2014-03-12 18-02-04 final march 12 joint answer brief
TRANSCRIPT
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 1/50
COLORADO COURT OF APPEALS
2 EAST 14TH
AVENUE,DENVER, COLORADO 80202 .
DISTRICT COURT, DENVER COUNTY
JUDGE MICHAEL MARTINEZ
CASE NO. 2013CV3113
APPELLANT: TABOR FOUNDATION, a Colorado non-
profit corporation,
v.
APPELLEES: COLORADO BRIDGE ENTERPRISE;COLORADO TRANSPORTATION COMMISSION;
TREY ROGERS, GARY M. REIFF, HEATHER BARRY,
KATHY GILLILAND, KATHY CONNELL, DOUGLAS
ADEN, STEVE PARKER, LES GRUEN, GILBERTORTIZ, and EDWARD J. PETERSON, all in theirofficial capacities as members of the Colorado
Transportation Commission, Defendants
COURT USE ONLY
Mark G. Grueskin (Atty. Reg. #14621) Recht Kornfeld, P.C.1600 Stout St. Ste. 1000
Denver, Colorado 80202Phone Number: 303-573-1900; FAX: 303-446-9400
Email: [email protected] Attorneys for Defendants Colorado Transportation Commission
and members of the Colorado Transportation Commission
JOHN W. SUTHERS, Colorado Attorney General,
HARRY S. MORROW, Assistant Attorney General (Atty. Reg.#12435)*
MEGAN PARIS RUNDLET, Assistant Attorney General (Atty.Reg. #27474)*
ROBERT C. HUSS, Assistant Attorney General (Att. Reg.
#38388)*Ralph L. Carr Colorado Judicial Center
1300 Broadway, 10th FloorDenver, CO 80203
Telephone: 720-508-6000; FAX: 720-508-6032E-Mail: [email protected] E-Mail: [email protected]
E-Mail: [email protected] *Counsel of Record for Defendant Colorado Bridge Enterprise
Case No. 13CA1621
JOINT ANSWER BRIEF
DATE FILED: March 12, 2014 6:04 PM
FILING ID: 47C0470B9827B
CASE NUMBER: 2013CA1621
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 2/50
CERTIFICATE OF COMPLIANCE
I hereby certify that this brief complies with all requirements of C.A.R. 28
and C.A.R. 32, including all formatting requirements set forth in these rules.
Specifically, the undersigned certifies that: the brief complies with C.A.R. 28(g).
It contains 9,494 words. The word count was obtained using Microsoft Word
2010.
The brief complies with C.A.R. 28(k). It contains, under a separate heading,
a statement of whether such party agrees with the opponent’s statements
concerning the standard of review and preservation for appeal, and if not, why.
s/ Mark G. Grueskin ________________MARK G. GRUESKIN
[i]
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 3/50
TABLE OF CONTENTS
CERTIFICATE OF COMPLIANCE …………………………. i
STATEMENT OF ISSUES PRESENTED FOR REVIEW….. 1
STATEMENT OF THE CASE………………………………… 1
STATEMENT OF THE FACTS……………………………….. 2
SUMMARY OF ARGUMENT ………………………………… 7
LEGAL ARGUMENT…………………………………………… 9
I. STANDARD OF REVIEW………………………… 9
II. THE BRIDGE SAFETY SURCHARGE
IS A FEE, NOT A TAX…………………………….. 11
A. The Bridge Safety Surcharge lacks thenecessary indicia of a tax……………………. 12
1. Does the charge help pay the generalcosts of government?.................................... 11
2. What was the legislative purpose for the
charge imposed?........................................... 13
B. The Bridge Safety Surcharge possessesthe necessary indicia of a fee……………….. 15
1. As a matter of law, fees need not be proportional to actual use…………………. 16
a. Roadway maintenance fees ……….. 18 b. Transit planning fees ………………... 19
Street lighting fees …………………… 20
[ii]
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 4/50
2. Trial testimony established the Bridge
Safety Surcharge is a fee………………… 22
III. CBE is a qualifying “enterprise” under TABOR…. 26
A. CBE is a “government-owned business.”…… 26
B. CBE did not accept State grants in excessof 10% of its revenue………………………… 28
1. Federal reimbursement of costs was not
a grant to CBE……………………………… 29
2. The transfer of bridges was not a
grant to CBE……………………………….. 30
3. The transferred bridges were correctlyvalued at an amount that totals less than
10% of enterprise revenue………………… 32
a. Enterprise valuations under state
statute………………………………….. 33 b. CDOT’s valuation practices, based on
the required use of generally accepted
accounting principles………………….. 34
c. TABOR Foundation’s expert testimony
on bridge valuation…………………….. 36d. Inapplicability of “fair market value”
to enterprise valuations……………….. 38
IV. Attorney Fees are not warranted here……….…. 40
CONCLUSION…………………………………………. … 40
[iii]
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 5/50
TABLE OF AUTHORITIES
Cases
Anema v. Transit Construction Authority,
788 P.2d 1261 (Colo. 1990)………………………………………. 19
Ard v. People, 182 P 892, 893 (Colo. 1919)…….……………….. 14 Barber v. Ritter , 196 P.3d 238, 248 (Colo. 2008)…………………. 14, 16
Bloom v. City of Fort Collins, 784 P.2d 304, 307(Colo. 1989)………………………………………………………. 12, 16,17,
18, 25
Bolt v. Arapahoe County School Dist. No. 6 ,
898 P.2d 525, 537 (Colo.1995)…………………………………… 9
Bruce v. City of Colorado Springs, 131 P.3d 1187, 1911(Colo. Ct. App. 2006)……………………………………………. 16, 18, 20,
21, 26
Cherry Hills Country Club v. Bd. of County Comm'rs,
832 P.2d 1105, 1108 (Colo. Ct. App.1992)…………………………… 10
Colorado Common Cause v. Meyer , 758 P.2d 153, 159 (Colo.1988). 28
Communications Workers of America 7717 v. Industrial Claim
Appeals Office, 292 P.3d 1127, 1129-30 (Colo. Ct. App. 2012)……. 24
Golob v. People, 180 P.3d 1006, 1011 (Colo. 2008). ………………. 38
HCA-Healthone, LLC v. City of Lone Tree,
197 P.3d 236, 241 (Colo. Ct. App. 2008)…………………………… 9
In re Estate of Romero, 126 P.3d 228, 231(Colo. Ct.App.2005)………10
[iv]
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 6/50
In re Marriage of Antuna, 8 P.3d 589, 593-94 (Colo. Ct. App. 2000).. 10
In re Marriage of Lamm, 682 P.2d 67, 68 (Colo. Ct. App. 1984)…… 34
In re Submission of Interrogatories on House Bill 99–1325,
979 P.2d 549, 557 (Colo.1999)…………………………………….. 10
Krupp v. Breckenridge Sanitation Dist., 19 P.3d 687, 694(Colo. 2001)…………………………………………………………. 16
Loup-Miller Constr. Co. v. Denver , 676 P.2d 1170,1173, 1175 (Colo. 1984)…………………………………………….. 24
Magin v. Division of Employment , 899 P.2d 369, 370
(Colo. Ct. App. 1995)……………………………………………… 25, 27
Nicholl v. E-470 Public Highway Authority, 896 P.2d 859, 869
(Colo. 1995)………………………………………………………… 15, 26
People v. Laeke, 271 P.3d 1111, 1115 (Colo. 2012)……………….. 32
Pueblo Bancorp. v. Lindoe, Inc., 37 P.3d 492, 496(Colo. Ct. App. 2001)…. …………………………………………….. 38
Quintana v. City of Westminster , 56 P.3d 1193, 1198
(Colo. Ct. App. 2002)………………………………………………… 38
Constitutional Provisions
Colo. Const., art. X, sec. 20(2)(b)…………………………………. 26
Colo. Const., art. X, sec. 20(2)(d)………………………………….. 26, 28
Colo. Const., art. X, sec. 20(4)(b)………………………………….. 26
Colo. Const., art. X, sec. 20(4), (7)……………………………….. 31
[v]
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 7/50
Statutes
C.R.S. § 24-30-202(12)………………………………….. 34
C.R.S. § 24-77-101(1)(b)………………………………… 31
C.R.S. § 24-77-101(1)(d)…………………………………………. 31
C.R.S. § 24-77-101(1)(f)…………………………………………. 31
C.R.S. § 24-77-101(2)(a)…………………………………………. 30
C.R.S. § 24-77-101(2)(b)…………………………………………. 31
C.R.S. § 24-77-101(2)(e)…………………………………………. 34
C.R.S. § 24-77-101(2)(f)…………………………………………. 34
C.R.S. § 24-77-102(7)(a)…………………………………………. 28, 30
C.R.S. § 24-77-102(7)(b)(I), (III)………………………………… 29, 30
C.R.S. § 42-3-103(1)(a)………………………………………….. 16
C.R.S. § 43-1-210………………………………………………… 33
C.R.S. § 43-1-210(5)(a)(II), (V)…………………………………. 33, 36
C.R.S. § 43-4-801………………………………………………… 2
C.R.S. § 43-4-802(2)(b)………………………………………….. 15
C.R.S. § 43-4-805(2)(c)………………………………………….. 2, 11, 154
C.R.S. § 43-4-802(2)(d)………………………………………….. 15
[vi]
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 8/50
STATEMENT OF ISSUES PRESENTED FOR REVIEW
Did the District Court correctly find that the Bridge Safety Surcharge, which
is assessed only on vehicles that are registered for use on the state’s highways, is a
fee rather than a tax and thus did not need prior voter approval under TABOR?
