opening brief, tabor foundation v. cbe

8/13/2019 Opening Brief, TABOR Foundation v. CBE

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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 9,498 words, as reported

by the word processing system used to prepare the brief.

The brief complies with C.A.R. 28(k). It contains under a separate heading:

(1) a concise statement of the applicable standard of appellate review with citation

to authority; and (2) a citation to the precise location in the record (CD page ___),

not to an entire document, where each issue was raised and ruled on.

/s/ James M. ManleyJames M. Manley


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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .................................................................. iii

STATEMENT OF THE ISSUES PRESENTED FOR REVIEW .......... 1

STATEMENT OF THE CASE .............................................................. 2

STATEMENT OF THE FACTS ............................................................ 4

SUMMARY OF THE ARGUMENT ..................................................... 11

ARGUMENT .......................................................................................... 12

I. STANDARD OF REVIEW .......................................................... 12

II. THE DISTRICT COURT ERRED IN DENYING THEFIRST CLAIM FOR RELIEF BECAUSE THE BRIDGESURCHARGE IS A TAX REQUIRING VOTER

APPROVAL ................................................................................. 13

A. The District Court Ignored The Case Law DefiningTABOR-Exempt Fees ........................................................ 14

B. Taxes Collected For A Particular Purpose Are StillTaxes Subject To Voter Approval Under TABOR ............ 20

III. THE DISTRICT COURT ERRED IN DENYING THESECOND CLAIM FOR RELIEF BECAUSE THE CBEDOES NOT OPERATE AS A TABOR-EXEMPT

BUSINESS ENTERPRISE; THEREFORE IT MUSTHAVE VOTER APPROVAL TO ISSUE DEBT ......................... 23

A. The Power To Tax Is Inconsistent With TheCharacteristics Of A TABOR Enterprise ........................... 24


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B. The CBE Lost Enterprise Status Because It ReceivedMore Than Ten Percent Of Annual Revenue In Grants

From The State ................................................................... 27

1. The CBE lost enterprise status as a result of a$14.4 million grant the CBE received fromCDOT in fiscal year 2011 ........................................ 28

2. The CBE lost enterprise status as a result of 56bridges the CBE received from CDOT in fiscalyear 2011 .................................................................. 33

i. The purpose of TABORs ten percentlimit is served by classifying the 56

bridges as a grant for TABOR purposes ........ 35

ii. The purpose of TABORs ten percentlimit is served by requiring use of fairmarket value .................................................. 37

iii. The district court erred in excluding the

testimony of the TABOR Foundationsbridge valuation expert .................................. 38

CONCLUSION ....................................................................................... 40

REQUEST FOR ATTORNEY FEES ..................................................... 41

ADDENDUMColo. Const. art. X, 20C.R.S. 43-4-801 et seq.

C.R.S. 42-3-101 et seq.C.R.S. 24-77-101 et seq.


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TABLE OF AUTHORITIES

CASES Page

Americans United for Separation of Church and State Fund, Inc. v.

State, 648 P.2d 1072 (Colo. 1982) ..................................................... 29, 30, 31

Anema v. Transit Const. Authority,788 P.2d 1261 (Colo. 1990) ............................................................... 16

Ard v. People,182 P. 892 (Colo. 1919) ..................................................................... 17, 19

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

Bickel v. City of Boulder,885 P.2d 215 (Colo. 1994) ................................................................. 12

Bloom v. City of Fort Collins,

784 P.2d 304 (Colo. 1989) ................................................................. 15, 21, 22

Board of Cnty. Commrs v. Fixed Base Operators, Inc.,939 P.2d 464 (Colo. Ct. App. 1997) .................................................. 16

Bruce v. City of Colorado Springs,131 P.3d 1187 (Colo. Ct. App. 2005) ................................................ 13, 20

Bruce v. City of Colorado Springs,129 P.3d 988 (Colo. 2006) ................................................................. 12

Campbell v. Orchard Mesa Irr. Dist.,972 P.2d 1037 (Colo. 1998) ............................................................... 15

Cherry Hills Farms, Inc. v. City of Cherry Hills Village,670 P.2d 779 (Colo. 1983) ................................................................. 13


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City of Aurora v. Acosta,892 P.2d 264 (Colo. 1995) ................................................................. 4

Clementi v. Nationwide Mut. Fire Ins. Co.,16 P.3d 223 (Colo. 2001) ................................................................... 6

Colorado Common Cause v. Meyer,

758 P.2d 153 (Colo. 1988) ................................................................. 26

E-470 Public Highway Authority v. 455 Co.,3 P.3d 18 (Colo. 2000) ....................................................................... 12

Federal Power Commn v. New England Power Co.,415 U.S. 345 (1974) .......................................................................... 16, 20

Frazier v. People,90 P.3d 807 (Colo. 2004) ................................................................... 36

H.L. Johnson v. Bd. of County Commrs of Morgan County,336 P.2d 300 (Colo. 1959) ................................................................. 38

Huber v. Colorado Mining Assn,264 P.3d 884 (Colo. 2011) ................................................................. 20

Huntoon v. TCI Cablevision of Colorado,969 P.2d 681 (Colo. 1998) ................................................................. 12

In re Interrogatory Propounded by Governor Roy Romer on House

Bill 91S-1005, 814 P.2d 875 (Colo. 1991) ........................................ 29, 30

Kirk v. Denver Pub. Co.,

818 P.2d 262 (Colo. 1991) ................................................................. 15

Lindner Packing & Provision Co. v. Industrial Commn,99 Colo. 143 (1936) ........................................................................... 24

LoupMiller ConstructionCo. v. City and County of Denver,676 P.2d 1170 (Colo. 1984) ............................................................... 16, 22


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National Cable Television Assn v. United States,

415 U.S. 336 (1974) .......................................................................... 20

Nicholl v. E-470 Public Highway Authority,896 P.2d 859 (Colo. 1995) ................................................................. passim

People v. Ramirez,155 P.3d 371 (Colo. 2007) ................................................................. 38, 39

Submission of Interrogatories on Senate Bill 93-74,852 P.2d 1 (Colo. 1993) ..................................................................... 4, 20

Taxpayers for Public Education v. Douglas County School

District, 2013 WL 791140 (Colo. Ct. App. 2013) ............................. 32

Western Heights Land Corp. v. City of Fort Collins,362 P.2d 155 (Colo. 1961) ................................................................. 22

Westrac, Inc. v. Walker Field,

812 P.2d 714 (Colo. Ct. App. 1991) .................................................. 16

Zelinger v. City and County of Denver,724 P.2d 1356 (Colo. 1986) ............................................................... 22

Zelman v. Simmons-Harris,536 U.S. 639 (2002) .......................................................................... 29, 30, 31

Zobrest v. Catalina Foothills School Dist.,509 U.S. 1 (1993) .............................................................................. 29

CONSTITUTIONAL PROVISIONS

Colo. Const. art. X, 20 ......................................................................... 4

Colo. Const. art. X, 20(1) .................................................................... 14, 41

Colo. Const. art. X, 20(2)(b) ................................................................ 23


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Colo. Const. art. X, 20(2)(d) ................................................................ 23, 27, 28

Colo. Const. art. X, 20(4) .................................................................... 2

Colo. Const. art. X, 20(4)(a) ................................................................ 4, 13

Colo. Const. art. X, 20(4)(b) ................................................................ 4, 10, 23

Colo. Const. art. X, 20(7) .................................................................... 34

Colo. Const. art. XI, 2 .......................................................................... 30

STATUTES

C.R.S. 23-5-101.7 ................................................................................ 26

C.R.S. 23-18-101 et seq. ...................................................................... 31

C.R.S. 24-77-101 et seq. ...................................................................... 34

