To: Honorable Mayor and Members of Town Council
From: Kristin Zagurski, Assistant Town Manager
Title
Update: Review of Municipal Revenue Restrictions
Body
________________________________________________________________________________
Executive Summary
In discussing the Town’s 2020 property tax mill levy, which must decline due to a revenue restriction within the Town Charter, Council in September requested information on any other communities with similar revenue restrictions. Staff has completed research on this topic and is providing this update to present that information.
In summary, there are few, if any, other comparable municipalities in Colorado with the same revenue restrictions in place as the Town.
Discussion
The Town manages its finances in accordance with two general sets of revenue restrictions: 1) those in the Colorado Constitution, and 2) those within the Town Charter. This memo will provide details regarding both sets of restrictions and their applicability to other municipalities.
TABOR
Article X of the Colorado Constitution, more commonly known as the Taxpayer’s Bill of Rights (TABOR), has a provision that imposes revenue restrictions on state and local governments; a formula that accounts for changes in inflation and population is used to determine a revenue cap. If a local government exceeds its revenue cap, it can either provide taxpayers refunds or request voters’ permission to retain the “excess” revenue.
In recent years, staff has managed Town finances to keep revenues within TABOR limits. Town revenues did exceed the TABOR cap for 2015, however, by about $715,000. Town Council in 2016 asked voters to decide what should be done with that “excess” revenue, and roughly 70% of voters cast ballots in favor of the Town retaining the revenue for public safety and transportation purposes.
A provision within TABOR allows voters to remove revenue restrictions on their local government, either temporarily or permanently, which is commonly known as “de-Brucing.” Staff in 2014 conducted a survey of the 25 most populous municipalities in Colorado regarding their current TABOR status. At that time, the Town was one of only four major Colorado cities that was not “de-Bruced” in any significant manner. The others were Colorado Springs, Littleton and Pueblo. (Recent “Denver Post” information indicates that 85% of Colorado municipalities have opted out of TABOR.) Since that time, the Springs and Littleton - like the Town - have held elections in which voters allowed for the retention of “excess” revenues. See Attachment A for a summary of TABOR elections from the Colorado Municipal League (CML).
In addition to restricting revenues, TABOR also requires governments to ask for voter approval prior to raising taxes or issuing debt. This memo has focused on the revenue restriction provisions, since that is the topic at hand.
Town Charter
In addition to the revenue restrictions established by TABOR, the Town Charter contains “Limitations on Future General Property Taxes.” That provision generally states that the Town’s property tax should not levy more than the amount of revenue levied in the previous year, plus 5.5%. This provision causes the Town’s property tax mill levy to decline as property values and corresponding revenues increase, as shown in the below chart.
Property tax trend
As directed by Council, staff conducted research this fall into what other municipalities might have comparable restrictions within their charter. Research found that among home rule municipalities like Castle Rock, Dillon has a comparable provision, which restricts revenues to the amount levied in the previous year plus 5%. Frisco previously had a similar provision, which voters in 2002 elected to exempt. In surveying CML, members of the Colorado Government Finance Officers Association and staff in the 10 Colorado municipalities closest in size to Castle Rock, staff did not discover any other home rule municipalities with a similar revenue restriction within their charter. (This was confirmed by staff in Northglenn, Littleton, Commerce City, Grand Junction, Broomfield, Loveland and Longmont.)
Similarly, our neighboring jurisdictions within Douglas County do not have comparable revenue restrictions, as noted in the table below.
|
Jurisdiction/Restriction? |
TABOR |
Property Tax |
|
Castle Pines |
No |
No |
|
Douglas County |
No |
No |
|
Lone Tree |
No |
No |
|
Parker |
No |
No |
Staff’s research did reveal that statutory municipalities’ revenues are similarly restricted, at 5.5%, by what’s known as the “Annual Levy Law,” Section 29-1-301, et seq., C.R.S. Staff believes Erie to be the largest statutory municipality in Colorado, with a population of about 25,000, which is significantly smaller than Castle Rock. Therefore, staff’s research has concluded that there are few, if any, comparable municipalities in Colorado with the same revenue restrictions in place as the Town.
Attachments
Attachment A: TABOR Election Results Summary from Colorado Municipal League