Did the District Court correctly find that the Colorado Bridge Enterprise
qualifies as an “enterprise” under TABOR and thus could issue revenue bonds to
finance the reconstruction of bridges that are structurally deficient or functionally
obsolete and rated “poor” by the Colorado Department of Transportation?
STATEMENT OF THE CASE
In May, 2012, TABOR Foundation sued over the Bridge Safety Surcharge, a
fee imposed to help generate funds to address the state’s deteriorating bridges.
TABOR Foundation alleged that: (1) the imposition of the Bridge Safety Surcharge
violated TABOR’s requirements that an election be held before a new tax is
imposed; and (2) “enterprises” may accept state and local grants only up to 10% of
their revenue, and transfers of bridges and federal reimbursements of bridge
reconstruction costs were state grants to the Colorado Bridge Enterprise (“CBE”)
in excess of the 10% limit. See Colo. Const., art. X, sec. 20(2)(d), (4).
TABOR Foundation moved for summary judgment. The District Court
denied this motion. After a two-day trial, the Court issued its order, denying relief
under both claims asserted. This appeal followed.
1
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 9/50
STATEMENT OF THE FACTS
In 2009, the Colorado General Assembly adopted the “Funding
Advancements for Surface Transportation and Economic Recovery Act”
(“FASTER”). See C.R.S. § 43-4-801, et seq., and specifically C.R.S. § 43-4-805.
In FASTER, the General Assembly created CBE as a “government-owned business
within the department [of transportation]” and authorized CBE to impose a bridge
safety surcharge fee as the mechanism “to finance, repair, reconstruct and replace
any designated bridge.” C.R.S. § 43-4-805(2). The purpose of the FASTER
program is to address safety hazards to the traveling public. May 14 Tr., 50:13-21.
In Colorado’s transportation network, bridges are the physical assets that are
of greatest risk to motor vehicle occupants. May 13 Tr., 173:11-15. The issue is a
statewide concern, as the traveling public cannot generally travel very far without
encountering a highway bridge. Id. at 162:6-12.
There are approximately 3,500 bridges on the state highway system, 168 of
which have been identified as eligible for CBE funding. Id. at 166:20-25, 170:23-
171:1; May 14 Tr., 46:9-12. CBE’s focuses on the state’s “worst” bridges, in
terms of safety. May 13 Tr. at 168:9-170:13. Not surprisingly, CBE prioritizes the
most deficient bridges in the state that are then eligible for CBE funding. Trial CD
at 326-27 (Trial Exhibit 10). Based on the age of segments of the state’s bridge
infrastructure and the deterioration of portions of that network over time,
2
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 10/50
additional bridges are identified as being eligible for repair and/or replacement as
“designated bridges.” May 14 Tr., 47:14-48:11.
A “designated bridge” eligible for CBE funding is defined as a structurally
deficient or functionally obsolete bridge which is also rated poor. C.R.S. §43-4-
803(10). A “structurally deficient” bridge refers to the diminished ability of a
bridge to carry its original design load. May 14 Tr., 102:14-103:3. A “functionally
obsolete” bridge refers to the substandard size of a bridge relating to vertical
clearance over traffic below, inadequate width, lack of shoulders, or similar issues.
Id ., 108:7-16.
A “poor” bridge carries a sufficiency rating below 50, using federal
standards for required bridge inspections. Id ., 39:13-18. The sufficiency rating
includes consideration of structural deficiencies and functional obsolescence, but
also considers other factors such as traffic counts, length of detour if the bridge is
out of service, and whether the bridge provides an essential safety link which
cannot be replaced if the bridge is out of service. Id., 109:11-110:2. CDOT
conducts federally required bridge inspections on a two-year cycle. Id ., 50:1-7.
CDOT originally transferred bridges that needed to be replaced to CBE.
However, CDOT has since determined that the transfer of such bridges was
unnecessary, as the bridges were to be demolished anyway. CBE no longer
3
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 11/50
transfers bridges that are scheduled to be replaced. It only transfers bridges that are
to be rehabilitated. May 13 Tr., 108:3-109:6.
The Bridge Safety Surcharge was first effective on July 1, 2009. The
FASTER legislation authorized, and CBE adopted, the bridge safety surcharge.
The Bridge Safety Surcharge is imposed pursuant to the schedule contained in
C.R.S. § 43-4-805(5)(g)(I) and is based upon vehicle weight – the greater the
vehicle weight, the higher the fee. Fees range from $13.00 to $32.00. The
graduated fee schedule is based upon the relative wear and tear on bridges caused
by vehicles due to their weight. Heavier vehicles cause greater impacts and do
more to shorten the life-span of a bridge. For all purposes, including original
construction, effecting rehabilitation measures, or replacing a bridge, vehicle
weight directly correlates to the service life of a bridge. May 14, Tr., 155:5-156:2.
Certain classifications of vehicles, such as agricultural vehicles, carry a lower fee
based upon their limited uses for farming or ranching. That fee is half the amount
otherwise imposed, so long as the vehicle is owned by a farmer or a rancher and is
used commercially only to transport raw agricultural products, commodities, or
livestock. C.R.S. § 43-4-805(5)(g)(VI).
CDOT and CBE maintain separate financial accounting and reporting
systems and maintain separate financial administration. Within the state treasury,
the Treasurer maintains separate funds for CDOT (Fund 400) and CBE (Fund 538).
4
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 12/50
Revenues generated by the Bridge Safety Surcharge are credited to Fund 538, the
separate “bridge special fund,” and the use of such revenues is restricted to CBE’s
statutorily defined purposes. May 14 Tr., 224:12-16; C.R.S. § 43-4-805(3). All
revenues generated by the Bridge Safety Surcharge have been expended solely on
CBE’s the statutorily authorized purposes, consisting of the replacement and
rehabilitation of designated bridges, the maintenance of new bridges, and the
administration of the Bridge Enterprise program. None of the revenues generated
by this fee are available for the general expenses of the state, and none of the
Bridge Safety Surcharge revenues are credited to the State’s general fund. May 14
Tr., 224:12-226:7; 229:15-230:17.
The General Assembly retained no authority to expend monies in the “bridge
special fund” but, instead, directed that the expenditure of such revenues be under
the “exclusive authority” of the Bridge Enterprise Board. C.R.S. § 43-4-805(3)(c).
In all respects, CDOT revenues are distinct from CBE revenues.
In November 2010, the Colorado Transportation Commission authorized the
CBE to receive up to $15 Million in reimbursement from federal transportation
funds that are allocated to the State of Colorado. The federal funds authorized for
CBE do not pass through CDOT Fund 400 before CBE receives them. Such
federal funds are credited directly into the CBE Fund 538 on a reimbursement
basis. Trial CD at 824 (Order at 4, ¶10).