C.R.S. 24-77-101(2)(a) ........................................................................ 34

C.R.S. 24-77-101(2)(e) ........................................................................ 34

C.R.S. 24-77-101(2)(f) ........................................................................ 34

C.R.S. 24-77-102 ................................................................................. 34

C.R.S. 24-77-102(7)(a) ........................................................................ 34

C.R.S. 24-77-102(7)(b)(III) ................................................................. 28

C.R.S. 32-9-119(i) ............................................................................... 21

C.R.S. 32-9-119.7 ................................................................................ 21

C.R.S. 39-10-107(1)(a) ........................................................................ 21


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C.R.S. 39-27-112(2)(b) ........................................................................ 21

C.R.S. 39-28.5-108(1) ......................................................................... 21

C.R.S. 39-28-110(1) ............................................................................ 21

C.R.S. 42-3-103(1)(a) .......................................................................... 17

C.R.S. 42-3-106(1) .............................................................................. 17

C.R.S. 43-1-106 ................................................................................... 4

C.R.S. 43-1-210(5)(a)(II) ..................................................................... 34

C.R.S. 43-4-801 et seq ......................................................................... 1213

C.R.S. 43-4-805(1)(b)(II) .................................................................... 5

C.R.S. 43-4-805(2) .............................................................................. 3

C.R.S. 43-4-805(2)(a)(I) ...................................................................... 4

C.R.S. 43-4-805(2)(b) .......................................................................... 4, 20

C.R.S. 43-4-805(2)(c) .......................................................................... 4, 13, 18

C.R.S. 43-4-805(3)(a) .......................................................................... 20

C.R.S. 43-4-805(5)(g)(I) ...................................................................... 17, 18

OTHER AUTHORITIES

Op. Atty Gen. No. 95-07 (Dec. 22, 1995) ............................................. 26

Op. Atty Gen. No. 05-03 (Jul. 29, 2005) ............................................... 29, 3133


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STATEMENT OF THE ISSUES PRESENTED FOR REVIEW

1. Whether the district court erred in ruling that the bridge surcharge is

not a tax, but rather a fee exempt from the voting requirement of the Taxpayers

Bill of Rights (TABOR).

2. Whether the district court erred in ruling that the Colorado Bridge

Enterprise (CBE) operates as a TABOR-exempt business enterprise.

3. Whether the district court erred in ruling that the CBE did not receive

grants from the State totaling more than ten percent of the CBEs annual revenue

in fiscal year 2011.

4. Whether the district court erred in excluding the testimony of the

TABOR Foundations bridge valuation expert.

5. Whether the district court erred in denying the TABOR Foundations

claims for relief.


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STATEMENT OF THE CASE

On May 21, 2012, the TABOR Foundation sued the CBE, the Colorado

Transportation Commission, and the members of the Transportation Commission,

who oversee both the CBE and the Commission. Compl., CD page 3. The

TABOR Foundation alleged two claims for relief: (1) that the CBE levied a bridge

tax, without seeking the voter approval required by TABOR; and (2) that the CBE

issued $300 million in bonds, again without a TABOR-required vote of the people.

Id., CD pages 911. By taking these actions without voter approval, the CBE

violated the rights of the TABOR Foundations members to vote on new taxes and

debt, as guaranteed by TABOR. Colo. Const. art. X, 20(4).

On August 15, 2012, the CBE filed an Answer denying that it is subject to

TABOR because it is purportedly a TABOR-exempt enterprise. CBE Answer, CD

page 63. The Transportation Commission and its members separately answered,

likewise denying that the CBE is subject to TABOR. Commission Answer, CD

page 54.

On February 11, 2013, the TABOR Foundation moved for summary

judgment. M. for Summ. J., CD page 93. The district court denied the TABOR

Foundations motion for summary judgment and, after a two-day trial, denied both

claims. Order, CD page 652; Findings of Fact and Conclusions of Law


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(Findings), CD page 821. The district court ruled that the bridge surcharge is not

a tax, but rather a TABOR-exempt fee. Findings, CD pages 82830. The district

court also ruled that the CBE operates as a TABOR-exempt enterprise because it

does not have the power to levy a tax and did not receive more than ten percent of

its funding from state grants. Id., CD pages 83032. Accordingly, the district

court ruled that CBE was an enterprise, as that term is defined in the applicable

TABOR provisions, C.R.S. 43-4-805(2), when it properly assessed the bridge

surcharge safety fee and issued revenue bonds in fiscal year 2010-2011, and did

not violate TABOR by the issuance of such bonds without submitting the matter to

voters in a statewide election. Id., CD pages 83132. The TABOR Foundation

appeals these rulings and the district courts denial of its claims.


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CBEs total revenue for fiscal year 2011 was $78.5 million. Exhibit 16 at 11; Tr.

vol. I at 137 (CBE/CDOT CFO Ben Stein); Findings, CD page 82425. Each

source of revenue is discussed in detail below.

Bridge Surcharge

The CBE has discretion to impose a bridge safety surcharge at rates

reasonably calculated to defray the costs of completing designated bridge projects

and distribute the burden of defraying the costs in a manner based on the benefits

received by persons paying the fees and using designated bridges. C.R.S. 43-4-

805(1)(b)(II). In 2009, the CBE levied a bridge surcharge against all vehicles

registered in Colorado, without regard to whether a vehicle uses a CBE designated

bridge or any benefits received from the CBE. Tr. vol. I at 9091 (Stein);

Findings, CD page 823. The CBE did not seek voter approval for the bridge

surcharge. Tr. vol. I at 142 (Stein), 164 (CBE/CDOT Executive Director Don

Hunt). Approximately five percent of bridges on the Colorado highway system are

CBE eligible bridges. Findings, CD page 824. A CBE eligible bridge will not

receive CBE funding unless it is programmed, i.e., budgeted. Tr. vol. I at 160

61 (Hunt); Tr. vol. II at 74 (CBE Program Manager Ken Szeliga). As of

September 19, 2012, the CBE has programmed bridges in only 37 Colorado

counties. Exhibit 9 at App. A, B, C; Exhibit L; Tr. vol. I at 15862 (Hunt); Tr. vol.


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II at 167 (CDOT bridge engineer/Former CBE Deputy Program Manager Joshua

Laipply). As of September 19, 2012, the CBE has programmed no bridges in 27

counties, including Grand County. Tr. vol. II at 116, 169 (Laipply). The CBE has

no plans to program any bridges in Grand County. Id.

TABOR Foundation member Chris Sammons is a rancher in Grand County.

Tr. vol. I at 20. Her family has worked their ranch in Grand County for over 100

years. Id. Her livelihood depends on the development of livestock and crops. Id.

at 21. Her ranch relies on several vehicles licensed and registered in Grand

County, including four trucks that never leave the County because they are used

exclusively on or near her ranch. Id. at 27, 29, 5455. The use of these four

vehicles is limited because they are not maintained to be safe for high-speed, long-

distance travel. Id. at 27, 29. She has not used, has no plans to use, and would not

allow these four vehicles to be used to cross any bridges programmed by the CBE.

Id. at 28, 3435, 5455. She has no reason to believe that any of these vehicles

will ever be driven outside Grand County.1Id. She has derived no benefit from

the bridge surcharges she has paid for these four vehicles. Id. at 2829. These

1To the extent the district court made a contrary finding, Findings, CD page 827, itwas based on the erroneous proposition that it is possible to prove a negative. SeeClementi v. Nationwide Mut. Fire Ins. Co., 16 P.3d 223, 23132 (Colo. 2001).Moreover, even if one of these vehicles crossed a CBE bridge in the future, there isno evidence that they have done so to date and therefore the bridge surcharge has

been assessed against these vehicles for a service they did not use.


