Reply in Support of MSJ.final.final

8/10/2019 Reply in Support of MSJ.final.final

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DISTRICT COURT, DENVER COUNTYSTATE OF COLORADO

1437 Bannock Street, Room 256Denver, Colorado 80202

TABOR FOUNDATION, a Colorado non-profit corporation; andPENN PFIFFNER,

Plaintiffs,

v.

REGIONAL TRANSPORTATION DISTRICT, et al.,

Defendants.COURT USE ONLY

Jeffrey W. McCoy (Atty. Reg. No. 43562)Steven J. Lechner (Atty. Reg. No. 19853)MOUNTAIN STATES LEGAL FOUNDATION2596 S. Lewis WayLakewood, Colorado 80227(303) 292-2021(303) 292-1980 (facsimile)[email protected]

[email protected]

Attorneys for Plaintiffs

Case No.: 13CV854

Division: 424

PLAINTIFFS REPLY IN SUPPORT OF THEIR CROSS-MOTION FOR SUMMARY

JUDGMENT


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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ..................................................................................... v

INTRODUCTION ................................................................................................ 1

ARGUMENT ................................................................................................ 2

I. THE FOUNDATION IS CHALLENGING THE DISTRICTSDISCRETIONARY DECISION TO LEVY TAXES ON THE ITEMSIN HB13-1272 ............................................................................................... 2

II. BY LEVYING SALES AND USE TAXES ON THE ITEMS INHB13-1272, THE DISTRICTS ARE LEVYING NEW TAXES INVIOLATION OF TABOR ............................................................................. 5

A. The Levying Of Taxes On The Items In HB13-1272 Is AChange In The Status Quo ................................................................. 5

B. Under The Plain Language Of Previously Approved BallotMeasures, The Districts Do Not Have The Authority To LevyTaxes On The Items In HB13-1272 ................................................... 7

1. The Previous Ballot Measures do not Authorize RTD toLevy Taxes on the Items in HB13-1272 ................................ 8

a. The 1973 election did not authorize RTD to levytaxes on cigarettes and advertising materials ............. 9

b. In 1980, the voters revoked RTDs authority tolevy sales taxes on food and food containers ............. 11

2. The Previous Ballot Measures do not Authorize SCFDto Levy Taxes on the Items in HB13-1272 ............................ 12

III. BY LEVYING SALES AND USE TAXES ON THE ITEMS INHB13-1272, THE DISTRICTS INSTITUTED A TAX POLICYCHANGE THAT DIRECTLY CAUSES A NET TAX REVENUEGAIN FOR THE DISTRICTS ....................................................................... 13

A. The Districts Have Implemented A Tax Policy Change .................... 13


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B. The Tax Policy Change Directly Caused A Net Tax RevenueGain ................................................................................................ 15

IV. THIS COURT SHOULD NOT APPLY ANY JUDICIALLYCREATED EXCEPTIONS TO TABOR ....................................................... 19

CONCLUSION .......................................................................................................... 20

CERTIFICATE OF SERVICE .................................................................................. 22


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EXHIBITS1

Exhibit I, 1963 Colorado Revised Statutes (relevant portions)

Exhibit J, 1973 Colorado Revised Statutes (relevant portions)

Exhibit K, 1973 Colorado Revised Statutes, 1979 Cumulative Supplement (relevantportions)

Exhibit L, 1973 Colorado Revised Statutes, 1982 Replacement Volume (relevantportions)

Exhibit M, Colorado Secretary of State, Quarterly Business & Economic Report, FirstQuarter 2014

1The letters assigned to the exhibits continue from the exhibits filed with the Foundationsmotion for summary judgment.