5
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 13/50
To be eligible for federal reimbursement, the Federal Highway
Administration (“FHWA”) must pre-approve a CBE designated bridge project
based on a number of federal requirements. CBE expends the monies it has in
hand from Fund 538 on qualifying federal elements of a designated bridge project.
Thereafter, application is made for reimbursement directly to FHWA, which
reviews and, in its sole discretion, approves CBE reimbursement requests. May 13
Tr., 134:12-135:13. There is never a cash transfer from CDOT to CBE under this
process.
Besides Bridges Safety Surcharge fees and federal reimbursements, monies
placed in Fund 538 come from revenue bond proceeds that are released by the
trustee and interest on the monies in the Fund. May 14 Tr., 225:6-12. Based on
the state’s audited Financial Statement for 2011, CBE revenues totaled $78.5
million, including $11.447 million in federal funds and $66.964 million in Bridge
Safety Surcharge fees. May 13 Tr., 137:18-25.
Witnesses for TABOR Foundation, Chris Sammons and William Wharton,
reside in Grand County and own vehicles they claim do not use state highways.
Sammons and Wharton object to paying the Bridge Safety Surcharge on any
vehicle that does not cross a CBE bridge. Trial CD at 826-27 (Order at 6-7).
6
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 14/50
SUMMARY OF ARGUMENT
TABOR Foundation alleges that the Bridge Safety Surcharge is a new tax,
requiring prior voter approval. TABOR Foundation never proved that the Bridge
Safety Surcharge is a tax, and all evidence at trial pointed in the opposite direction.
A tax is used for the general purposes of defraying the general costs of the array of
programs provided by government. It is undisputed that the Bridge Safety
Surcharge is only used to pay for improvements to the safety of deteriorating
bridges in Colorado. According to the Supreme Court, the key criterion for
determining whether a charge is a fee or a tax is the intent of the General Assembly
in enacting the charge. It is undisputed that the General Assembly intended the
Bridge Safety Surcharge to be a fee.
Regardless, the Bridge Safety Surcharge qualifies as a fee. It is imposed
only on vehicles that are registered with the State of Colorado. All such vehicles
must be designed for use on the state’s highways, which is where state bridges are
located. The evidence at trial centered on the testimony of two individuals who
have not used certain of their vehicles to traverse state bridges even though they
pay the Bridge Safety Surcharge. But the State has created a transportation
network that includes bridges that have been rehabilitated or reconstructed, given
their structural deterioration or functional obsolescence and “poor” condition under
federal bridge inspection standards. The ability of any driver of these individuals’
7
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 15/50
vehicles (owners, spouses, children, and neighbors) to use this network at any
moment is an on-call service that benefits them as fee payers. Colorado courts
routinely observe that transportation fees need not be proportional to use of any
infrastructure that has been financed and maintained by fee proceeds. This case
falls well within that precedent.
TABOR Foundation also argues that CBE does not qualify as a TABOR
enterprise. Enterprises can accept only 10% of their revenues from state or local
grants, and it is alleged that a state grant was made when CBE was able to apply
for up to $15 million out of CDOT’s allocation of federal highway funds as
reimbursement for CBE’s construction and related costs. Yet, Colorado law
specifically defines “grant” to exclude federal funds as well as any indirect benefit
conferred by the state. As such, federal funds cannot have been a grant to CBE.
Finally, TABOR Foundation argues that CDOT’s transfer of deteriorated
bridges to CBE was a grant, also depriving CBE of enterprise status. State law
also expressly provides that a “grant” must be a direct cash subsidy or direct
contribution of money. The transfer of bridges was neither.
The District Court correctly rejected these claims, as should this Court.
8
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 16/50
LEGAL ARGUMENT
I. STANDARD OF REVIEW
TABOR Foundation is correct that this Court reviews a district court’s legal
conclusions about the interplay of TABOR and related statutes on a de novo basis.
HCA-Healthone, LLC v. City of Lone Tree, 197 P.3d 236, 240 (Colo. Ct. App.
2008). TABOR Foundation is also correct that multiple interpretations of TABOR
favor the one that most restrains government as long as the competing
interpretations are “equally supported” by TABOR’s text. Opening Brief at 12
(citations omitted). However, the courts will not employ a “rigid interpretation of
(TABOR) which would have the effect of working a reduction in government
services.” Bolt v. Arapahoe County School Dist. No. 6 , 898 P.2d 525, 537
(Colo.1995). Nor will they employ a literal interpretation of TABOR that “could
lead to absurd results” and “cripple the everyday workings of government.” In re
Submission of Interrogatories on House Bill 99–1325, 979 P.2d 549, 557
(Colo.1999).
TABOR Foundation argues a district court’s decision to “exclude” expert
testimony is subject to a clear error or abuse of discretion standard. Opening Brief
at 12. But no expert was prevented from testifying at trial, and therefore this
standard of review is inapplicable to this appeal. The District Court allowed
TABOR Foundation’s expert to testify and admitted the expert report as a trial
9
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 17/50
exhibit. Ultimately, though, the Court gave this evidence little or no weight
because the expert’s analysis was performed in an unreliable manner and his
testimony was unpersuasive. See Trial CD at 831-32 (Order at 11-12).
The evaluation of the credibility of witnesses, including expert witnesses,
falls “solely within the fact finding province of the trial court.” Cherry Hills
Country Club v. Bd. of County Comm'rs, 832 P.2d 1105, 1108 (Colo. Ct.
App.1992). This is true even where the question before the Court is one of
valuation. In re Marriage of Antuna, 8 P.3d 589, 593-94 (Colo. Ct. App. 2000).
An appellate court “will not reweigh testimony or reevaluate (such) evidence on
appeal.” In re Estate of Romero, 126 P.3d 228, 231 (Colo. Ct. App.2005).
TABOR Foundation maintains that this appeal does not address the
constitutionality of the Bridge Safety Surcharge statutory scheme. Opening Brief
at 12. But its case at trial had the effect of implicating at least one state statute as
being in violation of TABOR. C.R.S. § 43-4-805(2)(c) provides, “a bridge safety
surcharge imposed by the bridge enterprise… is not a tax but is instead a fee
imposed… to defray the cost of completing designated bridge projects.”
(Emphasis added.) TABOR Foundation’s position throughout this litigation has
been that the Bridge Safety Surcharge is a not a fee but instead a tax. The District
Court referenced that, in order for it to find a statute unconstitutional, the
unconstitutionality must be established beyond a reasonable doubt. Trial CD at
10
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 18/50
829 (Order at 9). The Court found that CBE’s practices comported with TABOR –
specifically, the fee imposed by the Colorado Bridge Enterprise is not a tax, and
the CBE is an “enterprise” as defined by state law. Trial CD at 832-33 (Order at
12-13); see also id. at 822 (Order at 2). The Court did not explicitly rule on the
constitutionality of the statute. Regardless, TABOR Foundation did not establish
C.R.S. § 43-4-805(2)(c) to be unconstitutional beyond a reasonable doubt in the
trial court and does not seek such relief on appeal.
II. THE BRIDGE SAFETY SURCHARGE IS A FEE, NOT A TAX.
TABOR Foundation argues that because there is no charge to drivers each
time a motor vehicle crosses an affected bridge, the Bridge Safety Surcharge
cannot be a fee. Because it is alleged that the Bridge Safety Surcharge cannot be a
fee, TABOR Foundation argues that the Surcharge must be a tax. In both respects,
this analysis is incorrect.
A. The Bridge Safety Surcharge lacks the necessary indicia of a tax.
In order to determine whether this charge to vehicle owners is a tax, there
are two straight-forward tests, set forth by the Colorado Supreme Court. The
Bridge Safety Surcharge meets neither condition for a tax.
1. Does the charge help pay the general costs of government?
The objective of a tax has long been recognized to be the generation of
revenue that helps to offset the general expenses associated with running a unit of
11
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 19/50
government. The clear purpose of a tax “is to provide revenues in order to defray
the general expenses of government as distinguished from the expense of a
specific function or service.” Bloom v. City of Fort Collins, 784 P.2d 304, 307
(Colo. 1989) (emphasis added). A fee, on the other hand, is imposed “upon
persons or property for the purpose of defraying the cost of a particular
governmental service,” rather than to generate funding that may be appropriated
by a legislative body to fund general governmental expenditures that need have no
relationship to the charge imposed. Id. at 308 (emphasis added).