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vehicles have not utilized a particular service provided by the CBE. Id. She owns

two other vehicles, which are maintained for highway travel, that she uses when

she leaves Grand County. Id. at 29;see alsoTMO, CD pages 68586. Numerous

other ranchers face the same problem as Ms. Sammons; i.e., they own ranch

vehicles that are assessed the bridge surcharge, but are used exclusively on or near

a ranch and therefore never use a CBE bridge. Tr. vol. I at 3032.

Similarly, TABOR Foundation member William Wharton lives in Grand

County. Tr. vol. I at 62. He owns a 1971 Toyota Landcruiser FJ-40 that he uses to

clear snow from his driveway, haul trash to his neighborhood dumpster, and pick

up his mail in Grand Lake. Id. at 6263. He also removes snow from an elderly

neighbors driveway. Id. at 69. This vehicle is licensed and registered in Grand

County. Id. His homeowners association requires him to register this vehicle in

order to park it on his property. Id. at 78. Since he purchased this vehicle in 2005,

it has never left Grand County because it is used exclusively on or near his

property. Id. at 64. Since 2007, this vehicle has not crossed any bridges. Id. at 65.

Mr. Wharton has not used and has no plans to use this vehicle to cross any CBE

bridges.2Id. at 6667, 77. The use of this vehicle is limited because its age makes

it unsafe and unreliable when traveling more than a few miles or at more than 50

2Seesupranote 1.


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miles per hour. Id. at 27, 29, 7980. He has derived no benefit from the bridge

surcharges he has paid for this vehicle. Id. at 67. This vehicle has not utilized a

particular service provided by the CBE. Id. He owns two other vehicles licensed

and registered in Grand County, which he drives when he leaves Grand County.

Id.;see also TMO, CD pages 68687.

Transfers from CDOT

In November 2010, the Transportation Commission passed Resolution TC-

1925 authorizing itself to allocat[e] and transfer[] from CDOT to the Colorado

Bridge Enterprisefifteen million dollars ($15,000,000) of eligible federal funds.

Exhibit 15; Exhibit 8 at 19. CDOTs fiscal year 2011 bridge budget was $49.8

million. Tr. vol. I at 12627 (Stein). Of that total, $21.4 million was provided by

the State of Colorado and $27.4 million was provided by the Federal Highway

Administration (FHWA). Exhibit 8 at 17. In fiscal year 2011, FHWA allocated

$14.4 million of CDOTs $49.8 million bridge budget to the CBE, pursuant to the

Transportation Commissions direction in TC-1925. Exhibit 16 at 7; Tr. vol. I at

127, 131 (Stein). In fiscal year 2012, the CBE received an additional $15 million

of CDOTs bridge budget pursuant to TC-1925. Tr. vol. I at 131 (Stein).

In fiscal year 2011, CDOT also transferred 56 bridges and associated design

work to the CBE. Exhibit 8 at 1214; Exhibit 11; TMO, CD page 688. The design


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work associated with the bridges was worth $1,085,837. Exhibit 8 at 6, 37; Tr. vol.

I at 94, 96 (Stein). CDOT last appraised the 56 transferred bridges in 2007 for

accounting purposes, using a depreciation method, and concluded that the total

depreciatedvalue of all 56 bridges was $5.25 million. Exhibit 8 at 3, 814.

CDOT concluded that bridges F-11-AC and F-11-AB were together worth $1.367

million, and must be treated and accounted for under TABOR as having such

value for purposes of transfer from CDOT to the Bridge Enterprise. Exhibit 13;

Tr. vol. I at 105 (Stein); Tr. vol. II at 70 (Szeliga). However, CDOT concluded

that each of the other 54 bridges had a depreciatedvalue under $500,000. Exhibit

8 at 23, 811; Tr. vol. I at 105 (Stein). For purposes of CDOTs accounting

practices, these 54 bridges were not capitalized, i.e., their value was recorded as

zero, even though CDOT calculated a depreciated value for each bridge. Id. All of

the transferred bridges were functioning at the time of transfer. Exhibit 12; TMO,

CD page 688. The CBE reported the value of 54 of the 56 bridges as zero for

TABOR purposes. Exhibit 8 at 3; Exhibit 11; Exhibit 13; Tr. vol. I at 105 (Stein).

An asset with zero value for accounting purposes can still have economic value.

Tr. vol. I at 11516 (Stein). At the very least, the possibility of selling

[demolished bridges] for scrap exits. Tr. vol. I at 114 (Stein). The CBE allows

the contractors who demolish its bridges to capture the market value of a


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demolished bridge, in exchange for a discount on the demolition. Tr. vol. I at 145

46 (Stein). The CBE did not attempt to determine the market value for the 56

bridges, either as scrap or otherwise, for purposes of TABORs ten percent limit on

state grants to enterprises. Tr. vol. I at 9899, 11316 (Stein); Exhibit 11; Exhibit

13.

Bonds

In 2011, the CBE issued $300 million in bonds. Findings, CD page 825.

The CBE does not have adequate present cash reserves pledged irrevocably and

held for payments in all future fiscal years to pay for the bonds it has issued.

Colo. Const. art. X, 20(4)(b); TMO, CD page 688. The CBE listed the proceeds

from the sale of the 56 transferred bridges as a source of repayment for the $300

million bonds it issued. Exhibit 17 at 4, 15; Tr. vol. I at 11314 (Stein). No public

vote was held authorizing the CBE to issue these bonds. Tr. vol. I at 142 (Stein),

163 (Hunt).


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SUMMARY OF THE ARGUMENT

The CBEs decision to levy a tax and issue debt without voter approval

violated the Colorado Constitution. The bridge surcharge is a tax because it is

collected without regard to any services utilized by the vehicles charged. Because

the CBE only operates in 37 of Colorados 64 counties, numerous vehicles never

come within sight of a CBE bridge, yet they are assessed the same bridge

surcharge rates as every other vehicle in the state. No one who pays the bridge

surcharge is provided a particular service, and actual benefits received, if any, have

no bearing on the surcharge rates paid. The bridge surcharge fails to meet the

definition of a TABOR-exempt fee established by the Colorado Supreme Court.

The bridge surcharge is therefore a tax requiring voter approval in advance.

The CBE also requires voter approval in advance before it can issue bonds,

because it does not operate as a TABOR-exempt business enterprise. There are

three independently-sufficient reasons that the CBE does not qualify as a TABOR

enterprise: (1) the CBE levies a tax, and therefore does not operate as a business;

(2) the CBE received a $14.4 million cash grant from the Transportation

Commission; and (3) the CBE received a grant from the Transportation

Commission in the form of 56 bridges.


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ARGUMENT

I. STANDARD OF REVIEW.

The district courts interpretation of constitutional provisions and other legal

conclusions are reviewed de novo. Bruce v. City of Colorado Springs, 129 P.3d

988, 992 (Colo. 2006). The district courts decision to exclude expert testimony

and its findings of fact are generally reviewed under a clear error or abuse of

discretion standard . . . . E-470 Public Highway Authority v. 455 Co., 3 P.3d 18,

22 (Colo. 2000);Huntoon v. TCI Cablevision of Colorado, 969 P.2d 681, 690

(Colo. 1998); Findings, CD page 831.

This case involves interpretation and application of the Colorado

Constitution to the CBEs levying of the bridge surcharge and issuance of debt

without voter approval. [W]here multiple interpretations of [TABOR] are equally

supported by the text . . . 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). As demonstrated herein, the

only reasonable interpretation of TABOR renders the CBEs actions

unconstitutional.

