Opinion: Development impact fees should be part of Prop CC


Proposition CC, on the ballot this November, would allow the Colorado state government to keep all tax revenues above the population-plus-inflation limit approved by Referendum C in 2005, which got rid of the ratchet effect of the Taxpayer’s Bill of Rights, or TABOR. The state forecasts that Prop CC would allow the state to keep about $310 million for 2019-2020 and $342 million for 2020-2021 that otherwise would be refunded to the taxpayers.
House Bill 1257, which put Prop CC on the ballot, says this money is for public schools, higher education, roads, bridges and transit. As KC Becker, Speaker of the House and a Boulder representative, commented in The Colorado Sun, “Is this the long-term fix to any of the state’s long-term issues? No, it’s not,” but “I think it’s a necessary, important part of it.” But the real problem is that most of Colorado’s huge unfunded needs are caused by growth and development not paying its way, and Prop CC fails to implement any of the necessary fixes. And besides, it’s just a small fraction of the needed money.
Gov. Jared Polis’ office misidentified the problem, stating, “This common-sense policy doesn’t alter the right of citizens to vote on taxes, but allows Colorado to keep pace with a growing economy.” But the growth rate of the economy is not the issue; it’s the rapidly increasing number of people that use the roads and transit, and send their children to public schools.
Reports are that legislative leaders are considering a special session to improve Prop CC, because they think it will be a loser at the ballot box. If they do hold this session, here are some suggestions they might consider if they actually want to enact long-term solutions.
School funding has two fundamental roles: paying for school operations (including salaries, maintenance and upgrades) and building new schools to handle the increasing population. Currently, new schools are financed by school districts going back to the citizens to ask for property tax and debt increases; this happens every few years in rapidly growing areas. This drives citizens crazy, especially because it’s on top of the huge property tax increases driven by skyrocketing property values due to growth pressures.
Right now, developers are not required to pay for the new schools needed because of their developments and to which they, in effect, sell access. In fact, state law actually prohibits the imposition of development impact fees to pay for new schools, thereby protecting developers’ excess profits at the public’s expense. The first thing the Legislature should do is to remove this legal constraint and require cities and counties to collect impact fees that their school districts impose. That would quickly fix this inequity, and the resulting impact fees could yield over half a billion dollars a year. Then the Legislature should dedicate Prop CC money to actually improving school operations, and the development impact fees would replace the need for the recurring property tax hits. From the perspective of the ordinary taxpayer, Prop CC would actually be a net positive.
Transportation funding can also be split into operations and capacity improvements. There are many ways to decrease the need for capacity improvements, such as imposing user fees (like tolls, congestion pricing, parking charges, etc.) and using the proceeds to pay for transit, van pools, etc. But for the moment, the Colorado Department of Transportation forecasts a continuing $1 billion per year deficit in attempting to meet capacity needs. Again, the proper way to pay for this huge budgetary hole is development impact fees. A quick calculation puts this cost at roughly $10,000 per new resident, which would be allocated between new residential, commercial and other development using trip generation rates, for example.
Right now there is no revenue to cover this billion-dollar annual deficit. So the Legislature should assign CDOT to work with the regional transportation organizations (like the Denver Regional Council of Governments) to come up with the appropriate numbers for the widely varying areas of the state, and then impose these fees on new development. No TABOR votes would be needed, because the money would go through “enterprise funds,” just like water utilities. Again, this is simply collecting developers’ excess profits made by selling free access to transportation systems.
Rather than just modifying Prop CC’s tax proposal, the Legislature should use their special session to finally require new development to pay its own way and relieve existing taxpayers of that burden. As an add-on, the Legislature could also propose a constitutional amendment to provide protections for statutory ballot measures, so that the dedication of Prop CC’s funding could not be changed.


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