It was undisputed below that the Bridge Safety Surcharge is used solely to
rebuild and rehabilitate bridges in various parts of the state. “The record
overwhelmingly demonstrates that the monies raised via the Bridge Safety
Surcharge fee are kept in a separate treasury account, to be used only for the
CBE’s authorized purpose.” Trial CD at 829 (Order at 9). This separate account
operates under the exclusive authority of the CBE Board and is beyond the reach
of the General Assembly to appropriate for any purpose. Id . at 824 (Order at 4,
¶7). The CBE fund is also segregated from any revenue that is available for use by
CDOT. Id. (Order at 4, ¶8). The District Court correctly found that none of the
bridge monies are ever placed in the state’s General Fund or “used for the general
non-bridge related costs of government.” Id. (Order at 4, ¶9). It is likewise true
that the General Assembly may not augment the bridge fund with other tax
12
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 20/50
revenues that have been collected for the purpose of offsetting the general costs of
state government. C.R.S. § 43-4-805(3)(a) (“in no event may revenues from any
tax otherwise available for general purposes be deposited in the special bridge
fund”).
Thus, there is no credible argument that the Bridge Safety Surcharge is used
to pay the general expenses of state government, which means it cannot be a tax.
2. What was the legislative purpose for the charge imposed?
The legislature’s objective in establishing this charge is central to the
resolution of whether it qualifies as a tax or a fee. “To determine whether a
government mandated financial imposition is a ‘fee’ or a ‘tax,’ the dispositive
criteri[on] is the primary or dominant purpose of such imposition at the time
the enactment calling for its collection is passed.” Barber v. Ritter , 196 P.3d 238,
248 (Colo. 2008) (emphasis added). To complete this analysis, the Supreme Court
held that it is necessary to evaluate the language used by the General Assembly in
enacting the charge.
If the language discloses that the primary purpose for the charge is tofinance a particular service utilized by those who must pay the charge,then the charge is a “fee.” On the other hand, if the language states
that a primary purpose for the charge is to raise revenues for generalgovernmental spending, then it is a tax. Moreover, the fact that a feeincidentally or indirectly raises revenue does not alter its essentialcharacter as a fee, transforming it into a tax.
13
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 21/50
Id . at 249. Thus, a court must assess whether the legislative body’s primary
purpose was to finance a particular service or general governmental spending. See
Ard v. People, 182 P.2d 892, 893 (Colo. 1919) (the purpose of motor vehicle
registration fees “is not the levying of taxes or the collection of revenue”).
Here, the purpose of the Bridge Safety Surcharge was addressed expressly
by the General Assembly:
The creation of a statewide bridge enterprise authorized to completedesignated bridge projects, to impose a bridge safety surcharge and
issue revenue bonds… will improve the safety and efficiency of thestate transportation system by allowing the state to accelerate the
repair, reconstruction, and replacement of structurally deficient,functionally obsolete, and rated as poor bridges.
C.R.S. § 43-4-802(2)(d) (emphasis added). The fee was intended to meet the
“urgent present need to repair and replace structurally deficient and functionally
obsolete bridges.” C.R.S. § 43-4-802(2)(b). The legislature clearly restricted
Bridge Enterprise fee monies to very specific uses:
to fund the administration, planning, financing, repair, reconstruction,replacement, or maintenance of designated bridges, and for theacquisition of land to the extent required in connection with anydesignated bridge project… (and) to pay (CBE’s) operating costs andexpenses.
C.R.S. § 43-4-805(2)(c). The Bridge Safety Surcharge rates were to be set at
levels sufficient “to defray the cost of completing designated bridge projects”
while being “reasonably calculated” to reflect benefits received by fee payers. Id.
14
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 22/50
The District Court concurred that the statutory purpose associated with the
Bridge Safety Surcharge is consistent with the legal definition of a fee. “It is clear
from the record here that the General Assembly’s intent in enacting FASTER was
to use the funds to maintain and replace bridges within the Colorado highway
system.” Trial CD at 829 (Order at 9). The statute precludes the use of Bridge
Safety Surcharge revenue to fund non-bridge related expenditures. C.R.S. § 43-4-
805(3)(a) (prohibiting the commingling of Bridge Safety Surcharge fees and
general fund monies). If the legislative body’s intent truly is “dispositive,” the
District Court correctly held that the Bridge Safety Surcharge must be a fee.
B. The Bridge Safety Surcharge possesses the necessary indicia of a fee.
TABOR Foundation’s principal contention is that, in order to qualify as a
fee, there must be a “direction connection” between a charge and a government
service provided. Opening Brief at 15. Likewise, TABOR Foundation suggests
that fee payers must receive individualized services because of their payment of
the fee. Id. at 18. In support of these contentions, TABOR Foundation relies on
language from Nicholl v. E-470 Public Highway Authority, 896 P.2d 859, 869
(Colo. 1995), stating that a fee must be assessed in “direct relation to services
provided,” and Barber v. Ritter, supra, 196 P.3d at 249, stating that a fee must be
designed to “finance a particular service utilized by those who must pay the
charge.” Opening Brief at 19.
15
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 23/50
1. As a matter of law, fees need not be proportional to actual use.
The Bridge Safety Surcharge is imposed on and used for the benefit of those
who own licensed vehicles which are, as expressly provided by statute, capable of
being driven on any Colorado highway. Vehicle registration is required for all
vehicles that are “primarily designed to be operated or drawn upon any highway of
this state.” C.R.S. § 42-3-103(1)(a). There was no dispute at trial that vehicles
paying this fee were designed for operation on state highways.
Neither TABOR nor the judicially developed definition of “fee” requires
that a fee be imposed for each individual use of a designated bridge. TABOR
Foundation acknowledges that a fee need not be assessed with “mathematical
exactitude.” Opening Brief at 15; Krupp v. Breckenridge Sanitation Dist., 19 P.3d
687, 694 (Colo. 2001). It suggests that the fee must be voluntary.1 But the Courts
will not determine whether a legislative body chose the best way to assess such a
fee as long as the method chosen was reasonable. “Because the setting of rates and
fees is a legislative function that involves many questions of judgment and
discretion, we will not set aside the methodology chosen by an entity with
ratemaking authority unless it is inherently unsound.” Id. at 693-94. The charge
1 TABOR Foundation notes that the fee is not voluntary and that the District Courtso observed. Opening Brief at 20, n.4. It is settled law in Colorado that a chargedoes not need to be voluntary in order to qualify as a “fee.” Bloom, supra, 784P.2d at 310-11; Bruce, supra, 131 P.3d at 1190. The cases relied on by TABORFoundation in footnote 4 of the Opening Brief were distinguished by the Court in
Bloom and thus are not persuasive precedent here.
16
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 24/50
thus needs only to be “reasonably designed” to defray the cost of the particular
service rendered and cannot be set aside unless the structuring of the fee is overtly,
fundamentally flawed. Bloom, supra, 784 P.2d at 310-11.
As the District Court found, “Plaintiff’s assertions that the benefit its
members derive (from the Bridge Safety Surcharge) is required to be proportional
to the fee paid is without support in the law…. [A] nexus between an
individual’s use and the permissibility of a user fee is not required in Colorado.”
Trial CD at 829-30 (Order at 9-10).
In particular, our courts have recognized that transportation-related charges
qualify as fees because they generate revenue from persons who derive a benefit
from the planning, construction, and maintenance of these infrastructure
improvements. In case after case, these fees have been upheld against precisely the
claim advanced by TABOR Foundation – that a fee can only be imposed upon a
specific use of, or reflect an individual's particularized benefit arising from, a given
public roadway improvement. Uniformly, the Colorado courts have rejected this
argument.2
2 Amicus curiae's brief addresses the tax vs. fee debate as resolved by other states'courts. Given long-standing precedent and the specific wording of Colorado'sConstitution, this Court rejects the use of out-of-state precedent to resolve thisquestion. See, e.g., Bruce v. City of Colorado Springs, 131 P.3d 1187, 1191 (Colo.Ct. App. 2006) (rejecting argument that precedent from Washington, based on thatstate’s constitutional provisions, was persuasive in TABOR lawsuit), cert. denied .
17
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 25/50
a. Roadway maintenance fees.