This case does not involve the constitutionality of any statute. Contra

Findings, CD page 829. The TABOR Foundation never alleged that C.R.S. 43-


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4-801 et seq., the statute creating the CBE, is unconstitutional. Rather, the

TABOR Foundations claims focus on the CBEs decision to levy a tax and issue

debt without voter approval. SeeCompl., CD page 1314. Nothing in C.R.S.

43-4-801 et seq., prevents the CBE from complying with the voter approval

provisions of TABOR. If the CBE had asked for voter approval prior to levying

the bridge surcharge or issuing bonds, the Complaint in this matter would never

have been filed. But the CBE chose not to follow the requirements of TABOR.

II. THE DISTRICT COURT ERRED IN DENYING THE FIRST CLAIM

FOR RELIEF BECAUSE THE BRIDGE SURCHARGE IS A TAX

REQUIRING VOTER APPROVAL.

TABOR requires voters to approve any new tax. Colo. Const. art. X,

20(4)(a). TABORs voting requirements apply to taxes, but not fees. Barber v.

Ritter, 196 P.3d 238, 249 (Colo. 2008). Thebridge surchargeis labeled a fee in

an attempt to avoid the voter approval requirements of TABOR. C.R.S. 43-4-

805(2)(c). However, the distinction between a tax and a fee is not a matter of

legislative declaration. See Bruce v. City of Colorado Springs, 131 P.3d 1187,

1190 (Colo. Ct. App. 2005) (The distinction between a fee and a tax depends on

the nature and function of the charge, not on its label.); Cherry Hills Farms, Inc.

v. City of Cherry Hills Village, 670 P.2d 779, 782 (Colo. 1983) (The [Service

Expansion Fee], regardless of its label, is a tax.).


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In its first claim for relief, the TABOR Foundation alleged that the bridge

surcharge is a tax, levied without voter approval in violation of TABOR. Compl.,

CD pages 1112. Therefore, the TABOR Foundation sought an order holding

unconstitutional and setting aside the bridge surcharge and a refund of the

surcharges collected, pursuant to Colo. Const. art. X, 20(1). Compl., CD page

12.

The district court made two fundamental errors in ruling that the bridge

surcharge is a TABOR-exempt fee: (1) the district court failed to apply the

definition of TABOR-exempt fees developed by this Court and the Colorado

Supreme Court; and (2) the district court instead focused on whether the bridge

surcharge revenue is used only for the CBEs purposes. Findings, CD page 829

30. The district courts failure to consider the relevant test for TABOR-exempt

fees is reversible error.

A. The District Court Ignored The Case Law Defining TABOR-

Exempt Fees.

The district court asserted without support that a nexus between an

individuals use and the permissibility of a user fee is not required in Colorado.

Id., CD page 830. The Colorado Supreme Court and this Court have ruled just the

opposite. Barber, 196 P.3d at 249. The essential distinction between a TABOR-


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exempt fee and a tax is whether there is a direct connection between a charge and a

government service provided to those who pay:

If the [statute] 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 [statute] states

that a primary purpose for the charge is to raise revenues for generalgovernmental spending, then it is a tax.

Id.(emphasis added). The Supreme Courts decision inBarberand numerous

other casesshows that in order to qualify as a TABOR-exempt fee, a charge must

be assessed in direct relation to services provided . . . . Nicholl v. E-470 Public

Highway Authority, 896 P.2d 859, 869 (Colo. 1995). While [m]athematical

exactitude . . . is not required,Bloom v. City of Fort Collins, 784 P.2d 304, 308

(Colo. 1989), there must be a connection between the charge and a service

provided to those assessed. Barber, 196 P.3d at 250;see alsoCampbell v.

Orchard Mesa Irr. Dist., 972 P.2d 1037, 1040 (Colo. 1998) (While general taxes

exact revenue from the public at large for general governmental purposes, an

irrigation districts special assessment benefits specific landowners whose land the

district supplies with water.);Kirk v. Denver Pub. Co., 818 P.2d 262, 271 (Colo.


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1991) (A user fee is in the nature of a special fee designed to defray the cost of a

governmental service and is imposed on the users of that service.).3

Colorado case law is clear that the services financed by a TABOR-exempt

fee must be real, not theoretical or obscure, and provided to those assessed.

Barber, 196 P.3d at 250 (In the present case, the primary purpose of the

enactments that created the special cash funds was solely to defray the cost of

services provided to those assessed.);Board of Cnty. Commrs v. Fixed Base

Operators, Inc., 939 P.2d 464, 469 (Colo. Ct. App. 1997) (The [passenger facility

charges] are akin to user fees assessed and collected from users of airport

facilities.); Westrac, Inc. v. Walker Field, 812 P.2d 714, 716 (Colo. Ct. App.

1991) (Rates charged for use of a public facility . . . are not considered taxes

because . . . they are imposed only upon those using the service provided.);see

also Anema v. Transit Const. Authority, 788 P.2d 1261, 1267 (Colo. 1990) (At the

time of the assessments challenged here, the service performed was the

determination of the feasibility, contours, and cost of rapid rail transit.). The

3

The United States Supreme Court applies a similar test: A fee . . . bestows abenefit on the applicant, not shared by other members of society. National CableTelevision Assn v. United States, 415 U.S. 336, 34041 (1974);see also Federal

Power Commn v. New England Power Co., 415 U.S. 345, 350 (1974) (a chargewill most often be a tax when the identification of the ultimate beneficiary isobscure and the service can be primarily considered as benefiting broadly thegeneral public.).


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district court failed to even consider the relevant test for TABOR-exempt fees,

even though the TABOR Foundation and the CBE made the district court aware of

the relevant case law. M. for Summ. J., CD pages 10910; Defs. Resp., CD page

569.

The bridge surcharge is a tax because it is collected without regard to any

services utilized by the vehicles charged. Tr. vol. I at 9091 (Stein); Findings, CD

page 823. The bridge surcharge is not collected directly from [CBE bridge]

users. Nicholl, 896 P.2d at 868. The CBE extracts its revenue from the public at

large by assessing a general levy on vehicles registered in Colorado, without any

regard to a vehicles use of CBE bridges. C.R.S. 43-4-805(5)(g)(I); Tr. vol. I at

9091 (Stein); Findings, CD page 823.

Essentially every vehicle in Colorado primarily designed to be operated or

drawn upon any highway must be registered, whether or not it is operated on the

highways. C.R.S. 42-3-103(1)(a). The owner of each [vehicle] shall pay an

annual specific ownership tax . . . . C.R.S. 42-3-106(1). The bridge surcharge is

an additional tax on vehicle ownership assessed by the CBE. See Ard v. People,

182 P. 892, 893 (Colo. 1919) (The [vehicle] registration or license fees required

by the act of 1913 are a taxation imposed upon privileges, . . . . Such registration

fees are a tax upon the privilege of using the motor vehicle upon the public


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highway.) (quotation omitted).

The notion that the bridge surcharge provides a specific service to the

persons upon whom the fee is imposed and at rates reasonably calculated based on

the benefits received by such persons is, in practice, false. C.R.S. 43-4-

805(2)(c). No one who pays the bridge surcharge is provided a particular

service,Barber, 196 P.3d at 249, and actual benefits received, if any, have no

bearing on the surcharge rates paid. If a vehicle is registered in Colorado, the

bridge surcharge is collected based on that vehicles weight; no consideration is

given to any services or benefits provided by the CBE. Tr. vol. I at 9091 (Stein);

Findings, CD page 823; C.R.S. 43-4-805(5)(g)(I).