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TABLE OF AUTHORITIES

Page

Cases

Barber v. Ritter,196 P.3d 238 (Colo. 2008) ................................................................................... 2

Bickel v. City of Boulder,885 P.2d 215 (Colo. 1994) ................................................................................... 4, 5, 6, 7

Bolt v. Arapahoe Cnty. Sch. Dist. No. 6,898 P.2d 525 (Colo. 1995) ................................................................................... 10, 15

Bruce v. City of Colorado Springs,

129 P.3d 988 (Colo. 2006) ................................................................................... 6, 7

Bruce v. Pikes Peak Library Dist.,155 P.3d 630 (Colo. App. 2007) .......................................................................... 15

Celotex Corp. v. Catrett,477 U.S. 317 (1986) ............................................................................................. 18

Fabec v. Beck,922 P.2d 330 (Colo. 1996) ................................................................................... 5

HCA-Healthone, LLC v. City of Lone Tree,197 P.3d 236 (Colo. Ct. App. 2008) .................................................................... 6, 7

Howard Elec. & Mech., Inc. v. Dept of Revenue of State of Colo.,771 P.2d 475 (Colo. 1989) ................................................................................... 10

Huber v. Colorado Mining Ass'n,264 P.3d 884 (Colo. 2011) ................................................................................... 4, 5, 12, 15

McKinney v. Cadleway Properties, Inc.,548 F.3d 496 (7th Cir. 2008) ............................................................................... 18

Mesa Cnty. Bd. of Cnty. Comm'rs v. State,203 P.3d 519 (Colo. 2009) ................................................................................... passim

Mt. Emmons Min. Co. v. Town of Crested Butte,690 P.2d 231 (Colo. 1984) ................................................................................... 18


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C.R.S. 39-26-707(1)(e) (2014)................................................................................ 11

C.R.S. 39-26-707(2)(d) (2014) ............................................................................... 11

C.R.S. 138-5-4(1)(b) (1963) ................................................................................... 9, 14

C.R.S. 138-5-14(1)(e) (1963) .................................................................................. 9

Other Authorities

Blacks Law Dictionary (7th Ed. 1999) ..................................................................... 6, 9

Colorado Legislative Drafting Manual ...................................................................... 14

Colorado Secretary of State, Quarterly Business & Economic Report, FirstQuarter 2014,http://www.sos.state.co.us/pubs/business/quarterlyReports/2014-Q1.pdf (lastvisited November 21, 2014) ....................................................................................... 17

Daniel D. Domenico, The Constitutional Feedback Loop: Why No StateInstitution Typically Resolves Whether A Law Is Constitutional and What, IfAnything, Should Be Done About It, 89 Denv. U. L. Rev. 161 (2011) ...................... 4

Op. Atty Gen. No. 93-03 (Apr. 6, 1993) .................................................................. 14

Op. Atty Gen. No. 96-01 (Feb. 27, 1996) ................................................................. 14

Submission of Interrogatories on Senate Bill 93-74, 852 P.2d 1 (Colo. 1993) ......... 5

Websters II New College Dictionary (1999) ............................................................ 6, 9


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INTRODUCTION

Plaintiffs TABOR Foundation and Penn Pfiffner (collectively the Foundation) bring

this case to ensure that the Regional Transportation District (RTD) and the Science and

Cultural Facilities District (SCFD) comply with the requirements of the Colorado Constitution.

Contrary to Defendants personal attacks on the Foundation, this case is not about whether

levying taxes on candy, soda, food containers, cigarettes, and advertising materials would be

good or bad for Colorado. The Foundation only seeks to ensure that it is the voters, and not the

districts, that ultimately decide that question.

As demonstrated previously, and further demonstrated below, the levying of taxes on the

items in HB13-1272 is levying of new taxes without voter approval in violation of the

Taxpayers Bill of Rights (TABOR), Colo. Const. art. X, 20. The previous ballot measures

related to the districts taxing authority limited the taxing authority of the districts. Under the

plain language of the previous voter-approved ballot measures, the districts do not have voter

approval to levy taxes on the items in HB13-1272.

In addition, the districts should be enjoined from levying taxes on the items in HB13-

1272 because they have implemented a tax policy change that has resulted in a net tax revenue

gain for the districts in violation of TABOR. Before the passage of HB13-1272, the districts

knew that a decision to levy taxes on those items would result in a net tax revenue gain. Despite

this, Defendants attempt to circumvent the requirements of the Colorado Constitution by arguing

that their poor recordkeeping allows them to implement tax policy changes without consequence.

This is an unreasonable interpretation of TABOR and should not be adopted. Furthermore, even

under Defendants unreasonable interpretation, the districts should be enjoined from levying any


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further taxes on the items in HB13-1272 because the record demonstrates that the districts

realized a net tax revenue gain as a result of the tax policy change.

