Amendment 61 - Would Restrict State and Local Government Borrowing
This proposal amends Article X, Section 20 of the Colorado Constitution ("TABOR") to add a new section to prohibit State debt and limit local government debt. It also amends certain sections of Article XI. The amendments to TABOR will be in addition to all other provisions of TABOR. The proposal applies after 2010 and provides that all conflicting laws, rulings and practices would be repealed, overturned and superseded.
The proposal applies to "any loan, whether or not it lasts more than one year; may default; is subject to annual appropriation or discretion; is called a certificate of participation, lease-purchase, lease-back, emergency, contingency, property lien, special fund, dedicated revenue bond, or any other name; or offers any other excuse, exception, or form."
The State is prohibited from borrowing, directly or indirectly, money or other items of value for any reason or for any period of time. This applies to any loan, whether it lasts more than a year or not, regardless of its form. Specifically, this addresses lease purchase agreements and certificates of participation and other obligations subject to annual appropriation which have been exempt from voting requirements under existing law. This prohibition applies to the State and its enterprises, authorities and other state political entities.
Local governments and their enterprises, authorities and other local political entities may borrow money, but only after a November vote. All local government borrowings are subject to voter approval under this proposal.
For entities other than enterprises, there will be a debt limit of 10 percent of the assessed taxable value of the real property in the jurisdiction.
Any new borrowing apparently has to be in the form of bonded debt, be subject to prepayment without penalty (and at any time) and mature within 10 years.
The proposal states that "No borrowing may continue past its original term." The proposal also provides that "all current borrowings shall be paid."
Except for enterprise borrowings, when a borrowing is repaid, tax rates must decline in an amount equal to its planned average repayment, even if the debt is not repaid from taxes.
The proposal also makes some changes to Article XI of the Constitution, none of which seem significant given the TABOR provisions, except that the proposal adds to Section 6 a requirement that the ballot title specify the use of the funds, which shall not be changed.
If you have any questions regarding this article or its possible impact on your activities and operations, please contact your Sherman & Howard attorney or one of the attorneys in our Public Finance Group.
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