The situation of those Coloradans in the 27 counties where the CBE does not

operate is all the more striking. Almost half of Colorados counties receive no

services or direct benefits from the CBE. Tr. vol. II at 116, 169 (Laipply). Yet

vehicles registered in those counties are forced to pay the same bridge surcharge as

vehicles in those counties actually served by the CBE. Tr. vol. I at 9091 (Stein);

Findings, CD page 823. Even vehicles that never leave those 27 counties, and thus

never utilize a particular service provided by the CBE, must pay the same

surcharge rates as every other vehicle registered in Colorado. Tr. vol. I at 9091

(Stein).


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For example, some TABOR Foundation members live hundreds of miles

from any CBE-designated bridge and have paid the bridge surcharge for vehicles

that have never crossed a CBE bridge. Two of these members reside in Grand

County and own vehicles that never leave the County; no CBE bridge is located in

Grand County, nor does the CBE have any plans to operate in Grand County. Tr.

vol. II at 116, 169 (Laipply). Both these members own other vehicles better suited

to travel far from home, including travel outside Grand County. Tr. vol. I at 29,

67. They have been assessed and have paid bridge surcharges for those vehicles,

too. Id. They have not been provided a specific service, nor do the surcharge rates

they pay bear any relationship to benefits received. Id.; Tr. vol. II at 169

(Laipply). These members situation is typical of others who have vehicles that do

not come within sight of CBE bridges, but nonetheless are required to fund the

CBE through compulsory payment of the bridge surcharge. Tr. vol. I at 3032.

The bridge surcharge cannot qualify as a TABOR-exempt fee because it is

not imposed in direct relation to services provided . . . . Nicholl, 896 P.2d at

869. Nor does it finance a particular service utilized by those who must pay the

charge . . . . Barber, 196 P.3d at 249. Accordingly, the bridge surcharge is a tax

that must be approved in advance by a vote of the people. See Ard, 182 P. at 893.

The district courts ruling to the contrary is unsupported by law and must be


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reversed.4

B. Taxes Collected For A Particular Purpose Are Still Taxes SubjectTo Voter Approval Under TABOR.

Like many taxes, the bridge surcharge is collected for a particular purpose,

in this case to finance, repair, reconstruct, and replace any designated bridge, and

deposited in a special account. C.R.S. 43-4-805(2)(b), (3)(a). The district court

considered this dispositive of the question whether the bridge surcharge is a

TABOR-exempt fee. Findings, CD page 829 ([T]he monies raised via the bridge

surcharge are kept in a separate treasury account, to be used only for the CBEs

4The district court acknowledged that the bridge surcharge is not voluntary andruled that TABOR-exempt fees need not be voluntary. Findings, CD page 829.That inquiry is not central to the issues in this case, but the fact that the bridge

surcharge is a compulsory charge is an additional factor weighing in favor ofcharacterizing the surcharge as a tax subject to TABOR. SeeNational CableTelevision Assn, 415 U.S. at 34041;New England Power Co., 415 U.S. at 350.The purpose of TABOR is best served by requiring fees to be voluntary, especiallywhen the purported fee is assessed by an unelected statewide body such as theCBE. See Submission of Interrogatories on Senate Bill 93-74, 852 P.2d 1, 4 (Colo.1993) (the principal purpose of TABOR . . . is to require that the voters decide forthemselves the necessity for the imposition of new tax burdens . . . .);Huber v.Colorado Mining Assn, 264 P.3d 884, 891 (Colo. 2011) (TABOR altered whoultimately must approve imposition of new taxes, tax rate increases, and tax policy

changes . . . .). Moreover, the bridge surcharge is imposed by the CBE Board ofDirectors, an unelected, unaccountable board. Contra Bruce, 131 P.3d at 1190(municipal fee, levied against property owners who had recourse to the ballot box).Accordingly, the voter control purposes of TABOR are completely stymied by theCBEs failure to comply with TABOR.


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authorized purpose.). Under the district courts test, any time a charge is

legislatively dedicated to a particular purpose, the charge would become a

TABOR-exempt fee. This would transform school property taxes into school fees

(C.R.S. 39-10-107(1)(a)), cigarette and tobacco taxes into old age pension fees

(C.R.S. 39-28.5-108(1), 39-28-110(1)), gasoline taxes into highway and

aviation fees (C.R.S. 39-27-112(2)(b)), and so on. The fact, for example, that

RTD collects taxes only to fund public transportation does not transform its taxes

into transportation fees.5 C.R.S. 32-9-119(i).

The Colorado Supreme Court has avoided this absurd result by making clear

that a TABOR-exempt fee may only be collected against persons or property

utilizing services financed by the fee. Nicholl, 896 P.2d at 868;Barber, 196 P.3d

at 24950. As explained above, the district court ignoredNichollandBarber, and

thus its analysis is fundamentally flawed.

The district court citedBloom, 784 P.2d at 31011, for the proposition that

money deposited into a special fund is by definition a fee. Findings, CD page 829.

Bloomdoes not address TABOR-exempt fees directly, because it was decided

three years before TABOR was enacted; but, in approving a road maintenance fee,

5By comparison, when RTD sets bus ticket rates, it does so without the need forvoter approval, because a bus ticket is a fee for service, collected in direct relationto services provided . . . . Nicholl, 896 P.2d at 869; C.R.S. 32-9-119.7.


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the court observed that developed lots subject to the fee receive the benefit of a

program of city maintenance. Id.at 310. The court inBloomalso observed that

the fees would be held in an account separate from the Citys general fund. Id. at

311. Here, the district court focused on the fact that the fee inBloomwas

deposited in a separate fund, Findings, CD pages 82930, but the district court

ignored that the fee assessed inBloomwas levied only on developed properties

actually fronting the roads that were to be repaired by the revenue collected:

The transportation utility fee [is] imposed upon owners or occupantsof developed property fronting city streets and the revenues generatedthereby are used for the purpose of defraying the expenses connectedwith the operation and maintenance of city streets. The owners andoccupants of developed lots subject to the fee 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.

Bloom, 784 P.2d at 310. Moreover, the fee inBloomwas based on usage, because

it varies with the amount of the lots street frontage and the traffic generation

factor (or estimated street usage) applicable to the lot.6Id. at 309.

6A direct benefit is also present in the cases upon whichBloom relied. 784 P.2d at30809 (citingLoupMiller ConstructionCo. v. City and County of Denver, 676

P.2d 1170, 117475 (Colo. 1984) (approving fee for new customers who requestedthat their properties be physically connected to sewer system);Zelinger v. City andCounty of Denver, 724 P.2d 1356, 1359 (Colo. 1986) (same for storm drainagefee); Western Heights Land Corp. v. City of Fort Collins, 362 P.2d 155, 158 (Colo.1961) (approving sewer and water fee because the principal object is to defray theexpense of operating a utility directed against those desiring to use the service. . . .)).


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There is no support for the district courts conclusion that a fee may be

assessed without regard to actual services provided, so long as the proceeds are

kept in a separate treasury account, to be used only for the CBEs authorized

purpose. Findings, CD page 829. Accordingly, the district court erred in ruling

that the bridge surcharge is not a tax.

III. THE DISTRICT COURT ERRED IN DENYING THE SECOND

CLAIM FOR RELIEF BECAUSE THE CBE DOES NOT OPERATE

AS A TABOR-EXEMPT BUSINESS ENTERPRISE; THEREFORE ITMUST HAVE VOTER APPROVAL TO ISSUE DEBT.

TABOR requires voter approval for the creation of any multiple-fiscal year

direct or indirect district debt or other financial obligation . . . . Colo. Const. art.

X, 20(4)(b). TABORs debt approval requirements do not apply to enterprises.

Id. 20(2)(b). TABOR defines an enterprise as a 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. Colo.

Const. art. X, 20(2)(d). The Colorado Supreme Court has further clarified that a

TABOR enterprise must function as a business given the ordinary meaning and

understanding of that term. Nicholl, 896 P.2d at 868.

