $714,580, and the additional expenses will depend on the refund approach as determined by Council.


In addition to the potential expenses already outlined within this memo, staff would recommend the addition of a one-page insert into the water bill in which the refund is provided, to explain the details about why the customer is receiving the refund. The estimated cost for this insert is $1,800.


Funds necessary to accomplish the refund are not yet included within the 2016 Budget. Therefore, if Council so directs, staff would prepare a budget amendment for Council to adopt along with the ordinance authorizing the refund.


Staff Recommendation


Staff believes the most efficient way to resolve the 2015 TABOR surplus is to provide a one-time credit to Castle Rock Water customers.







Proposed Motion


“I move to direct staff to prepare and bring back to Council for adoption the necessary ordinances to accomplish a refund of 2015 revenues in excess of the TABOR cap via utility bill credits. This includes preparation of a budget amendment appropriating the funds needed to provide for the refunds and associated expenses.”




Attachment A:  Results of Online Poll

Attachment B:  Online Form Submissions

Attachment C:  Feedback from May Growth Open House

Attachment D:  TABOR Update from May 3 Town Council meeting