ARGUMENT

I. THE FOUNDATION IS CHALLENGING THE DISTRICTS DISCRETIONARY

DECISION TO LEVY TAXES ON THE ITEMS IN HB13-1272.

Defendants incorrectly argue that the nature of the Foundations challenge is irrelevant to

the standard of review this Court should apply in this case. The nature of the case determines the

standard of review because the Foundation is not asking this Court to set aside any statute.

Barber v. Ritter, 196 P.3d 238, 247 (Colo. 2008) (stating that the beyond a reasonable doubt

standard of review applies to challenges of astatutesconstitutionality because of the

presumption of constitutionality enjoyed by thestatutes . . . . (emphasis added)). If this Court

grants the relief requested by the Foundation, HB13-1272 will remain in place. See First

Amended Complaint Prayer for Relief B. The districts, RTD and SCFD, however, will be

prevented from levying taxes on the items in HB13-1272 unless and until they receive voter

approval. Id.

The General Assembly did not impose the challenged taxes. Instead, the General

Assembly merely granted the districts the statutory authority to levy the challenged taxes.2

C.R.S. 32-9-119(2)(a) (RTD has the power to levy sales taxes); C.R.S. 32-13-107(1)(a)

2Contrary to the Department of Revenues (DOR) suggestion, by mentioning the districtsstatutory authority, the Foundation does not misunderstand the fundamental purpose ofTABOR. See DOR Response/Reply at 8. In this case, prior to 2014, there were two separate anddistinct restrictions on the districts ability to levy taxes on candy, soda, food containers,cigarettes, and advertising materials. Prior to HB13-1272, the districts werestatutorilybarredfrom levying taxes on the items in the bill. In addition, because the voters have not given thedistricts authority to tax the items in HB13-1272, the districts were constitutionallybarred fromlevying taxes on those items. HB13-1272 removed the statutory limit on the levying of taxes,but only the voters can remove the constitutional limit. Colo. Const. art. X, 20(4).


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include an election provision. RTD Response/Reply at 6. HB13-1272 did not need to include an

election provision because RTD and SCFD already have statutory authority to hold elections in

order to comply with TABOR. C.R.S. 32-9-119.3 (RTD); C.R.S. 32-13-105 (SCFD).

Therefore, the decision to not hold an election prior to levying taxes on the items in HB13-1272

was solely that of the districts. That decision and the subsequent levying of the challenged taxes

by the districts without a vote of the people is the sole action challenged by the Foundation.

Therefore, this Court does not need to decide the constitutionality of HB13-1272.

DOR cites two cases for the proposition that the beyond a reasonable doubt standard of

review applies in all TABOR cases . . . .. DOR Response/Reply at 4; but see Bickel v. City of

Boulder, 885 P.2d 215, 227 (Colo. 1994) (applying a substantial compliance standard of

review). In the two cases cited by DOR, however, the Court made clear that the challenge was to

the facial constitutionality of the statute itself, not to any government action purporting to

implement the statute. Huber v. Colorado Mining Ass'n, 264 P.3d 884, 887 (Colo. 2011)

(challenge to a non-discretionary increase in tax rates under a statute that provided that the tax

rate . . .shall beincreased or decreased one percent. (emphasis added)); Mesa Cnty. Bd. of

Cnty. Comm'rs v. State, 203 P.3d 519, 52526 (Colo. 2009) (challenging a statute that provided

that [e]very districtshalllevy the number of mills determined . . . . (emphasis added)). When

a plaintiff challenges a districts discretionary implementation of a tax, the beyond a reasonable

doubt standard of review simply does not apply.5 See TABOR Found. v. Colorado Bridge

5This assumes, of course, that the beyond a reasonable doubt standard is even a viablestandard of review when reviewing purely legal questions. See Foundation Memo at 79. Thebeyond a reasonable doubt standard is an evidentiary standard, and its use as a legal standardof review is archaic and undefined. Seeid.;see also Daniel D. Domenico, The ConstitutionalFeedback Loop: Why No State Institution Typically Resolves Whether A Law Is Constitutionaland What, If Anything, Should Be Done About It, 89 Denv. U. L. Rev. 161, 16768 (2011)


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B. Under The Plain Language Of Previously Approved Ballot Measures, The

Districts Do Not Have The Authority To Levy Taxes On The Items In HB13-

1272.