In its second claim for relief, the TABOR Foundation alleged that the CBE

does not function as a TABOR enterprise, therefore the CBE violated TABOR by

issuing bonds without voter approval. Compl., CD pages 1213. The TABOR


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Foundation sought an order enjoining the CBE from issuing bonds without voter

approval. Compl., CD page 13.

There are three independently-sufficient reasons that the CBE does not

qualify as a TABOR enterprise: (1) the CBE levies a tax, and therefore does not

operate as a business; (2) the CBE received a $14.4 million cash grant from the

Transportation Commission; and (3) the CBE received a grant from the

Transportation Commission in the form of 56 bridges. Findings, CD pages 830

32. For any one of these reasons, the CBE did not have enterprise status when it

issued bonds without voter approval. The district court erred in ruling otherwise.

A. The Power To Tax Is Inconsistent With The Characteristics Of A

TABOR Enterprise.

The CBE is not a business enterprise exempt from TABOR becauseas

demonstrated aboveit generates revenue by levying a bridge tax. The Colorado

Supreme Court made clear inNicholl that a TABOR enterprise must function as a

business given the ordinary meaning and understanding of that term. 896 P.2d at

868. Thus, a TABOR enterprise must be engaged in an activity conducted in the

pursuit of benefit, gain or livelihood. Id.(citingLindner Packing & Provision Co.

v. Industrial Commn, 99 Colo. 143, 147 (1936)).

InNicholl, the court ruled that the E-470 Highway Authority fits the

definition of a business when it generates revenue by collecting tolls directly


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from E470 highway users. Id. But the Highway Authority was ultimately held

to not be a TABOR enterprise because it possessed the power to unilaterally

impose taxes, with no direct relation to services provided, [which] is inconsistent

with the characteristics of a business as the term is commonly used. Id. at 869.

The central question is whether a purported TABOR enterprise functions as a

business, or instead has authority atypical of an ordinary business:

By providing access to a public roadway in exchange for the paymentof tolls and user fees, the Authority is engaging in an activityconducted in the pursuit of benefit, gain or livelihood and, in theserespects, fits the definition of a business. However, while theAuthority is business-like in these respects, it has authority tofinance its operations in a manner not typical of a business as theterm is commonly used.

Id. at 868.

No ordinary business has the authority to charge customers to whom it does

not provide a service, or finance its operations by collecting revenue from every

person who mightuse its services. Tr. vol. I at 10304 (Stein). As explained

above, the CBE assesses the bridge surcharge against every vehicle registered in

Colorado, even if a vehicle does not use the CBEs services. If other TABOR

enterprises adopted the CBEs practices, the University of Colorado could start

charging an application fee to every high school senior in the State, because they


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might apply to CU.7 Such a scheme would obviously eviscerate CUs enterprise

statusjust as the CBEs collection of the bridge surcharge from every vehicle

registered in Colorado eviscerates its enterprise status herebecause the charge

would be levied with no direct relation to services provided, [which] is

inconsistent with the characteristics of a business as the term is commonly used.

Nicholl, 896 P.2d at 869.

Consistent withNicholl, the Attorney General has clarified that a TABOR

enterprise must be:

[O]perated as a self-supporting business activity and the transactionsbetween the enterprise and [customers] are market exchanges takingplace in a competitive, arms-length manner. This requirement isnecessary to eliminate the concern that such a transaction is merely a

subterfuge designed to circumvent the . . . provisions of TABOR.

Op. Atty Gen. No. 95-07 (Dec. 22, 1995);see Colorado Common Cause v. Meyer,

758 P.2d 153, 159 (Colo. 1988) (Attorney Generals Opinion obviously entitled to

respectful consideration . . . .).

The CBEs revenue is not derived from market exchanges taking place in a

competitive, arms-length manner, Op. Atty Gen. No. 95-07, but rather from the

tax revenue generated by the bridge surcharge. Nor is the CBE engaged in an

activity conducted in the pursuit of benefit, gain or livelihood, it is engaged in

7See C.R.S. 23-5-101.7 (Enterprise status of institutions of higher education).


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general taxation in pursuit of the construction of public infrastructure. Nicholl, 896

P.3d at 868. Accordingly, the CBE does not function as a TABOR enterprise and

it must have voter approval to issue bonds. Id. at 869.

B. The CBE Lost Enterprise Status Because It ReceivedMore Than

Ten Percent Of Annual Revenue In Grants From The State.

Assuming arguendo that the bridge surcharge is not a tax, the CBE still does

not qualify as an enterprise because it is funded in large measure by CDOT. A

TABOR enterprise must receiv[e] under 10% of annual revenue in grants from all

Colorado state and local governments combined. Colo. Const. art. X, 20(2)(d).

The purpose of TABORs ten percent limit is to distinguish a purported enterprise

from a governmental unit. Nicholl, 896 P.2d at 869.

In fiscal year 2011when the CBE issued its bondsthe CBEs revenue

was $78.5 million, making the ten percent maximum state grant $7.85 million.

Exhibit 16 at 11; Tr. vol. I at 137 (Stein); Findings, CD page 82425. Grants from

CDOT to the CBE in fiscal year 2011 came in two primary forms, either of which

exceeded TABORs ten percent limit: (1) $14.4 million from CDOTs bridge

budget; and (2) 56 bridges owned by CDOT (along with associated design work),

worth at least $8.5 million. Tr. vol. I at 127, 131 (Stein); Exhibit 11. Thus, either

of these grants from CDOT impermissibly exceeded the $7.85 million allowed

under TABOR. Even if the bridge surcharge were not a tax, the CBE lost its


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enterprise status in fiscal year 2011 due to either of these grants.

1. The CBE lost enterprise status as a result of a $14.4 milliongrant the CBE received from CDOT in fiscal year 2011.

In November 2010, the Transportation Commission passed Resolution TC-

1925 authorizing itself to allocat[e] and transfer[] from CDOT to the Colorado

Bridge Enterprisefifteen million dollars ($15,000,000) of eligible federal funds.

Exhibit 15. In fiscal year 2011, FHWA allocated $14.4 million of CDOTs $49.8

million bridge budget to the CBE, pursuant to the Transportation Commissions

direction in TC-1925. Tr. vol. I at 127, 131 (Stein). This was a state grant.

TABORs ten percent limit applies only to grants from all Colorado state

and local governments combined; grants from the federal government do not

count against the limit. Colo. Const. art. X, 20(2)(d);see also C.R.S. 24-77-

102(7)(b)(III). The $14.4 million the CBE received from CDOTs bridge budget is

not a federal grant. The CBE received that money only because of the genuinely

independent choices of the Transportation Commission. See Exhibit 15 ([A]ny

decision as to whether or not to allocate and transfer such funds to the [CBE] shall

be made by the Transportation Commission, in its sole discretion, in the year in

which the transfer is to occur.). But for the Transportation Commissions

decision to grant the money to the CBE, the CBE would not have received the

funds. Tr. vol. I at 129 (Stein). The Transportation Commissions control over


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this money makes it a state grant for TABOR purposes. See Op. Atty Gen. No.

05-03 (Jul. 29, 2005).

Both the U.S. Supreme Court and the Colorado Supreme Court have held

that the entity that controls a grant determines its character. See Zelman v.

Simmons-Harris, 536 U.S. 639, 649 (2002);Americans United for Separation of

Church and State Fund, Inc. v. State, 648 P.2d 1072, 1083 (Colo. 1982);In re

Interrogatory Propounded by Governor Roy Romer on House Bill 91S-1005, 814

P.2d 875, 878 (Colo. 1991). In addition, the Colorado Attorney General has

concluded that this principle applies to grants received by TABOR enterprises.