In Bloom v. City of Fort Collins, supra, the Supreme Court considered the
city’s transportation utility fee. The fee was paid by owners or occupants of real
property within the City’s corporate limits, and it was set at amounts that would
generate funds sufficient to properly maintain local streets. 784 P.2d at 305. The
amount of any person’s monthly fee was based upon the property’s frontage and a
“traffic generation factor” that was based upon the type of use to which the
property was put. The lowest traffic generation factor was set for multifamily
residential property, and the highest traffic generation factor was set on
nonresidential property. Single family residential property had a traffic generation
factor set between the other two property categories. Id. at 305-06.
The ordinance did not require that a fee-paying landowner use the city street
system or even own a vehicle that could do so. “While the transportation utility
fee at issue here is imposed on all owners or occupants of developed property
fronting a public right of way, it is not conditioned on the performance of an act,
event, or occurrence.” Id. at 310 (holding that the transportation fee was not an
excise tax). Under the Fort Collins ordinance, the only precondition for payment
of the fee was ownership or rental of real property in the City. Id. at 306, n.4;
contra Opening Brief at 22 (“the fee in Bloom was based on usage”).
18
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 26/50
As such, a fee payer was not required to benefit in direct proportion to the
amount of the fee paid. In Bloom, the fee did not need to “be utilized to pay for
improvements benefiting the particular property on which the fee is imposed.” Id.
at 310. It was enough that each fee payer in Fort Collins would “receive the
benefit of a program of city maintenance calculated to provide effective access to
and from residences, buildings, and other areas within the city.” Id.
The question of whether there needed to be a direct, proportional benefit to
each fee payer was not lost on the Court in Bloom. In fact, it was squarely before
the Court. Id. at 313 (Lohr, J., dissenting). It simply was not an obstacle to finding
the transportation utility fee to be just that – a fee.
The Fort Collins fee could have been set based on other criteria. It could
have been assessed on all adults in the city or on “all licensed drivers residing
within the city.” Id at 310. If one transportation fee can be imposed on all licensed
drivers, certainly another can be imposed on all registered vehicles.
b. Transit planning fees.
In Anema v. Transit Construction Authority, 788 P.2d 1261 (Colo. 1990), the
Supreme Court addressed a $2.00 per month per employee fee, paid by employers,
that was imposed to fund the planning stage for a fixed guideway between
downtown Denver and the suburbs in the southeast part of the metro area. Id. at
1263. The Authority was created to plan, finance, construct, and operate the
19
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 27/50
guideway system. Id. While the project was still in its initial phase, the fee was
challenged, and the district court upheld it as an excise tax. Id. at 1267.
The Supreme Court also upheld the charge but did so because it was a fee,
despite the plaintiffs’ claim that there was “no concrete benefit” to employers who
paid such fee. Id. The Court held that appellants there took “too narrow a view of
the benefits involved.” Id. According to the Court, virtually all governmental
functions and services have a planning component that must be paid for. Id. The
fact that the agency was using a fee to plan for future infrastructure improvements
was not a basis for treating it as a tax.
The Supreme Court noted that the payers of the fee were “individuals and
entities reasonably likely to benefit from a rapid transit system,” and it was
“reasonable to assume that employers within the service area would benefit from
the development of such planning.” Id. (emphasis added). There was no
requirement that a specific benefit accrue to a specific fee payer in an amount
equivalent to the fee paid. The monthly fee was a “valid method of defraying the
expenses” associated with planning the infrastructure improvement. Id.
c. Street lighting fees.
In Bruce v. City of Colorado Springs, 131 P.3d 1187 (Colo. Ct. App. 2006),
cert. denied , this Court addressed a fee to operate, maintain, and pay capital costs
of street light infrastructure for arterial and residential city streets. Id. at 1189.
20
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 28/50
The fee amounts were calculated based on the type of property owned (residential
vs. commercial), the relative amounts of residential and commercial property
within the city, and the estimated cost of operating the City’s streetlights. Id.
Just as in Bloom, the Court debated whether the amount of the charge had to
be directly associated with the service provided and whether a reasonable
relationship existed between the amount of the fee and the service provided to fee
payers. Id. at 1193, 1194 (Graham, J., dissenting). Here, the street lighting fee
was imposed on a property owner even if he had “no service from the street
lights.” Id. Certain property owners (owners of commercial property) paid higher
fees even though they had less need for street lighting than, say, owners of
residential property because commercial property owners often provided such
lighting themselves. Id.
In Bruce, the charge on property owners was upheld as a fee. The charge
did not need to be apportioned based on each fee payer’s individualized use of the
street lighting system. It satisfied the requirements for a fee because it was
“reasonably related to the overall cost of providing street lights” and was placed in
a special fund where it could not be used for general fund purposes. Id. at 1191.
2. Trial testimony established the Bridge Safety Surcharge is a fee.
TABOR Foundation’s witnesses, Chris Sammons and William Wharton,
were adamant that they received no benefit from the Bridge Safety Surcharge paid
21
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 29/50
on certain vehicles that neither witness knowingly drove across a bridge that had
been improved with Bridge Safety Surcharge revenue. May 13 Tr. 28:13-29:2;
69:23-70:2. Yet, both testified that their vehicles could be used on bridges
improved with Bridge Safety Surcharge revenue.
Sammons is not the only driver in her household. Her husband and her
daughter also drive all family-owned vehicles. Id. at 33:14-20. Her daughter was
scheduled to get her driver’s license less than a month after the trial. Id. at 43:17-
44:2. Her husband is a licensed driver who uses their vehicles for personal and
business purposes, including businesses that are unrelated to their ranching
activities. Sammons admitted that she does not actually know where her husband
takes their trucks, for which they pay the Bridge Safety Surcharge, when he drives
them for business and other purposes. Id. at 34:4-15. She did not know if her
neighbors, who regularly borrow those same vehicles, leave Grand County when
using the trucks. Id. at 34:16-35:8. And she does not know whether her husband
or her neighbors have driven one of these family-owned vehicles across a CBE
designated bridge. Trial CD at 827 (Order at 6-7, ¶19-20).3
3 Appellant complains of the burden of disproving a negative. Opening Brief at 6,n.1. It had notice of the issue of other drivers’ use of Sammons’ vehicles, givenher statements at deposition about family members’ use of these vehicles. TrialCD at 510 (18:24-20:24), 513 (30:15-31:2), 515 (39:1-23), 526 (82:6-84:5).Moreover, Sammons raised the extent of her neighbors’ and family members’ useof these vehicles in her direct testimony at trial. May 13 Tr. at 27:16-18, 29:15-24.Appellant could have, but did not, call any of these third parties to testify.
22
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 30/50
Sammons chose not to register two of her vehicles as they are predominantly
used on her ranch. Id. at 35:20-36:2. As to other vehicles she and her husband
own, she does use the state highway system and CBE-financed bridges. Id. at
39:17-20. She does not reconfigure her vehicular routes to avoid bridges deemed
to be in poor condition and eligible for CBE funding but not yet rehabilitated or
rebuilt. May 13 Tr. at 41:20-42:4. She knows she has the legal right to take all of
her registered vehicles on these trips but has made a personal choice to drive some
and not others on state highways (and thus across CBE-repaired bridges). Id. at
37:8-38:4. She feels that she benefits from the Bridge Safety Surcharge, even if
each one of her registered vehicles does not. Id. at 42:5-11; 42:25-43:7.
Wharton registers his vehicles – including the Toyota Landcruiser – with the
State of Colorado. Each vehicle is legally permitted to be driven on any highway
in the state, including across bridges that have been, will be, or need to be
improved with CBE funds. Id. at 72:8-73:10. Whether any of his vehicles is
driven across a particular bridge is a matter of Wharton’s personal choice. Id . at
73:11-16. Wharton did not know if he had driven over bridges improved with
Bridge Enterprise funds, id. at 74:22-25, and does not check to see whether a route
he is planning to drive includes a bridge that is in need of rehabilitation or
replacement. Id. at 75:1-8. He does not anticipate using the Landcruiser on a trip
that would cross CBE eligible bridges, but he could not be certain he would not do
23
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 31/50
so and stated that it was possible he would. Trial CD at 827 (Order at 7, ¶23). The
Landcruiser can traverse state highways; it can be driven at 50-60 miles per hour.
