Colorado wraps up 'transformational' legislative session

BY SourceMedia | MUNICIPAL | 05/14/24 08:01 AM EDT By Karen Pierog

The Colorado Legislature ended its session last week after passing a fiscal 2025 budget, school funding changes, a property tax cut, and measures aimed at pushing multi-billion-dollar passenger rail projects and a bond-financed purchase of an historic hotel forward.

State officials celebrated a legislative session Senate President Steve Fenberg called "nothing short of transformational" at a Thursday press conference.

"This has been by magnitude of achievement in area after area the most significant by far," Gov. Jared Polis told reporters, referring to legislative sessions since he took office in January 2019.

The Democratic governor, who already signed into law a $40.6 billion, all-funds budget for the fiscal year that begins July 1, said public schools will get a funding boost.

"We're fully funding our schools for the first time in 14 years," he said. "That's about $17,000 per classroom more in resources."

Lawmakers eliminated a so-called budget stabilization factor that dates back to 2010, allowing the state to tap education funding to balance the state budget, according to the Colorado Education Association.

"Combined with state tax code constraints, per-pupil funding levels have failed to keep pace with national standards, consistently placing Colorado among the lowest-ranked states," the teachers union said in a statement. "While buying down the (budget stabilization factor) is an important step to fully funding public education in Colorado, doing so will only return public education funding to 1989 levels."

Polis said bipartisan support in the Democratic-controlled legislature produced a $1.3 billion property tax cut.

In an effort to rein in rising property values that have led to big jumps in tax bills, Senate Bill 233 curbs assessed valuation growth for residential and commercial property and creates a $10.3 million backfill fund for local governments and requires a $351.7 million state funding increase for school districts to make up for lost property tax revenue, according to a legislative fiscal note.

"Beginning with the 2025 property tax year, the bill limits property tax revenue growth for local governments, other than school districts, home-rule jurisdictions, and local governments where revenue is already limited by TABOR (Taxpayer Bill of Rights) or by the 5.5% revenue limit in current law," the fiscal note said. "The limit is equal to the level of the local government's 2023 property tax collections, plus any reimbursements received by the state for that year, grown annually by 5.5%."

It added the bill would result in a slight increase in the state's general fund statutory reserve, which under current law, must contain an amount equal to 15% of general fund appropriations.

In a March report, Moody's Ratings said the stable outlook on Colorado's Aa1 issuer rating "reflects the expectation that the state's strong economic fundamentals and sound fiscal management will continue to support healthy financials, including maintaining general fund reserve at the current 15% statutory reserve level."

A proposed constitutional amendment backed by a conservative think tank that seeks to limit property tax revenue growth will be on the Nov. 5 statewide ballot.

Bipartisan support also propelled Senate Bill 228, which changes TABOR refund mechanisms, over the finish line. TABOR, a 1992 amendment to the state constitution, generally limits the amount of revenue governments in the state can retain and spend.

The measure "will create additional income tax reductions under the (TABOR), as well as add a sales and use tax cut to the current TABOR refund mechanisms," according to a statement from Senate Republicans, which added that taxpayers will pay less in income and sales taxes in years when state revenue is projected to exceed the TABOR cap.

Long-sought passenger rail in Colorado got a boost from bills passed by the legislature.

Senate Bill 184 would authorize the Colorado Transportation Investment Office to impose an up to $3 per day fee on short-term car rentals that would raise an estimated $58.2 million in fiscal 2025 and $60.7 million in fiscal 2026 for rail and transit projects.

Polis said the revenue will help in the pursuit of federal dollars from the Consolidated Rail Infrastructure and Safety Improvement Program.

"Nearly all the federal grants around rail and transit require a state match and we simply didn't have that," he said. "We could have pulled down some money in some quarters but not enough to make passenger rail a reality."

The bill also requires the Front Range Passenger Rail District to produce by March 1, 2025, a plan to begin rail service by Jan. 1, 2029.

The rail district was created by a 2021 state law that authorized it to levy taxes through ballot measures, issue bonds, and enter into public-private partnerships to provide intercity passenger train service initially from Fort Collins through Denver and south to Pueblo. Longer term plans would connect Colorado to New Mexico and Wyoming. The district says it expects to eventually ask voters for an up to 0.8% sales and use tax to fund train service development and operation.

Another bill aims to impose new fees on oil and gas production that would raise an estimated $52.7 million in fiscal 2025 and $116.3 million in fiscal 2026 for transit services with 20% allocated to passenger rail project funding.

Legislation that would pave the way for the Colorado Educational and Cultural Facilities Authority to issue debt to fund its purchase of the historic Stanley Hotel in Estes Park won final passage last week.

An amendment to House Bill 1295 sought by the authority would allow it to operate and manage facilities it finances through the issuance of bonds. CECFA plans to create a nonprofit subsidiary that would hire the hotel's current owner, Grand Heritage Hotel Group, to operate and manage the facility, which inspired Stephen King's The Shining.

The plan emerged in March after an Arizona nonprofit pulled out of a deal to finance the property's purchase and renovation with up to $475 million of cultural facilities revenue bonds issued through CECFA.

"The financing for the Stanley project continues to evolve," CECFA Executive Director Mark Heller told The Bond Buyer, adding there was no timetable yet for bond issuance.

The amended bill added hotels, a film center, gift shops, and eating and drinking establishments to the definition of facilities. Grand Heritage Hotel Group's plans for the hotel include the Stanley Film Center, which it says "will be the permanent home for film, fun and the horror genre."

Denver Health, Colorado's sole public safety net healthcare provider, which has been struggling with rising uncompensated care exacerbated by the unpaid treatment of migrants from the southern border, said state lawmakers approved $5 million in one-time funding, the same supplemental payment provided to the health system last year.

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