Defendants attempt to get aroundHCA-Healthone, and the plain meaning of new,by

arguing that the voters previously approved levying taxes on the items in HB13-1272.

Defendants interpretations of the previous ballot measures ignore the limited taxing authority

the voters granted to the districts. As a result, just like inHCA-Healthone, the expansion of the

districts sales taxes to items not previously approved constitutes a new tax for the purposes of

TABOR.7

The ballot measures must be given their plain meaning, and understood in the context of

a typical voters understanding. Bruce, 129 P.3d at 996 (Interpreting the ballot measure based on

how a typical voter would interpret it). The purposes of TABOR are to notify voters of, and

give them ultimate authority over, potential tax increases. Bickel, 885 P.2d at 23637 ([T]he

purpose of such a disclosure requirement is to permit the voters to make informed choices at the

ballot. In our view, that purpose was not substantially achieved . . . because the ballot title failed

to give any indication of the potential magnitude of that tax increase.). Therefore, previous

ballot measures can only give the districts the authority to levy taxes on the items in HB13-1272

if such a purpose was clear from the language of those previous ballot measures. As

demonstrated below, the districts ballot measures did not clearly give the districts that authority

and, in fact, the ballot measures expressly limited the items the districts could levy taxes on.

7DOR also mistakenly relies onMesa County to argue that requiring an additional electionwould be redundant. DOR Response/Reply at 10. As demonstrated previously, and furtherdemonstrated below, levying of taxes on the items in HB13-1272 does not fall within the taxinglimits previously approved by a districts voters because the ballot measures did not authorizethe districts to levy taxes on the items in HB13-1272. See Foundation Memo at 1318.Therefore, requiring voter approval for the new taxes is not redundant.


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a. The 1973 election did not authorize RTD to levy taxes on

cigarettes and advertising materials.

In 1973, RTD voters approved a ballot measure authorizing the issuing of bonds to be

paid from A DISTRICTWIDE SALES TAX LEVIED AT A RATE OF ONE-HALF OF ONE

PERCENT UPON EVERY TAXABLE TRANSACTION.9 Ex. 3-J. The law in effect in 1973

defines what constituted a taxable transaction. In 1973, the state levied sales taxes on the

purchase price paid or charged upon all sales and purchases of tangible personal property and

retail. C.R.S. 138-5-4(1)(b) (1963), recodified at C.R.S. 39-26-104(1)(a) (1973).10 The sale

of cigarettes, however, were exempted from sales and use taxes and was therefore not a taxable

transaction in 1973. C.R.S. 138-5-14(1)(e) (1963); C.R.S. 39-26-114(1)(d) (1973).

Furthermore, in 1973, the sale or use of direct advertising material was not a taxable transaction

because it was not included in the definition of tangible personal property at the time. See

Exhibit 20-J at 38 (2010 law changing the definition of tangible personal property to include

DIRECT MAIL ADVERTISING MATERIALS . . . .).

The 1973 enabling statute confirms the meaning of the ballot measure and provides that

RTD, after an election, has the authority to levy uniformly throughout the district a sales tax at

the rate of one-half of one percent upon every transaction or other incident with respect to which

a sales tax is now levied by the state, pursuant to the provision ofArticle 26 of Title 39, C.R.S.

1963. Ex. 2-J at 99192 (all emphasis added). The use of the present tense term now levied,

indicates that RTD only has the authority to levy sales and use taxes on items taxed at the time of

9The 1973 ballot measure also provides that the bonds issues in conjunction with the ballotmeasure will MATURE WITHIN THIRTY YEARS AFTER THE DATE OR RESPECTIVEDATES OF THE BONDS. Therefore, RTDs authority under the 1973 election expired whenthe bonds matured in 2003.10The relevant portions of the 1963 and 1973 statutes are attached hereto as exhibits I and J.


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approved sales taxes to particular statutory authority, frozen in time. DOR Response/Reply at

7. Accordingly, even accepting Defendants arguments that the 1973 election is the only election

that limits their taxing authority, RTD would still need voter approval to levy sales and use taxes

on cigarettes and advertising materials.

b. In 1980, the voters revoked RTDs authority to levy sales taxes

on food and food containers.

The 1973 election is not the only election that limits RTDs taxing authority, however,

because in 1980, the state exempted food and food containers from sales and use taxes. C.R.S.