Id. at 75:11-19. As to all bridges he drives across in Colorado, Wharton stated, “I
assume they’re safe.” May 13 Tr. at 75:10.
TABOR Foundation insists that there is no service rendered to a fee payer
unless a specific vehicle makes a specific trip across a specific CBE bridge. But
the service rendered through the use of Bridge Safety Surcharge revenue is access
to a transportation system that necessarily includes bridges upon which vehicle
owners can rely without assessing the individual safety of each. A “service” is
“done for the benefit of or at the command of another.” Communications
Workers of America 7717 v. Industrial Claim Appeals Office, 292 P.3d 1127,
1129-30 (Colo. Ct. App. 2012) (citations omitted) (emphasis added).
Having a safe bridge system for known and unforeseeable trips involving
one’s motor vehicles – including those where routes are determined by authorized
drivers such as spouses, neighbors, and children – is a benefit that vehicle owners,
including Sammons and Wharton, expect to be in place. They made it clear at trial
that they benefit from a safe system of bridges, available to each of their registered
vehicles. As such, a service is exchanged for a fee. See Loup-Miller Constr. Co. v.
Denver , 676 P.2d 1170, 1173, 1175 (Colo. 1984) (sewer fee was imposed on
apartment complex “available units of occupancy;” upheld as fee to address
24
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 32/50
increases in “potential use” of the system and the need to provide “the city’s
readiness to provide sewage service”); see also Magin v. Division of Employment ,
899 P.2d 369, 370 (Colo. Ct. App. 1995) (one provides a compensable “service”
by maintaining on-call availability to provide the service on demand).
TABOR Foundation argues that CBE bridges have not yet been rebuilt in 27
Colorado counties and therefore the fee payers in those counties derive no benefit
from the Bridge Safety Surcharge. Opening Brief at 18. TABOR Foundation
adduced no evidence at trial that any drivers in counties other than Grand County
have vehicles, for which the Bridge Safety Surcharge is paid, that do not cross
CBE bridges somewhere in the state. As such, there is no basis in the record to
find that anyone other than Sammons and Wharton believe payment of the fee
yields the payer no benefit, and it would be error on appeal to so conclude.
Based on the evidence in the record below, the District Court properly found
that the Bridge Safety Surcharge is a fee, reasonably calculated to defray the costs
of rehabilitating or reconstructing the state’s worst bridges. The Court was correct
that the fee does benefit those who register vehicles that, as a matter of law, may
be operated on the state’s highways that include those very bridges.4 The District
Court’s findings should therefore be upheld .
4 TABOR Foundation contends the lower court’s ruling could allow governmental
entities to call any charge a “fee” to evade TABOR. Opening Brief at 19, 25-26.This argument has been rejected. “While it could be argued that the Bloom
25
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 33/50
III. CBE is a qualifying “enterprise” under TABOR.
TABOR governs “districts,” defined to mean “the state or any local
government, excluding enterprises.” Colo. Const., art. X, sec. 20(2)(b). An
“enterprise” is any “government-owned business authorized to issue its own
revenue bonds and receiving under 10% of annual revenue in grants from all
Colorado state and local governments combined.” Id ., sec. 20(2)(d). TABOR
Foundation alleges that CBE is not a qualifying enterprise and thus is a “district”
that is subject to the provisions of TABOR, required to obtain prior voter approval
for the issuance of multiyear instruments of debt. Id ., sec. 20(4)(b).
A. CBE is a “government-owned business.”
TABOR Foundation argues that CBE is not a government-owned business
because it has the power to levy taxes (the Bridge Safety Surcharge) and is not
engaged in a commercial undertaking. Opening Brief at 24-27.
As discussed at length above, the Bridge Safety Surcharge is not a tax. It is
a fee. The Surcharge is distinct from the tax levies that are constitutionally
inconsistent with “enterprise” status – sales and use taxes, employment taxes, or
taxes on the privilege of conducting a business or profession. Nicholl, supra, 896
analysis of special fees has led, and will lead, to almost any governmental service being structured as a fee, thereby escaping TABOR,” that conclusion would“change a test announced by our supreme court,” and was not a step this Court, asan immediate court of appeals, would take. Bruce, supra, 131 P.3d at 1191.
26
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 34/50
P.2d at 868-69 (addressing taxes that kept an entity from qualifying as an
“enterprise”).
Moreover, CBE’s activities qualify as a “government-owned business.”
There is no question that this entity is government-owned. TABOR Foundation
disputes that CBE is engaged in a business undertaking. The “financing,
constructing, operating and maintaining” of transportation improvements is
precisely such a pursuit. Id. In Nicholl, this qualifying business activity was
undertaken in exchange for a toll payment. Here, CBE provides virtually the same
business activity – financing, constructing, and maintaining segments of the state’s
transportation network (bridges) – in exchange for fee payments. See May 14 Tr.
at 42:1-13.; 42:25-43:5; 225:17-226:3; 229:12-230:11.
As a result, any licensed driver can take any licensed vehicle through any
part of the state’s transportation network. This “on call” capacity (here, of a safe
bridge system) is a service that is not dissimilar to the type of service provided in
the business world. Magin, supra, 899 P.2d at 370 (simply maintaining the
availability of a contractor to provide an agreed upon service produces a “benefit”
for the payor).
TABOR Foundation relies on an Attorney General’s Opinion as the legal
basis for alleging that the activity undertaken by a government-owned business
must reflect “market exchanges taking place in a competitive, arms-length
27
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 35/50
manner.” Op. Att’y Gen. No. 95-07 (Dec. 22, 1995). TABOR Foundation also
cites Colorado Common Cause v. Meyer , 758 P.2d 153, 159 (Colo. 1988), for the
proposition that an Attorney General’s Opinion is “obviously entitled to respectful
consideration….” Opening Brief at 26. However, the Meyer Court went on to say
that it was “not persuaded” that it should give that attorney general’s opinion
weight and, because the issue was an interpretation of law, engaged in its own
legal analysis and ultimately came to a conclusion different than the one reached
by the Attorney General. 758 P.2d at 159. Thus, this Court must consider the
legal merits of this question, notwithstanding the attorney general’s opinion cited
by TABOR Foundation.
B. CBE did not accept State grants in excess of 10% of its revenue.
Under TABOR, CBE is able to accept 10% of its budget in grants from state
or local governments. Colo. Const., art. X, sec. 20(2)(d). “Grant” is a statutorily
defined term and is pivotal to determining an entity's “enterprise” status. As used
in TABOR, “grant" means “any direct cash subsidy or other direct contribution of
money from state or local government in Colorado which is not required to be
repaid.” C.R.S. § 24-77-102(7)(a) (emphasis added). Two key categories of
funding are expressly excluded from the definition of grant, however: (1) “any
indirect benefit conferred upon an enterprise from the state or any local
government;” and (2) “any federal funds, regardless of whether such federal funds
28
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 36/50
pass through the state or any local government in Colorado prior to receipt by an
enterprise.” C.R.S. § 24-77-102(7)(b)(I), (III). TABOR Foundation seeks to
invalidate CBE's enterprise status based on arguments that ignore and are plainly
inconsistent with these statutory provisions.
1. Federal reimbursement of costs was not a grant to CBE.
TABOR Foundation alleges that CBE failed to qualify as an enterprise
because, in fiscal year 2011, it accepted $14.4 million from the Federal Highway
Administration (“FHWA”). Yet, state law is explicit: federal funds are not grants.
C.R.S. § 24-77-102(7)(b)(III). Notably, TABOR Foundation does not challenge
the constitutionality of this statutory definition.
In any event, these were not funds that were transferred from CDOT to CBE.
This was a reimbursement by the federal government to CBE. CBE could only
receive the funds if its verified expenditures (certain project costs and debt service)
qualified under federal law. If they did not qualify, CBE was not entitled to any
federal money. May 13 Tr. at 133:8-135:19.
Moreover, the funds in question never came into the possession of CDOT.
CBE and CDOT had entirely separate accounts in the State Treasury, and the
federal monies that CBE used for bridge improvements were deposited only to
CBE’s Treasury account. Trial CD at 830 (Order at 10). Thus, CDOT could not
exert control over or even access the monies transferred by FHWA. This alleged
29
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 37/50
access to CDOT’s budgetary authority through FHWA is, at best, an “indirect
benefit” which, again, as expressly addressed in statute, cannot be a “grant” under
TABOR. C.R.S. § 24-77-102(7)(b)(I).
