DENVER DISTRICT COURT

Denver City and County Building

1437 Bannock St.
Denver, CO 80202

DATE FILED: February 25, 2015 10:07 AM

CASE NUMBER: 2013CV854

Plaintiff:
TABOR FOUNDATION, ET. AL.

v.
COURT USE ONLY

Defendant:
RTD, ET. AL.

Case Number: 13CV854

Courtroom: 424

ORDER

THIS MATTER comes before the Court on the parties motions and cross-motion for
summary judgment.
BACKGROUND AND PROCEDURAL HISTORY
This TABOR amendment challenge was initially filed in Jefferson County and was
transferred to the Denver District Court on December 9, 2013. On December 17, 2013, the
Court set a briefing schedule regarding Plaintiffs Motion for Preliminary Injunction. After
holding a hearing on the matter, the Court denied Plaintiffs request for a preliminary
injunction. Subsequently, the parties filed a stipulation of facts on August 21, 2014,
followed by briefing on each partys motion for summary judgment. The Court heard oral
argument on the summary judgment issues on February 2, 2015.
Colorado House Bill 13-1272 (HB 1272 or the Bill) was passed in 2013, and
made several adjustments to the items upon which the Regional Transportation District
(RTD) and Scientific and Cultural Foundations District (SCFD) (collectively, the
Districts) could and could not collect sales tax. The Bill aligned the list of items taxable by
the Districts with items taxed by the State. HB 1272 states that the regional transportation
district and the scientific and cultural facilities district have the same sales and use tax base
as the state with respect to tangible personal property, but the districts and the state have
different exemptions for several types of such property. Joint Exhibit 21, 1(1)(a). The
Bill, in its legislative declaration, states that this situation leads to confusion for taxpayers
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and it is an administrative burden for vendors who collect and remit the tax to the state. Id.
at (1)(b). The intended purpose of the Bill is to simplify the administration and collection
of sales and use tax . . . . Id. at (1)(c). The Bill goes on to eliminate exceptions to the
Districts tax authority and states that each district has the power to levy such uniform sales
and use taxes throughout the district . . . upon every transaction or other incident with
respect to which a sales and use tax is levied by the state. Id. at 3. This grant of power is
generally consistent with the Districts historical authority to tax all items that were taxed by
the State.
Plaintiffs argue that, under the TABOR Amendment, voter approval was required
before the Districts subjected any new items to sales tax pursuant to HB 1272. They assert
that the Districts implementation of the Bill resulted in a new tax or a tax policy change
directly causing a net tax revenue gain to RTD and SCFD.
STANDARD OF REVIEW
The long-established rule in Colorado is that every statute is presumed to be
constitutional until and unless the contrary is shown beyond a reasonable doubt. Rathke v.
MacFarlane, 648 P.2d 648, 655 (Colo. 1982). Further, a statute challenged under article X,
section 20 [the TABOR Amendment] must be proven to be unconstitutional beyond a
reasonable doubt. Mesa County Bd. Of County Comrs v. State, 203 P.3d 519, 523 (Colo.
2009). A reviewing court must assume that the legislative body intends the statutes it
adopts to be compatible with constitutional standards. Id. at 527 (internal citation omitted).
To avoid the beyond-a-reason-doubt (BARD) standard, Plaintiffs argue that they
are not challenging the constitutionality of HB 1272, but rather, the decisions of RTD and
SCFD to implement the Bill by collecting taxes on new items without first conducting an
election to obtain voter approval. Plaintiffs therefore assert that they need not show that the
statute is unconstitutional beyond a reasonable doubt; instead, Plaintiffs point to guidance in
TABOR indicating that where multiple interpretations . . . are equally supported by the
text of TABOR, a court should choose that interpretation which it concludes would create
the greatest restraint on the growth of government. Bickel v. City of Boulder, 885 P.2d 215,
229 (Colo. 1994).
Plaintiffs also overtly criticize the BARD standard and urge the Court not to apply it,
or to interpret it as nothing more than a presumption of validity that attaches to any
legislative act. The Court concedes there is some irony in applying the BARD standard to
TABOR, which not only restricts the Legislatures taxing prerogative, but reflects distrust
that the Legislature will attempt to avoid or evade those restrictions. Nevertheless, this Court
must follow Supreme Court precedent, which is based on the fundamental tenant of respect
among branches of government. Therefore, because of the importance of determining the
appropriate standard of review, the Courts analysis must, and will, begin there.
ANALYSIS
A. BARDApplicable or Not
Plaintiffs assert that their challenge is to the actions of RTD and SCFD; the
Districts could have complied with TABOR after HB 1272 was passed by either electing not
to collect taxes on the items identified, or by holding an election to obtain voter approval.
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Defendants respond that the purpose of the Billto eliminate confusion and make tax
collection more uniformwould be undermined if RTD and SCFD had chosen not to
implement it in full. In this regard, only a strained reading of the Bill would suggest that the
Legislature intended the Districts compliance to be optional. Moreover, Plaintiffs approach
would have placed the Districts in the untenable position of no longer being able to tax
certain items, while being precluded from taxing other items pending an election.
Additionally, HB 1272 does not include a provision authorizing or allowing the Districts to
delay implementation in order to conduct an election. Had the Districts delayed in adjusting
their tax collection policies in order to hold the election demanded by Plaintiffs, HB 1272
would not have achieved its purpose in reducing confusion and inconsistency. To the
contrary, the administrative burden on vendors would have continued, and worsened if
voters rejected the purported new tax. Thus, while Plaintiffs assert they are not directly