39-26-114(1)(a)(XVI), 39-26-114(1)(a)(XX) (1973, 1979 Cumulative Supplement);11See

also C.R.S. 39-26-707(1)(e) (2014); 39-26-707(2)(d) (2014). In 1980, the General Assembly

submitted to the voters the question of eliminating the authority of the district . . . to levy a sales

tax on food. Exhibit 5-J at 682;see also id. at 681 (discussing compensation of RTD for the

elimination of the authority to levy a sales tax on food). Therefore, the voters expressly revoked

RTDs ability to levy a sales tax on food, and RTD must obtain voter approval before it can levy

sales taxes on food for the first time in over 30 years. In 1992, the voters confirmed RTDs

limited taxing authority by authorizing RTD to levy uniformly throughout the district a sales tax

at the rate of six-tenths of one percent upon every transaction or other incident with respect to

which a sales tax is now levied by the state, pursuant to the provisions of article 26 of title 39,

C.R.S. RTD Exhibit 5 (emphasis added). Accordingly, the voters have made it clear that RTD

does not have the authority to levy sales and use taxes on the items in HB13-1272 and RTD must

seek voter approval before it may levy taxes on those items.12

11The relevant portions of the 1979 statutes are attached hereto as exhibit K.12As demonstrated previously, RTDs 1999 and 2004 elections are irrelevant because theyconcerned subsection (7) waivers, not subsection (4)(a) waivers. Foundation Memo at 1316;


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2. The Previous Ballot Measures do not Authorize SCFD to Levy Taxes

on the Items in HB13-1272.

Like RTD, SCFDs ballot measures do not grant the district the authority to levy sales

and use taxes on the items in HB13-1272. SCFDs ballot measures also expressly incorporate

the law in effect at the time, and SCFD cannot broaden its taxing authority without voter

approval.

The 1988 ballot measure authorizes SCFD to RECEIVE PROCEEDS FROM A ONE-

TENTH OF A CENT SALES TAX TO BE DISTRIBUTED ACCORDING TO LAW . . . .

Exhibit 7-J at 185. The language according to law indicates that the sales tax will be

distributed based on the law in effect at the time. SCFDs enabling statute sets forth the law

incorporated in the ballot measure and provides that SCFD has the authority to levy [a] uniform

sales tax . . . upon every transaction or other incident with respect to which a sales tax is levied

by the state, pursuant to the provision of article 26 of title 39, C.R.S., except such sales tax shall

be levied on purchases of machinery or machine tools which are otherwise exempt . . . . Exhibit

6-J at 5 (all emphasis added). As with RTD, the statute uses the present tense is levied and

expressly incorporates the Colorado Revised Statutes in effect at the time. In 1988, the State of

Colorado did not levy sales taxes on candy, soda, direct advertising materials, cigarettes, or food

containers. C.R.S. 39-26-114(1)(a)(XVII), C.R.S. 39-26-114(1)(a)(XX) (1973, 1982

Replacement Volume).13 Therefore, even considering only the 1988 ballot measure, SCFD does

not have the authority to levy taxes on the items in HB13-1272.

Huber, 264 P.3d at 892 n.6 (The collection of increased revenue amounts is addressed by thespending limit and refund provisions of subsection (7) of article X, section 20, not the voterapproval requirement in subsection (4)(a).).13The relevant portions of the 1982 statutes are attached hereto as exhibit L.


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The 1988 ballot measure is irrelevant, however, because, by law, the authority was set to

expire in 1993. Exhibit 6-J at 13. All subsequent elections also had an expiration date on

SCFDs taxing authority. Exhibit 9-J at 143 (1994 ballot measure providing for an extension of

SCFDs sales tax until 2006). Therefore, SCFDs taxing authority comes from the most recent

ballot measure authorizing SCFD to levy sales and use taxes. In 2004, the voters approved a

ballot measure that extended THE AGGREGATE 0.1 PERCENT SALES AND USE TAXES

CURRENTLY LEVIED AND COLLECTED by SCFD.14 Exhibit 18-J. This language is in the

present tense, and clearly means that the voters granted SCFD the authority to levy sales and

use taxes on only those items that SCFD actually taxed at the time of the measure. Websters II

New College Dictionary 276 (1999) (defining current as [b]elonging to the present time).