Op. Atty Gen. No. 05-03. These authorities were briefed in the district court, M.

for Summ. J., CD pages 11516, but the court below ignored them, ruling that the

$14.4 million grant the CBE received in fiscal year 2011 was a federal grant

because the money originated with FHWA, despite the Transportation

Commissions control over the money. Findings, CD pages 83031.

The U.S. Supreme Court has held that neutral government programs that

provide aid directly to a broad class of individuals, who, in turn, direct the aid to

religious schools or institutions of their own choosing do not violate the

Establishment Clause of the U.S. Constitution. Zelman, 536 U.S. at 649;see also,

e.g., Zobrest v. Catalina Foothills School Dist., 509 U.S. 1, 8 (1993); accord


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Americans United, 648 P.2d at 1083. This is because, although the school aid

comes from the government, the individual recipients control over the money

means that [a]ny aid . . . that ultimately flows to religious institutions does so only

as a result of the genuinely independent and private choices of aid recipients,

making it private money for Establishment Clause purposes. Zelman, 536 U.S. at

65051 (quotation omitted). Similarly, the CBE receives a portion of CDOTs

bridge budget only because of the genuinely independent choices of the

Transportation Commission, making it state money for TABOR purposes.

The Colorado Supreme Court applied a similar rationale to the Gift Clause,

Colo. Const. art. XI, 2. In re House Bill 91S-1005, 814 P.2d at 878. The Gift

Clause prohibits the State from giving aid to private companies. Colo. Const. art.

XI, 2. Nevertheless, the court held that the State could give tax revenues to local

governments or the Colorado Housing and Finance Authority (CHFA), which

would in turn give the money to private companies. Id. The court approved the

grants at issue because the local governments or the CHFA would allocate the

money, not the State. Id. at 883. Thus, the local governments or the CHFAs

authority over the money removed the state character of that money for Gift Clause

purposes. Id. Similarly, the Transportation Commissions authority over CDOTs


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bridge budget removes the federal character of the money it grants to the CBE for

TABOR purposes.

Consistent with these decisions, the Attorney General has concluded that the

entity that controls a grant determines its character for TABOR purposes. Op.

Atty Gen. No. 05-03. The Attorney Generals opinion was rendered with regard

to the 2004 College Opportunity Fund Act, C.R.S. 23-18-101 et seq., and its

impact on the enterprise status of state institutions of higher education. The

Attorney General concluded that stipends provided by the State of Colorado to

college students to cover tuition at state universities lost their character as state

grants for TABOR purposes because the students exercised discretion over

distribution of the grants. Op. Atty Gen. No. 05-03 at 5 (Under theZelmanand

Americans Unitedanalysis outlined above, it is not necessary that the financial

assistance become the property of the student . . . indeed, this is not the situation in

any of the cases cited above.). The 2004 College Opportunity Fund Act applies

the principle developed with respect to school vouchersthat the entity that

controls a grant defines its characterand extends it to TABOR enterprise grants.

In the same way that a school board provides a voucher to a parent, who

then directs the money to the school of her choice, FHWA provides bridge funding

to the Transportation Commission, which then directed the money to the CBE. See


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Taxpayers for Public Education v. Douglas County School District, 2013 WL

791140, *20 (Colo. Ct. App. 2013). In both cases, the entity that decides who

receives the grantthe parent or the Transportation Commissionnever actually

obtains the money. In other words, the parent or the Transportation Commission

directs where the money should go and that authority defines the character of the

grant. CBE only received the $14.4 million from FHWA because the

Transportation Commission chose to allow it to receive it. In the same way, a

private school only receives money from a school board because a parent chooses

to allow it to receive it.

The district court ignored these authorities and concluded that the $14.4

million was not a state grant from the Transportation Commission. Findings, CD

page 830. That conclusion is inconsistent with the authorities discussed above, and

necessarily contradicts the Attorney Generals opinion that the College

Opportunity Fund Act did not impact the enterprise status of state institutions of

higher education. See Op. Atty Gen. No. 05-03 at 4. Either the character of a

grant is defined by the source of the funds (i.e., the state College Opportunity Fund

and the FHWA), or by the entity with authority to allocate the money (i.e., college

students and the Transportation Commission). If the $14.4 million grant to the

CBE was nota state grant because the funds came from FHWA, then the College


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Opportunity Fund stipends arestate grants because those funds came from the

State. In other words, either Attorney General Opinion No. 05-03 is right and the

district court is wrong, or vice versa. Given that the Attorney Generals Opinion is

consistent with state and federal case law, clearly the district court erred.

As demonstrated above, the $14.4 million grant the CBE received in fiscal

year 2011 was a grant from the Transportation Commission, well in excess of the

$7.85 million allowed under TABOR. Therefore, the CBE lost its enterprise status

in fiscal year 2011 due to this grant. The district courts ruling to the contrary was

not in accordance with law and must be reversed.

2. The CBE lost enterprise status as a result of 56 bridges the

CBE received from CDOT in fiscal year 2011.

Assuming the bridge surcharge is not a tax and assuming further that the

cash grant the CBE received from CDOTs bridge budget is not a state grant, the

CBE nonetheless lost enterprise status in fiscal year 2011 for another reason: the

CBE received capital contributions from CDOT in the form of 56 bridges and

associated design work. TMO, CD page 688. By CDOTs own reckoning, all

these bridges have value. Exhibit 8 at 3, 814. Yet, the CBE took the position at

the time of transfer that only two of the bridges counted against TABORs ten

percent limit. Exhibit 13. Moreover, the CBE radically underestimated the true

value of the 56 bridges because it conflated their accounting value with their


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market value. Exhibit 8 at 3; Exhibit 11.

The district court ruled that under the state statutes implementing TABOR,

any bridges transferred to the CBE did not count toward the 10 percent limitation

on state and local government grants because they were not cash subsidies or other

direct contributions of money. Findings, CD page 832 (citing C.R.S. 24-77-

102(7)(a)). Moreover, it ruled that state law required use of accounting value for

purposes of complying with TABORs ten percent limit. Id. at 11. Both of these

rulings were in error.

The district court relied on C.R.S. 24-77-102 for these two rulings, but this

was in error because the provisions of C.R.S. 24-77-101 et seq., were enacted to

facilitate compliance with the state fiscal year spending limit contained in Colo.

Const. art. X, 20(7). C.R.S. 24-77-101(2)(a). The provisions contained in

C.R.S. 24-77-102 only apply [a]s used in this article, unless the context

otherwise requires: . . . . Similarly, C.R.S. 24-77-101(2)(e) and (f) require use

of generally accepted accounting principles when preparing reports to facilitate

compliance with thestate fiscal year spending limit contained in Colo. Const. art.

X, 20(7). C.R.S. 24-77-101(2)(a) (emphasis added). The CBEs witnesses

conceded that these provisions have nothing to do with how TABOR defines

enterprises. Tr. vol . I at 12324 (Stein) (Whether an enterprise is an enterprise


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has no relationship to state fiscal year spending.);see alsoTr. vol. II at 20607

(Former Colorado State Controller David McDermott) (I'm trying to think of

whether theres any specific provisions in there that address enterprises. Its not

coming to my mind . . . .). The CBEs witnesses also conceded that generally

accepted accounting practices have nothing to do with how TABOR defines

enterprises or grants. Tr. vol. I at 123 (Stein); Tr. vol. II at 217 (McDermott).