challenging the facial constitutionality of HB 1272, the practical impact of their claims is
such a challenge.
In light of the Courts conclusion that Plaintiffs claims present a constitutional
challenge to HB 1272, the Court will adhere to the BARD standard. Therefore, Plaintiffs
must show that HB 1272 is unconstitutional beyond a reasonable doubt. But having reached
that conclusion, the Court also must determine how to meaningfully apply the standard to
the circumstances at hand. Before doing so, further interpretation of the Bill and TABOR is
necessary.
B. TABOR
Under Article 10 of the Colorado Constitution, districts must have voter approval
in advance for any new tax, tax rate increase, . . . or a tax policy change directly causing a
net tax revenue gain to any district. Colo. Const. Art. 10, 20(4). Plaintiffs claim that HB
1272 resulted in both a new tax on items previously not taxed by the Districts, and
constituted a new tax policy causing a net tax revenue gain.
1. New Tax
Plaintiffs argue that HB 1272 constituted a new tax because it allowed for the
collection of sales tax by RTD and SCFD on itemscigarettes, candy and soft drinks, etc.
that had not previously been included in their sales tax base. Defendants contend that HB
1272 did not impose a new tax, but was an effort to streamline the sales tax procedures for
businesses to eliminate situations where certain items would be subject to taxation by RTD
and SCFD, but not the State, and vice versa. In this way, HB 1272 ensured that the lists of
taxable items would be consistent between the Districts and the State and businesses would
not need to make complex calculations to determine their sales tax responsibilities.
Historically, RTD was granted the right to levy a sales tax in legislation passed in
1973. This bill permitted RTD to collect a sales tax at a rate of one-half of one percent for
every transaction upon which a sales tax was levied by the State. See Joint Exhibit 2. In
1980, the sales tax was revised to eliminate taxes on food, machinery, and machine tools. In
1994, the taxable items were again altered, this time exempting machinery and machine
tools from state taxation, but permitting RTD to tax those items. In 1997, the State exempted
from state taxation certain low emitting motor vehicles, but RTD was again permitted to
continue collecting tax on those items. In 2009, cigarettes were exempted from RTDs
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taxing authority. In 2010, the state sales tax was extended to direct mail advertising
materials, certain food items, candy, and soft drinks. However, RTD was not given authority
to tax those items. Finally, HB 1272 was passed to realign the two tax regimes by permitting
RTD to tax items taxed by the State and removing its authority to tax low emitting motor
vehicles, vending machine sales, and machinery and tools not subject to state tax.
SCFD was created in 1987 and was authorized to levy sales tax upon every
transaction so taxed by the State, except for machinery or machine tools, which were not
subject to state taxation, but were subject to SCFD sales tax. In 1994, voters approved an
extension of SCFDs taxing authority for an additional ten years. In 1999, SCFD was
permitted to levy taxes on vending machine sales of food and low emitting vehicles,
although the State did not tax such items. Voters again approved an extension of SCFDs
authority in 2004. In 2009, the State began to levy sales tax on cigarettes; however, SCFD
was not permitted to tax those items. Finally, in 2010, the State included direct mail
advertising, candy, soft drinks, and certain food items in state sales taxes, but did not grant
SCFD authority to tax those items. Again, HB 1272 was passed to realign SCFDs tax
authority with that of the State.
Against this historical backdrop, the Court concludes that HB 1272 did not create a
new tax. The tax allowed and imposed before HB 1272 was a sales tax and it remained a
sales tax after HB 1272. The Bill did not alter the nature of the tax being collected, nor did it
establish a new type or category of tax. The Bills main purpose and primary result was to
create consistency between taxes levied by the Districts and by the State. Voters had
previously approved sales taxes for both Districts. Given this history, a change in the list of
items that are subject to sales tax does not constitute the creation of a new tax. Rather, it is
an adjustmentprimarily of an administrative natureto an existing tax. Therefore, HB
1272 did not create a new tax that would have required voter approval under TABOR.
Plaintiffs rely on HCA-Healthone, LLC. v. City of Lone Tree, 197 P.3d 236 (Colo.
App. 2008), for the proposition that an expansion of the items subject to a tax without prior
voter approval is a new tax. However, that case is distinguishable from the present situation
in several critical respects. In HCA, voters initially passed a ballot measure authorizing a use
tax limited to construction and building materials. 197 P.3d at 238. In 2003, the City of Lone
Tree repealed its prior ordinances and adopted an ordinance that extended the use tax to
any article of tangible personal property. Id. This ordinance was not submitted to the
voters for approval. Id. at 239. One year later, the City repealed this ordinance and passed a
new ordinance submitting the same tax expansion to voters. Id. However, voters did not
approve the 2004 ordinance. Id.
The court of appeals held that the use tax initially approved by voters was expressly
limited to construction and building materials. Id. at 242. Therefore, the court found that
the expansion of the use tax to all personal property constituted a new tax on all such
property that was not construction or building materials, particularly because it was designed
to raise revenue for the City by collecting additional funds. Id. Although Plaintiffs argue
that the same situation exists here, the Court disagrees. In the present case, the Districts were
initially authorized to levy a sales tax on all items taxed by the State. Unlike the situation in
HCA, the initial grant of taxing authority here was not expressly limited to a list of items
which was then greatly expanded. Instead, the basic grant of authority remained constant,
with the Stateover time---making specific, enumerated exceptions and additions.