As demonstrated above, in 2004 SCFD did not levy sales and use taxes on the items in HB13-

1272. See also Foundation Memo at 1718. Therefore, it is not the Foundation that is ignoring

the will of the voters, it is the districts because their argument completely ignores the plain

language of the previously approved ballot measures. Accordingly, this Court should enjoin

SCFD from levying taxes on the items in HB13-1272 until it receives voter approval.

III. BY LEVYING SALES AND USE TAXES ON THE ITEMS IN HB13-1272, THE

DISTRICTS INSTITUTED A TAX POLICY CHANGE THAT DIRECTLY

CAUSES A NET TAX REVENUE GAIN FOR THE DISTRICTS.

A. The Districts Have Implemented A Tax Policy Change.

In addition to being a new tax, the levying and collecting of taxes on the items in HB13-

1272 constitutes a tax policy change directly causing a net tax revenue gain to the districts and

14Even if this ballot measure extended the original taxing authority granted in 1988, as SCFDcontends, it still does not authorize SCFD to levy taxes on the items in HB13-1272. SCFDResponse/Reply at 14. As demonstrated above, the 1988 ballot measure limited the scope ofSCFDs taxing authority, and did not include the authority to tax the items in HB13-1272.


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must be approved by the voters. Colo. Const. art. X, 20(4)(a). Prior to 2014, the districts

policies were to not levy sales taxes on the items in HB13-1272.15 Now, in 2014, the districts

have adopted a new policy, and they have chosen to levy taxes on the items in HB13-1272. The

obvious interpretation is that the districts have implemented a tax policy change, and that

interpretation is the one adopted by the Attorney General:

Of course, a change in the structure itselfthe addition or deletion of a statutoryvariable, a change in the method by which rates are computed, or any increase inthe standard or computed rates in the tax tableswould trigger the need foradvance voter approval, assuming a resultant net revenue gain.

Op. Atty Gen. No. 93-03 (Apr. 6, 1993); See also Colorado Legislative Drafting Manual at 9-9

(The repeal of a sales tax exemption appears to require voter approval since such repeal would

result in increased revenues.). The Attorney General reiterated this conclusion three years later:

A change in tax policy occurs when a statutory modification is made to thestandards or rules governing the imposition of a specific tax. For example, amodification might be made to the subject of a tax, the timing of a tax, or thedetermination of liability under a tax. If a change does not modify the standardsor rules regarding the imposition of a tax, no tax policy is being changed.

Op. Atty Gen. No. 96-01 (Feb. 27, 1996).

This interpretation is also consistent with the purpose of TABOR, which is to keep

taxpayers informed of when they will pay more taxes, by seeking their approval prior to a change

in the tax structure.16 The history of the districts sales and use taxes makes the districts policies

15Granted, RTD may have taxed food between 1973 and 1980. C.R.S. 138-5-4(1)(b) (1963);C.R.S. 39-26-104(1)(a) (1973). However, since 1980, it was RTDs policy to not levy a salestax on food and food containers. C.R.S. 39-26-114(1)(a)(XVI), 39-26-114(1)(a)(XX) (1973,1979 Cumulative Supplement).16As demonstrated above, the voters have not authorized the districts to levy taxes on the itemsin HB13-1272. However, any argument that a pre-TABOR vote could authorize a tax policychange in 2014 is not supported by the case law. Courts have limited the situations in whichthey found a pre-TABOR election sufficient to meet TABORs voter approval requirement, andno court has found that a pre-TABOR election authorizes a post-TABOR tax policy change. See


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(4)(a).). That is not the situation in the instant case. Here, the voters have only granted the

districts authority to levy sales and use taxes on certain items. See Part II,supra. If the districts

want to levy taxes on other items, and spend revenue from the collection of those taxes, then they

must have an additional subsection (4)(a) election. Such an election would not be redundant, but

necessary. Therefore, theMesa County language is inapplicable in this case.

Secondly, Defendants argue that the Foundation must prove that the districts actually

realized a net tax revenue gain in order for this Court to hold that the districts violated TABOR.