Indeed, the legislature has not developed comprehensive legislation explaining its

view of TABORs enterprise exemption. The district court should have been

guided by the text of TABOR and the Supreme Courts decision inNicholl, which

both demonstrate that TABORs ten percent limit is intended to distinguish a

purported enterprise from a governmental unit. 896 P.2d at 869.

i. The purpose of TABORs ten percent limit is served by

classifying the 56 bridges as a grant for TABOR purposes.

At the time of transfer, the CBE conceded that bridges F-11-AC and F-11-

AB carry substantial value and must be treated and accounted for under TABOR

as having such value for purposes of transfer from CDOT to the Bridge

Enterprise. Exhibit 13. This was a sound conclusion, because excluding transfers

of such assets from TABORs ten percent limit would render the limit a nullity.

The natural result would be a form of money laundering, whereby the State

transfers vehicles, property, buildingsor bridgesto enterprises, which in turn


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either sell those assets to finance their operations oras the CBE did herepledge

the assets as collateral to obtain debt financing. See Exhibit 17 at 4, 15. This is an

absurd result that would be at odds with the purposes of TABOR. See Nicholl, 896

P.2d at 869;Frazier v. People, 90 P.3d 807, 811 (Colo. 2004) (A statutory

interpretation leading to an illogical or absurd result will not be followed.).

By CDOTs own reckoning, the 56 bridges were worth at least $5.25

million. Exhibit 8 at 3, 814. The bridges also have scrap value, which at present

is given away to contractors who demolish the bridges in exchange for a discount

on the demolition. Tr. vol. I at 114, 14546 (Stein). The CBE did not attempt to

determine the market value of the 56 bridges, either as scrap or otherwise, for

purposes of TABORs ten percent limit on state grants to enterprises. Tr. vol. I at

9899, 11316 (Stein); Exhibit 11; Exhibit 13. The purpose of TABORs ten

percent limit cannot survive if the CBE is allowed to evade the limit by excluding

millions of dollars of non-cash grants. Accordingly, the district court erred in

concluding that the bridges transferred to the CBE did not count toward TABORs

ten percent limit.


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ii. The purpose of TABORs ten percent limit is servedbyrequiring use of fair market value.

The CBE has never assessed the actual value of the 56 bridges it was granted

by CDOT. Despite that all 56 of the transferred bridges were functioning at the

time of transfer, the CBE relied solely on CDOTs accounting value of the bridges,

zeroing the value of 54 of the 56 bridges for TABOR purposes. Exhibit 11;

Exhibit 13. Paradoxically, the CBE listed the proceeds from the sale of these

mostly valueless bridges as a source of repayment for the $300 million bonds it

issued. Exhibit 17 at 4, 15.

Moreover, the depreciated value assigned to these 56 bridges by CDOT

underestimates the fair market value of the bridges. CDOTs use of depreciated

value may have been appropriate for accounting purposes; however, the accounting

value of the bridges is not the same as their fair market value; the latter is the price

the asset would command in an arms-length transaction. Tr. vol. I at 9899

(Stein). State law requires CDOT to determine fair market value before

disposing of property no longer needed for transportation purposes. C.R.S. 43-1-

210(5)(a)(II). CDOT failed to comply with this requirement before transferring the

56 bridges to the CBE, despite the fact that even the depreciated values of almost

all the structures exceeded $5,000 and the possibility of selling [demolished


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bridges] for scrap exits. Tr. vol. I at 114 (Stein). Demolished bridges would

obviously not be needed for transportation purposes.

Additionally, even if state law did not dictate that CDOT use fair market

value here, the purpose of TABORs ten percent limit, to distinguish a purported

enterprise from a governmental unit, would not be served by allowing the State to

give away state property to enterprises at a fraction of its fair market value.

Nicholl, 896 P.2d at 869. For these reasons, the CBE was required by law to value

the 56 bridges according to their fair market value at the time of transfer.

iii. The district court erred in excluding the testimony of the

TABOR Foundations bridge valuation expert.

[I]n determining reliability under CRE 702, the court should consider

whether the scientific principles underlying the testimony are reasonably reliable,

and whether the expert is qualified to opine on such matters, considering the

totality of the circumstances.People v. Ramirez, 155 P.3d 371, 380 (Colo. 2007).

Here, the experts methods were based on his 39 years of experience as a licensed

professional engineer determining the value of infrastructure. Tr. vol. I at 184.

Given his extensive knowledge, skill, experience, training, and education, he was

qualified to offer an expert opinion as to the value of the transferred bridges. H.L.

Johnson v. Bd. of County Commrs of Morgan County, 336 P.2d 300, 301 (Colo.

1959) (engineer qualified to testify as to bridge value). Moreover, the undisputed


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evidence shows that infrastructure is ordinarily valued by an engineer, using the

methods employed by the expert here. Tr. vol. I at 19092.

The district court discounted the experts methods, although none of its

reasons for doing so are supported by the record. Findings, CD page 831. The

district court objected to the experts reliance on satellite imagery provided by

Google Earth to conduct a preliminary examination of the bridgeswhile

acknowledging that the expert also conducted a site inspection of the bridges that

confirmed his earlier assessment. Id.; Tr. vol. I at 21011. The district court found

it significant that the expert failed to take into consideration such obvious factors

as heavier weekend vehicle traffic when making his overall evaluation, but the

court ignored the fact that taking into account such traffic would have increased

the experts valuation estimates, which would have only made the divergence

between the CBEs valuation and fair market value more pronounced. Findings,

CD page 831; Tr. vol. II at 2527. It was error for the district court to exclude the

experts testimony as unreliable. See Ramirez, 155 P.3d at 380.

The extent of the variance between CDOTs depreciated value and fair

market value, even based on the experts conservative assessment, is significant.

For example, bridges F-11-AC and F-11-AB were valued at $1.367 million using

CDOTs deprecation methodology. Exhibit 13. The minimum fair market value


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of structures F-11-AC and F-11-AB is approximately $7.5 million. Exhibit 14 at 9.

The exact value of the bridges is immaterial to the question here: Are the bridges

worth more than ten percent of the CBEs annual revenues? That question is easily

answered by looking at the undisputed valuation range provided by the expert,

because even the lowest value estimate for just two of the 56 bridges and

associated design work exceeds TABORs ten percent limit by more than

$700,000.8 The precise value of all the bridgesand the precise extent of the

constitutional violationis immaterial. The CBE accordingly lost enterprise status

as a result of the bridges that CDOT granted in fiscal year 2011.

CONCLUSION

For the foregoing reasons, this Court should reverse the district courts

denial of the TABOR Foundations claims, remand for entry of judgment in favor

of the TABOR Foundation and determination of attorney fees, and award any other

further relief this Court deems just and appropriate.

8Depreciated value of F-11-AC and F-11-AB based on current replacement cost($7.5 million) + associated design work ($1.085 million) = $8.585 million, whichis $735,000 more than the fiscal year 2011 ten percent TABOR maximum ($7.85million).


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REQUEST FOR ATTORNEY FEES

The TABOR Foundation respectfully requests attorney fees in accordance

with Colo. Const. art. X, 20(1).

DATED this 21st day of January 2014.

Respectfully submitted,

/s/ James M. Manley

James M. Manley (Atty. Reg. No. 40327)Steven J. Lechner (Atty. Reg. No. 19853)MOUNTAIN STATES LEGAL FOUNDATION2596 South Lewis WayLakewood, Colorado 80227(303) 292-2021(303) 292-1980 (facsimile)

[email protected]

[email protected]

Attorneys for Appellant


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CERTIFICATE OF SERVICE

I certify that on the 21st day of January 2014, the foregoing document was

filed with the Court of Appeals and true and accurate copies of the same were

served on all other counsel of record via the Integrated Colorado Courts E-Filing

System.

/s/ James M. Manley

James M. Manley

opening brief, tabor foundation v. cbe

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