TABOR Foundation sidesteps the statutory authority for transfers of federal
funds by arguing that CDOT really controlled those monies and thus the monies
comprised a state grant from CDOT. Opening Brief at 29. However, TABOR
Foundation’s review of unrelated case law is not relevant to this appeal. The
General Assembly has stated clearly that federal funds cannot be grants,
“regardless of whether such federal funds pass through the state or any local
government… prior to receipt by an enterprise.” C.R.S. § 24-77-102(7)(b)(III).
Thus, there is no cogent argument for treating a federal reimbursement as a
“grant.”
2. The transfer of bridges was not a grant to CBE.
TABOR Foundation alleges that the value of bridges, transferred from
CDOT to CBE, exceeded the 10% cap on grants. But this allegation conflicts with
the specific statute that specifies grants must be direct cash subsidies or direct
contributions of money. C.R.S. § 24-77-102(7)(a).
Further, TABOR Foundation argues that the above-referenced statute applies
only in connection with the state’s compliance with the TABOR fiscal year
spending limit. Opening Brief at 31, citing C.R.S. § 24-77-101(2)(a) (“the
30
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 38/50
provisions of this article were enacted to facilitate compliance with the state fiscal
year spending limit”).
TABOR itself is wide-ranging, addressing prior voter approval for certain
fiscal events as well as limits on the amount of growth in a district’s spending.
Colo. Const., art. X, sec. 20(4), (7). The definitions in this statute may be used for
purposes of evaluating the state’s spending limit, but that is not their only use. A
brief survey of the legislative declarations in the statute makes this clear:
• “This article reflects the judgment of the general assembly regarding
the meaning and implementation of section 20 of article X of the
state constitution as it relates to state government.” C.R.S. § 24-
77-101(2)(b).
• “It is within the legislative prerogative of the general assembly to
enact legislation which will facilitate the operation of section 20 of
article X.” C.R.S. § 24-77-101(1)(b).
• “In interpreting the provisions of section 20 of article X, the
general assembly has attempted to give words of said constitutional
provision their natural and obvious significance.” C.R.S. § 24-77-
101(1)(d).
• “The content of this article represents the considered judgment of the
general assembly as to the meaning of the provisions of section 20
31
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 39/50
of article X as it relates to state government.” C.R.S. § 24-77-
101(1)(f).
(Emphasis added.)
Article 77 of Title 24 of the Colorado Revised Statutes is entitled, “State
Fiscal Policies Relating to Section 20 of the Article X of the State Constitution.”
This heading is not dispositive, of course, but it is an indicator of legislative intent.
People v. Laeke, 271 P.3d 1111, 1115 (Colo. 2012). Here, that heading is useful to
establish that the legislature had a broader design in crafting these definitions than
just calculating a fiscal year’s spending. Otherwise, it would have entitled this
article, “State Fiscal Policies Relating to Compliance with Fiscal Year Spending
Limits in Section 20 of Article X of the State Constitution.”
3. The transferred bridges were correctly valued at an amount that totalsless than 10% of enterprise revenue.
TABOR Foundation contends that the State undervalued the bridges when it
used generally accepted accounting principles (“GAAP”) and, instead, should have
used fair market value to value these bridges, particularly the two (Bridges F-11-
AB and F-11-AC) that were not fully depreciated at the time of transfer to the
CBE. For support, TABOR Foundation contends the fair market value approach is
required by state statute and by the purpose of TABOR. Opening Brief at 37-38.
32
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 40/50
a. Enterprise valuations under state statute
TABOR Foundation cites a statute in its Opening Brief that provides that
CDOT “shall obtain” an appraisal “to determine the fair market value” of property
with an approximate value of $5,000 or more prior to that property’s disposal.
C.R.S. § 43-1-210(5)(a)(II); see Opening Brief at 37. Nothing in this statute
governs the valuation of property for TABOR compliance or even general state
accounting purposes.
Regardless, TABOR Foundation was adamant at trial that C.R.S. § 43-1-210
was inapplicable to F-11-AB and F-11-AC. Counsel for appellant explicitly stated
below, “[C.R.S.] 43-1-210 doesn’t apply to the valuation of these two bridges,”
because the statute addresses only property no longer needed for transportation and
TABOR Foundation insisted that the bridges were still being used for
transportation purposes. May 13 Tr. at 202:15-16; 203:1-4. Having conceded that
this statute did not govern CBE’s actions before the trial court, TABOR
Foundation cannot reverse its position on appeal. In re Marriage of Lamm, 682
P.2d 67, 68 (Colo. Ct. App. 1984).
In contrast, for purposes of the General Assembly’s TABOR-related
compliance regimen, the “financial statements of the state prepared by the state
controller shall be prepared, insofar as possible, in conformity with generally
accepted accounting principles.” C.R.S. § 24-77-101(2)(e). These generally
33
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 41/50
accepted accounting principles (“GAAP”) are to be applied in preparing the state’s
financial report “unless otherwise provided by law or unless an irreconcilable
conflict exists between generally accepted accounting principles and the provisions
of section 20 of article X . . .” C.R.S. § 24-77-101(2)(f).
There is no irreconcilable conflict between GAAP’s mandated financial
reporting and the legally required TABOR treatment of bridges transferred to the
Bridge Enterprise. TABOR Foundation does not allege that there is any
irreconcilable conflict. Neither TABOR nor any other provision of law mandates
the use of “fair market value” or any other such principle in determining the 10%
limitation on state and local government grants to an enterprise during a fiscal
year.
In practice, the State Controller’s Office has uniformly made TABOR
enterprise calculations using GAAP as formalized and promulgated by the
Government Accounting Standards Board (“GASB”), pursuant to C.R.S. § 24-77-
101(2)(f). May 14 Tr. at 203:3-21. The state controller must maintain a unified
system of accounts for the state using the accrual system of accounting, as
enunciated by GASB. C.R.S. § 24-30-202(12).
b. CDOT’s valuation practices, based on the required use of
generally accepted accounting principles
When applied to Colorado’s bridges and other transportation assets, GASB
required CDOT to either use the “modified” approach or the “depreciation”
34
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 42/50
approach to valuation. The modified approach requires the entity to commit to an
ongoing maintenance reinvestment so that infrastructure resources are sustained at
a value equivalent to what they originally cost to construct. May 14 Tr. 180:16-
182:14; 184:3-9. In 2007, CDOT determined that it had not been and would not be
able to initiate or sustain such a commitment to ongoing maintenance of state
bridges. Id. at 184:10-185:4.
Under the depreciation approach, the asset’s depreciation would be recorded
and reflected against its historical cost. Id. at 188: 1-5. The State Controller
approved the depreciation methodology for CDOT’s use in complying with GAAP.
Id. at 188:11-189:5. Because CDOT had not been able to adequately maintain
these bridges, could not do so in the future, and thus was out of compliance with
the modified approach, the State’s books were corrected, and aggregate bridge
values in the State were reduced by $703 million. Id. at 187:14-22. Based on the
State’s fiscal manual, bridges having a depreciated value of less than $500,000
were considered to be fully depreciated and removed from the State’s books
altogether. Id. at 212:15-213:2.
The former State Controller provided much of the testimony on the use and
meaning of GASB to implement the requirements under TABOR-related statutes.
The District Court found his testimony to be “particularly credible,” given “his
relevant work experience and substantial knowledge on the subject matter.” Trial
35
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 43/50
CD at 825 (Order at 5). The Court further observed that the use of the GASB-
approved depreciation method “is consistent with other state and local
governmental entities that own bridges, roadways, and related transportation
infrastructure.” Id. at 826 (Order at 6).
c. TABOR Foundation’s expert testimony on bridge valuation
TABOR Foundation argues that the District Court erred by excluding expert
witness testimony on the issue of valuation. Opening Brief at 38-39. That witness,
Paul Wingard, advocated the use of a fair market value approach to documenting
these bridge transfers from CDOT to CBE, but the Court did not find his testimony
to be persuasive or credible.