Although the districts supported the passage of HB13-1272 because it was clear that levying

taxes on the items in HB13-1272 would result in a net tax revenue gain, they shamelessly argue

that the result of their own actions is unclear. See Foundation Memo. at 2125 (demonstrating

that the districts supported HB13-1272 because of the anticipated revenue gain if they levied

taxes on the items in the bill); Exhibit 28-J (RTD resolution supporting HB13-1271 and

providing that receipt of additional revenue will accelerate RTDs funding of these designated

projects . . . .); Exhibit 27-J (Minutes of meeting noting that SCFD was advised that levying

taxes on the items in HB13-1272 would result in increased revenues.). Defendants essentially

ask for this Court to find all tax policy changes unreviewable under TABOR unless a plaintiff

can produce evidence the districts will not collect or provide. Under their argument, it does not

matter if a district knows that a tax policy change will result in a revenue gain, so long as the

district can avoid collecting enough data to prevent a challenge.

Defendants interpretation does not keep taxpayers informed and, in fact, does the exact

opposite. It allows governments to circumvent TABOR without notice to the taxpayers by

refusing to keep adequate records. An interpretation of TABOR that gives it no force should not

be adopted by this Court. Patterson Recall Comm., Inc. v. Patterson, 209 P.3d 1210, 1215


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(Colo. App. 2009) (A court should avoid an unreasonable interpretation [of a constitutional

amendment] or one that produces an absurd result.).

Furthermore, even if this Court adopts Defendants interpretation of TABOR, the record

demonstrates that the districts realized a net tax revenue gain as a result of levying taxes on the

items in HB13-1272. Defendants concede that the districts have taken in more money this year,

but they argue that there are too many variables too consider. See DOR Response/Reply at 15.

By looking at and isolating the variables, however, one can determine whether the levying of

sales taxes on items in HB13-1272 resulted in a net tax revenue gain for the districts.

The Leeds report provides that RTDs levying of taxes on the items in HB13-1272 would

generate a net increase of $2.7 million in 2012 dollars, or 6% of 2012 RTD total revenue.

Exhibit 31-J at 3. The Report lists the other possible variables it considered when it calculated

the approximate impact of levying sales tax on the items in HB13-1272. The Report provides

that Colorado retail trade is projected to grow 7.3% and 7.8% in 2014 and 2015, respectively.

Continued growth is supported by expected increases in personal income and employment that is

anticipated to exceed the national average. Exhibit 31-J at 4. Defendants respond that

everything in the Leeds Report is an approximation. Those approximations, however, are

confirmed by recent data collected by the state. The Colorado Secretary of States quarterly

report for the first quarter provides that [r]etail sales improved 1.8% in the last quarter and were

up 4.8% annually. Colorado Secretary of State, Quarterly Business & Economic Report, First

Quarter 2014 at 5, http://www.sos.state.co.us/pubs/business/quarterlyReports/2014-Q1.pdf (last

visited November 21, 2014).17 Therefore, if anything, the Leeds Report overestimated the retail

17A copy of the Report is attached hereto as Exhibit M. The Report is produced by the LeedsSchool of Business on behalf of the Colorado Secretary of State.


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trade growth and, as a result, underestimated the potential impact of levying taxes on the items in

HB13-1272.18

The rate increase in sales and use tax returns far exceed even the liberal projections in the

Leeds Report. As demonstrated previously, RTD received a 10.24% increase in revenue and

SCFD received a 9.29% increase in revenue during the first four months of 2014. Foundation

Memo at 23, 25. Therefore, the districts received more revenue than can be attributed to retail

growth alone. Accordingly, the districts tax policy changes resulted in a net tax revenue gain

and must be enjoined until the districts receive voter approval.19

18The Leeds Report also provided that the districts revenue would increase as a result of retailmarijuana sales, but these additional sales cannot solely account for the districts increase inrevenue. Exhibit 31-J at 3 (As a result, RTD sales tax revenues from marijuana sales increasedby $99,000 in January. The new revenue stream will increase as more RTD tax districts allowthe operation of retail marijuana shops. As part of a separate study, the BRD research teamfound that marijuana tax revenues increased approximately 18% in Denver County after retailsales were allowed.).19Cross-motions for summary judgment are treated separately under the standards applicable toeach. See McKinney v. Cadleway Properties, Inc., 548 F.3d 496, 504 n.4 (7th Cir. 2008). TheFoundation has produced enough evidence to support its motion for summary judgment and shiftthe burden of persuasion to Defendants. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)(a party seeking summary judgment always bears the initial responsibility of informing thedistrict court of the basis for its motion.). Defendants have not attempted to refute this evidenceand, as a result, this Court should grant the Foundations motion for summary judgment. Id.([A] complete failure of proof concerning an essential element of the nonmoving party's casenecessarily renders all other facts immaterial.). Furthermore, by providing evidence that thedistricts realized a net tax revenue gain, the Foundation has met its burden to defeat Defendants

