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Suthers wants more from Utilities after voters say no to payments 

Wringing more from Utilities

click to enlarge This stormwater project on the city's north side is one of many the city needs to take on. - COURTESY CITY OF COLORADO SPRINGS
  • Courtesy City Of Colorado Springs
  • This stormwater project on the city's north side is one of many the city needs to take on.

On Oct. 13, 2009, the Colorado Springs City Council adopted a resolution opposing Issue 300, a ballot measure that would "severely cripple operations of the city ... to the detriment of the citizens."

The citizen-initiated measure called for an eight-year phase-out of payments made by city enterprises to the city general fund, including the annual payment in lieu of taxes (PILT) made by Colorado Springs Utilities, which the resolution quantified as $30 million.

But after voters embraced Issue 300 with 54.5 percent of the vote that November, the phase-out didn't happen. In fact, the PILT was simply given a different name, "the surplus," and was increased from $24.6 million in 2009 to $31.1 million in 2010. This year, it's $33 million.

Now, Mayor John Suthers wants Council, acting as the Utilities Board, to rejigger the PILT to take inflation and other factors into account. That, Suthers hopes, will increase the payment, some of which could be used toward the city's 20-year, $460-million promise to Pueblo County for stormwater control, and also to hire more cops, buy new vehicles and fund park maintenance, among other expenses.

To say Issue 300's author — conservative activist, former state representative and convicted tax-evader Douglas Bruce — is nonplussed would be a radical understatement.

"Since they couldn't scare people with that warning," he says, referring to the resolution, "they said, 'Nevermind what we said before the election, it does not eliminate the PILT.'"

In 2009, amid the Great Recession that caused sales tax revenues to plummet, the city shut off more than a third of its street lights, pulled trash cans from parks, radically reduced watering and laid off roughly 200 city workers.

The last thing the city needed was a $30-million hit from Issue 300, not to mention the measure killing the Stormwater Enterprise, which raised about $16 million a year from fees levied on property owners to fund the city's huge backlog of flood control projects.

But Bruce and others, embittered that Council simply enacted the stormwater fee in 2007 instead of consulting voters, initiated the measure to end the "rain tax" and curb all enterprise payments to the city.

The two-sentence measure called for phasing out all enterprise payments in eight years or less and barring loans, gifts and subsidies between enterprises and the city. The measure was so onerous that then-Councilor Scott Hente called it "a road of self-destruction," because it would "eventually prohibit payments from any enterprise to the City."

But it didn't.

After it passed, then-City Attorney Patricia Kelly wrote an opinion that allowed payments to continue. "It is impossible to implement the initiative without either violating the first sentence or the second sentence," the Dec. 30, 2009, opinion said. If enterprises don't pay the city, which would comply with the first sentence, the city would wind up providing subsidies to the enterprise via shared services, such as for legal, which would violate the second sentence, the opinion said.

Kelly's opinion noted city staff decided voters intended to make enterprises operate as businesses, and that "the enterprise [is not to] be used as a source of uncompensated cash, funds, or other benefits to the City's general fund." In other words, as long as the city and its enterprises exchanged "value for value," the payments didn't constitute subsidies or gifts.

Kelly also noted the City Charter requires "any remaining surplus" from Utilities to be handed over to the city, and the measure didn't alter the Charter. Hence, she said, the payments could continue.

Council adopted an ordinance based on the opinion in January 2010, having already defunded the Stormwater Enterprise the month before in response to passage of Issue 300.

Bruce notes that had the city heeded the ballot measure, the final PILT payment would have been made earlier this year, ending the practice.

Instead, Suthers is asking for more.

"That is so dishonest, deceptive and illegal it's pathetic," Bruce says. "Before the November 2009 election, Council passed a resolution that Issue 300 was horrible, because it will eliminate the PILT. Now, the height of audacity is they want to have a cost-of-living increase for a PILT that was supposed to be phased out, that they admitted would be phased out."

The upshot, he says, is the city is raising "taxes" by increasing the Utilities payment, all without a vote of the people, which violates the Taxpayer's Bill of Rights constitutional amendment that requires voter approval of tax hikes in Colorado. Bruce authored TABOR.

He called Kelly's opinion a de facto repeal of Issue 300. "They're saying all is none, up is down," he says. "They're saying they passed an interpretation when they passed a repeal, which they're not allowed to do."

Had the PILT payment been phased out, more than $200 million would have been returned to customers on their utility bills, Bruce says, adding, "People need to understand the enormity of this theft."

But Bruce already tried to challenge the issue in court and lost. "There really is no remedy," says Bruce, who remains on probation for a 2011 tax evasion conviction he claims was political payback for his anti-tax activist efforts.

There's another use for that money, City Hall observer Walter Lawson reminded the board during a June 19 Utilities Board meeting. He noted Utilities itself faces enormous, recurring infrastructure needs. Over 30 years, he noted, PILT payments have totaled $900 million — more than the $825-million Southern Delivery System (SDS) pipeline from Pueblo Reservoir.

Utilities staff and some board members will hash through various methods of recomputing the surplus figure and present options in time for the 2018 budget season later this year, Utilities CEO Jerry Forte said during the June 19 meeting, adding there is an "opportunity" to introduce an inflation factor into the formula.

No Utilities Board members have expressed opposition to revisiting the payment amount, so it appears the size of the increase is the big question.

Utilities Board Vice Chair Andy Pico says the Koch brothers-funded Americans for Prosperity suggested the payment be $50 million, while other conservatives have mentioned figures as high as $200 million. Obviously, the latter figure is out of the question, Pico says, but settling on the right figure is complicated by the fact "there is no industry standard."

Currently, the fee is based on electric and gas sales — Utilities pays the city .006173 of a dollar per kilowatt hour of sales within the city, and .391539 of a dollar per 1,000 cubic feet of gas sold inside the city.

The question is whether to stick with that formula or find a new one.

Pico, for one, will be a tough sell to increase the fee substantially. "Utilities is not the cash cow to fund the city," he says.

But many believe it is. Former Mayor Steve Bach pondered selling the electric utility to fund city capital improvements, while others have suggested soaking Utilities for more stormwater funding. (It's already ponying up tens of millions of dollars via the mayor's and Council's $460-million, 20-year commitment for flood control work and the SDS project.)

Utilities makes for an easy target, former Council President Pro Tem Jan Martin, who served from 2007 to 2015, says via email, because raising utility rates doesn't require voter approval. "When new mayors come into office and realize how lacking the city funding is," she says, "they start looking around for other sources of revenue and always land on CSU."

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