City officials hope to escape TABOR revenue limitations

Residents could see another question on November ballot


City officials hope to join the 346 municipalities across the state where the sky's the limit in revenue.

Residents in those cities have voted to de-Bruce, a process of exempting a governing body from revenue restrictions imposed by the 1992 Taxpayers Bill of Rights (TABOR). TABOR limits the amount of money a tax-based entity can collect and spend each year based on a formula that allows for a cost of living and growth increase.

Officials hope Craig residents will follow in the steps of others across the state. The Craig City Council will vote on a resolution at its next meeting that will allow it to place a question on the November ballot. If passed, the city will no longer be bound by TABOR restrictions and be allowed to retain all the revenue it collects from any source.

The city is not asking for a tax increase, city manager Jim Ferree said.

"We're just asking for the ability to hang on to the revenue we do receive," he said. "This is primarily due to some fairly substantial grants we're going to get."

The city received Energy and Mineral Impact Assistance funds for upgrades to the water system in the Glen Erie and Craig East subdivisions. The city was not able to collect all of those funds this year because it would have exceeded the TABOR limit. The remainder of that money will be accepted in next year's budget.

"The problem is that it just snowballs," Ferree said. "Eventually that catches up with you."

Next year, the city hopes to get a $247,000 grant for other water system improvements.

"Our concern is these funds, plus the remaining draw down from the Glen Erie grant, will put us over our limit," Ferree said.

If residents don't vote to de-Bruce, and the city is successful at obtaining grant funds, it would not be able to keep them because of TABOR limitations.

"If that's the case, we have to return the funds or not do the project," City Finance Manager Bruce Nelson said. "It's not that we're just rolling in the dough."

The city escaped exceeding TABOR limitations last year by reducing the mill levy by 1.6 mills, resulting in a $65,000 refund to taxpayers.

According to Nelson, the impact next year could be greater and the only solution will be to return grant money.

"Every dollar we can save can be used to increase city services," he said. "Maybe we could've done a few more projects if we hadn't had to reduce the mill levy last year."

Under TABOR, only 10 percent of enterprise funds can come from outside sources such as grants. The water and wastewater departments are enterprise funds, meaning their revenue comes from fees collected for services. Those funds do not collect any revenue from tax dollars.

The 2000 budget for the water fund was $3.3 million. Of that, only $300,000 can come from outside sources.

Funds that are created through tax revenue are allowed to grow based on a formula using the Denver/Boulder Cost of Living Index and local growth. In 2000, the city's general fund budget was only allowed to increase by 5.15 percent under the TABOR formula.

If the city is allowed to de-Bruce, that formula will no longer apply.

"This will enable us not to worry about going over and allow us to be as aggressive as possible in getting additional grants," Ferree said.

According to the Colorado Municipal League, 90 percent of the attempts to de-Bruce across the state have been successful.

Moffat County, the Moffat County School District and the Craig Rural Fire Protection District have all been successful in de-Brucing. Voters were asked in 1998 to exempt the state budget from TABOR limitations, but the measure was shot down.

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