motions for summary judgment. At the very least, Defendants motions should be deniedbecause the Foundation has produced enough evidence to demonstrate that a reasonable trier offact could find that RTD and SCFD realized a net tax revenue gain as a result of levying taxes onthe items in HB13-1272. Mt. Emmons Min. Co. v. Town of Crested Butte, 690 P.2d 231, 239(Colo. 1984) ([A]s long as a reasonable trier of fact nevertheless could draw divergentinferences from the application of the legal criteria to the facts, summary judgment should bedenied.).


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IV. THIS COURT SHOULD NOT APPLY ANY JUDICIALLY CREATED

EXCEPTIONS TO TABOR.

Defendants argue that, even if this Court finds that Defendants actions violate TABOR,

that it should not grant the Foundations motion for summary judgment because of two purported

judicial exceptions to TABOR. Defendants argue that any revenue gained from levying taxes on

HB13-1272 is de minimis, and that enjoining the districts from levying those taxes would curtail

the everyday functions of the districts. As demonstrated previously, the burden is on Defendants

to prove any purported judicial exception to TABOR. Foundation Memo at 2627. Because

Defendants have failed to meet their burden this Court should not apply any purported judicially

created exception.

As demonstrated previously, the only support for a judicially created de minimis

exception comes from dicta inMesa County which stated that tax policy changes that have a

de minimis impact may not violate TABOR. Mesa County, 203 P.3d at 529. The de minimis

exception is not included in the text of the Colorado Constitution and, as a result, this Court

should not apply a judicially created exception referenced in dicta. See Foundation Memo at 26

27. Even if this Court applies the exception, the only definition of de minimis offered by the

Colorado Supreme Court is where the cost of the election could exceed the additional revenue

obtained. Mesa County,203 P.3d at 529. Defendants have not attempted to demonstrate that

the perpetual increase in revenue from levying taxes on the items in HB13-1272 would be less

than the one-time cost of an election. Accordingly, this Court should not excuse Defendants

TABOR violations for being de minimis.20

20Furthermore, adopting the de minimis exception would set a precedent to allow governmentdistricts to make several de minimis tax policy changes in order to get around TABORslimitation.


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Defendants have also failed to demonstrate how preventing the districts from levying

taxes on the items in HB13-1272 until voters approve the taxes will prevent the districts from

operating. SCFD argues that H.B. 13-1272 did significantly aid SCFD in its everyday activity of

levying and collecting sales taxes . . . .. SCFD Response/Reply at 15. Where complying with the

Constitution would, at most, result in a mere inconvenience for a governmental entity, the

cripple the everyday workings of government exception does not apply. See In re Submission

of Interrogatories on House Bill 99-1325, 979 P.2d 549, 557 (Colo. 1999) (Stating, as an

example, that TABOR could not be interpreted so literally that it would prevent a local

government from entering into a multiple year lease-purchase agreement for equipment, like

copy machines or computers.). If enjoined from levying taxes on the items in HB13-1272, the

districts will still be able to operate without limitation, and they will still be able to provide their

services. Accordingly, the districts are not at risk of being crippled by complying with the

Constitution, and this Court should not use any exception to excuse the districts TABOR

violations.

CONCLUSION

For the foregoing reasons, this Court should grant Plaintiffs Cross-Motion for Summary

Judgment, deny Defendants Motions for Summary Judgment, and grant the relief requested in

Plaintiffs First Amended Complaint.

DATED this 21st day of November 2014.

E-filed in accordance with C.R.C.P. 121, 1-26.Respectfully submitted,

/s/ Jeffrey W. McCoy

Jeffrey W. McCoySteven J. Lechner


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Mountain States Legal Foundation2596 South Lewis WayLakewood, Colorado 80227(303) [email protected]

[email protected]

Attorneys for Plaintiffs


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