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2. Tax Policy Change

Plaintiffs also argue that HB 1272 constituted a tax policy change directly causing a
net tax revenue gain to the Districts. Defendants argue that the Bill did not result in a change
in tax policy, and that even if a change occurred, it did not result in a net revenue gain. In the
context of summary judgment, the Court disagrees with the latter assertionRTDs own
fiscal analysis predicted an overall increase in tax revenue from the Bill. At a minimum,
there appears to be a material issue of fact to be resolved. But because the Court finds that,
irrespective of any net revenue gain, the Bill did not create a tax policy change, this fact
issue does not preclude summary judgment.
A tax policy change is an undefined catch-all phrase attempting to encompass any
district action that is the equivalent of a new tax or tax rate change that would not be
covered by the more specific requirements listed before it. Mesa County, 203 P.3d at 529.
The phrase cannot be applied to any policy modifications that may have a de minimis
impact on a districts revenues. Id. Beyond that limitation, however, there is little case law
guidance applicable to the situation here.
To resolve the meaning of tax policy change in TABOR, this Court must accord
words found in the constitutional provision their plain, common, and ordinary meanings.
HCA-Healthone, 197 P.3d at 240 (citing Bruce v. City of Colorado Springs, 129 P.3d 988,
992-93 (Colo. 2006)). In common and ordinary usage, policy means or equates to a high
level overall plan embracing the general goals and acceptable procedures especially of a
governmental body. Policy, Merriam-Webster Online Dictionary. http://www.merriamwebster.com (24 Feb. 2015). Given this plain, common and ordinary meaning of the term,
the administrative simplification contemplated by HB 1272, on its face, is not a change in
tax policy since it is not a high level overall plan. Further, to conclude otherwise, the
Court would need to find that the Legislature drafted a law using language designed to
circumvent the requirements of TABOR, i.e., a tax policy change disguised as
administrative simplification. It is here that the Court invokes and applies the BARD
standard.
In applying the standard to its analysis, the Court finds that Plaintiffs must point to
evidence that would establish beyond a reasonable doubt that the Legislature intended to
avoid and/or evade TABOR under the guise of administrative simplification. Plaintiffs have
fallen well short of this showing. Since the Court has not been advised of any additional
evidence on this issue to be developed at trial, summary judgment is appropriate.
Therefore, the Court finds that HB 1272 is not a change in tax policy that requires
voter approval. The Court does not find that, beyond a reasonable doubt, the Legislature
sought to circumvent the requirements of TABOR.
In light of the Courts conclusions above, it need not address the other arguments
raised by the parties.

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CONCLUSION
Based on the foregoing, the Court grants summary judgment in favor of Defendants.

DATED February 25, 2015.

BY THE COURT:

______________________
A. Bruce Jones
District Court Judge

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