Wingard lacked the statutory qualifications to render an opinion on valuation
of transportation related property. He was not an appraiser or a right-of-way
acquisition agent, May 13 Tr., 193:23-194:2, 6-8, the only two types of
professionals authorized to value transportation-related property under Colorado
law. C.R.S. § 43-1-210(5)(a)(II), (V).
As an example of why the District Court did not find Wingard to be a
convincing witness, Wingard identified only two issues in connection with Bridges
F-11-AB and F-11-AC: functional obsolescence due to substandard roadway
shoulders and substandard guard railings. May 13 Tr., 214:5-25. In contrast, the
state’s bridge inspectors found fatigue cracking in the steel girders of both bridges.
36
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 44/50
Fatigue cracking undermines the structural capacity of a bridge, and if this
condition is unaddressed, a bridge can become structurally deficient and unable to
carry the load for which it was designed. Specifically, the fatigue cracks can
propagate through the girder, leading a bridge to break rather than bend under the
weight of vehicles travelling over it. May 14 Tr., 152:13-24: 153:8-13.
Wingard was unaware of this fatigue cracking, either from his use of Google
Earth to prepare his expert report or his brief visit to the bridges on the day before
trial. Based on his physical inspection (walking halfway across the top and one-
third of the way beneath the bridge), Wingard thought the bridge appeared “to be
in relatively sound condition” except for the fact that it “probably needs to be
painted.” May 13 Tr. at 240:7-9. Wingard acknowledged he had “never done” a
bridge inspection that met federal highway standards. Id. at 242:15-21.
When Wingard was tendered an expert, his qualifications were challenged as
not meeting the requirements of state law for a valuation expert under the pertinent
statutes. Id. at 198:4-11. The trial judge ultimately considered this objection to be
a challenge to the weight to be given to the expert testimony, not its admissibility.
Id., 203:5-13. In addition, the expert’s report was conditionally admitted into
evidence subject to any subsequent determination by the court regarding the
legality of the expert’s testimony. Id. at 230:15-23; see Trial CD at 234-257. The
37
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 45/50
Court never revisited its decision to allow the expert to testify, and the Court’s
Order reflects that it fully considered the expert testimony.
As fact finder, a trial court can accept or reject all or any portion of a
witness’s testimony, including that of an expert. Pueblo Bancorp. v. Lindoe, Inc.,
37 P.3d 492, 496 (Colo. Ct. App. 2001). The trier of fact may reject unpersuasive
expert testimony, even if it is uncontroverted. Quintana v. City of Westminster , 56
P.3d 1193, 1198 (Colo. Ct. App. 2002). The reason an appellate court defers to the
lower court in such matters is that the trial judge has superior opportunities to
assess the expert’s competence and the extent to which the expert’s opinion would
be helpful to the fact finder. Golob v. People, 180 P.3d 1006, 1011 (Colo. 2008).
According to the Order, the Court found the expert’s valuation techniques
were “questionable and unreliable.” Further, his testimony was “unpersuasive”
and “not sufficiently credible” to comprise a basis for the Court’s ruling. Trial CD.
at 831-32 (Order at 11-12). Thus, the question of the “exclusion” of an expert is
not before this Court, and the District Court’s assessment of the credibility of this
expert is not a matter that is appropriate for review in this appeal.
d. Inapplicability of “fair market value” to enterprise valuations
GASB prohibits the use of fair market value for transfers of property
between governmental entities. May 14 Tr. at 194:24-195:1. Instead, the value
applied to transferred property is its “carrying value,” which is the amount
38
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 46/50
recorded in the state’s accounting system and reported in its financial statements.
As applied to the state’s bridges, that carrying value is the depreciated value of the
asset. Id. at 192:23-193:23.
Had the fair market value been used to value these bridges, the State Auditor
would have issued a “qualified opinion” as to the State’s overall financial
statement, indicating that an error had been made in showing the value of these
bridge transfers to CBE. Id. at 195:1-25. The State Controller would not have
allowed the use of accounting mechanisms that violated GAAP, GASB, and
therefore, state law. He would have instructed CDOT to change its calculations to
use the depreciation method. Id. at 196:18-197:12. If he did not do so, or if CODT
did not comply, the State Auditor’s qualified opinion would have affected the
market for state-backed debt. Id. at 197:13-198:6.
TABOR Foundation’s expert stated it is important for public entities to use
GAAP and GASB to value publicly held assets. It is the only way to evaluate, on
an “apples to apples” basis, the creditworthiness of public entities and their bond
offerings. May 13 Tr. at 260:4-262:22. That same expert advocated the use of fair
market value for Bridges F-11-AB and F-11-AC and assigned them a broad range
of values – approximately $7.5 million to $31 million. However, he could not
provide an opinion of what their actual fair market value might be. Id. at 231:6-22;
232:1-15.
39
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 47/50
The District Court properly concluded, “there is no legal basis for using a
fair market value standard for valuing transfers of such property,” and “such a
valuation would be contrary to the specific accounting principles mandated by the
State.” Trial CD at 831 (Order at 11). Therefore, the findings of the District
Court, including that the value of all bridges transferred to CBE “was properly
calculated using generally accepted accounting principles,” should be upheld . Id.
As such, CBE qualifies as an “enterprise” under TABOR.
IV. Attorney Fees are not warranted here.
In order to warrant an award of attorney fees, Appellant must prevail. As
addressed in this Answer Brief, the District Court’s decision was correct. No fees
award is warranted under the law of this case.
CONCLUSION
CBE was created to remedy the “worst of the worst” of our bridges. It
collects a fee that meets the standards for a “fee,” as defined by the Constitution
and, importantly, as clarified by Colorado’s appellate courts. Acting as an
“enterprise,” CBE’s practices conform to the requirements of state statute as well
as the mandatory fiscal processes used to implement them.
The District Court’s ruling should be upheld in its entirety.
40
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 48/50
RESPECTFULLY SUBMITTED this Wednesday, March 12, 2014.
Respectfully submitted,
RECHT KORNFELD, P.C.
By: s/ Mark G. Grueskin____________Mark G. Grueskin1600 Stout Street, Suite 1000Denver, CO 80202Phone: 303-573-1900, Fax: 303-446-9400e-mail: [email protected]
JOHN W. SUTHERS, Colorado Attorney Gen.HARRY S. MORROW, Asst. Atty. Gen.*MEGAN PARIS RUNDLET, Asst. Atty. Gen.*ROBERT C. HUSS, Asst. Atty. Gen. *Ralph L. Carr Colorado Judicial Center1300 Broadway, 10th
FloorDenver, CO) 80203
Attorneys for Defendants ColoradoTransportation Commission and Members
of the Colorado Transportation Commission*Counsel of record for Defendant ColoradoBridge Enterprise
41
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 49/50
CERTIFICATE OF SERVICE
I certify that on March 12, 2014, the JOINT ANSWER BRIEF was filed
with the Court of Appeals and true and accurate copies of the same were served on:
James M. Manley, Esq.Steven J. Lechner, Esq.Mountain States Legal Foundation2596 S. Lewis WayLakewood, CO 80227
via the Integrated Colorado Courts E-filing System.
s/ Mark G. Grueskin____________
The original of this document is on file at the offices of Recht Kornfeld, P.C.,
and will be made available upon the request of the Court or counsel of record.
42
8/12/2019 2014-03-12 18-02-04 FINAL March 12 Joint Answer Brief
http://slidepdf.com/reader/full/2014-03-12-18-02-04-final-march-12-joint-answer-brief 50/50
C.R.S. §43-4-803(10)…………………………………………….. 2,3
C.R.S. § 43-4-805………………………………………………… 2
C.R.S. § 43-4-805(2)……………………………………………… 42
C.R.S. § 43-4-805(2)(c)…………………………………………… 10, 11, 14
C.R.S. § 43-4-805(3)……………………………………………… 5
C.R.S. § 43-4-805(3)(a)…………………………………………… 13, 15
C.R.S. § 43-4-805(3)(c)…………………………………………… 5
C.R.S. § 43-4-805(5)(g)(I)………………………………………… 4
C.R.S. § 43-4-805(5)(g)(VI)………………………………………. 4
Other Authorities
Op. Att’y Gen. No. 95-07 (Dec. 22, 1995)…………………………. 28