Colorado State Borrowing Act, Referendum D (2005)
The Colorado State Borrowing Referendum, also known as Referendum D, was on the statewide, November 1, 2005 ballot in Colorado as a legislatively-referred bond question, were it was defeated. The measure would have permitted the state to borrow up to $2.072 billion with a maximum repayment of $3.225 billion. The measure would only have been enacted into law if Referendum C, on the same ballot, had also passed.
|Colorado Referendum D (2005)|
Election results via:Colorado Secretary of State Elections Department.
Text of measure
WITHOUT INCREASING ANY TAX RATES OR IMPOSING ANY NEW TAXES, SHALL THE STATE BE AUTHORIZED TO ADDRESS CRITICAL STATE NEEDS BY ISSUING NOTES IN TOTAL AMOUNTS OF UP TO $2,072,000,000, WITH A MAXIMUM TOTAL REPAYMENT COST OF UP TO $3,225,000,000, AND WITH MAXIMUM TOTAL ANNUAL PRINCIPAL AND INTEREST PAYMENTS OF $55,000,000 IN STATE FISCAL YEAR 2005-06, $95,000,000 IN STATE FISCAL YEAR 2006-07, AND $125,000,000 IN EACH SUBSEQUENT STATE FISCAL YEAR, OF WHICH A MAXIMUM OF $25,000,000 PER STATE FISCAL YEAR MAY BE USED TO PAY NOTES ISSUED FOR NON-TRANSPORTATION PURPOSES, ONLY IF VOTERS OF THE STATE APPROVE REFERENDUM C AT THE NOVEMBER 2005 STATEWIDE ELECTION; SHALL NOTE PROCEEDS AND EARNINGS THEREON CONSTITUTE A VOTER-APPROVED REVENUE CHANGE; SHALL THE GENERAL ASSEMBLY BE AUTHORIZED TO MAKE ANNUAL APPROPRIATIONS FROM THE STATE GENERAL FUND THAT ARE EXEMPT FROM THE STATUTORY LIMITATION ON TOTAL ANNUAL STATE GENERAL FUND APPROPRIATIONS AND FROM OTHER LEGALLY AVAILABLE FUNDS TO PAY THE PRINCIPAL, INTEREST, AND NECESSARY COSTS OF THE NOTES; AND SHALL THE NOTES BE ISSUED IN THE FOLLOWING MAXIMUM AMOUNTS AND FOR THE FOLLOWING PURPOSES:
INTEREST PAYMENTS OF $30,000,000 IN STATE FISCAL YEAR 2005-06, $70,000,000 IN STATE FISCAL YEAR 2006-07, AND $100,000,000 IN ANY SUBSEQUENT FISCAL YEAR, TO BE USED TO REPAIR AND REPLACE HIGHWAYS AND BRIDGES AND ACCELERATE THE COMPLETION OF STRATEGIC TRANSPORTATION PROJECTS INCLUDED IN THE STRATEGIC TRANSPORTATION PROJECT INVESTMENT PROGRAM OF THE DEPARTMENT OF TRANSPORTATION;
EXPENDITURES RESERVE AND USED TO REPAIR, MAINTAIN, MAKE SAFE, AND REPLACE DETERIORATING PUBLIC SCHOOL FACILITIES;
USED TO REPAIR, MAINTAIN, MAKE SAFE, AND REPLACE STATE UNIVERSITY, COLLEGE, AND COMMUNITY COLLEGE FACILITIES; AND
BENEFIT FUND TO ADDRESS SHORTFALLS IN STATE FUNDING OF PENSIONS FOR POLICE OFFICERS AND FIREFIGHTERS?
The Colorado Constitution requires that the state obtain voter approval before borrowing money if more than one year is needed for repayment. Referendum D allows the state to borrow up to $2.072 billion, and to repay it over a number of years.
Repaying the money
The debt will be repaid from state tax revenue, which includes the additional money the state receives from Referendum C. Further, if voters approve both Referenda C and D, the state will be allowed to keep up to an additional $100 million each year beginning in 2011. Otherwise, this money will be returned to taxpayers.
Borrowing for transportation purposes
Referendum D permits the state to borrow up to $1.7 billion for transportation projects. No more than $600 million may be borrowed before January 1, 2007. If the voters approve both Referenda C and D, the state plans to borrow money beginning early in 2006 to begin construction during the spring and summer of 2006.
In 1999, voters approved state borrowing for up to $1.7 billion to help pay for 24 transportation projects. The maximum repayment amount for that borrowing is $2.3 billion, including principal and interest. Federal and state transportation dollars were earmarked as the source of money to repay this debt. The state was able to borrow $1.47 billion under the $2.3 billion repayment limit. This money is scheduled to be repaid over time through 2017.
Borrowing for nontransportation purposes
Up to $372 million may be borrowed for nontransportation items, including fire and police pension plans, repair of public school buildings, and repair of public college and university buildings. Money borrowed for fire and police pension plans and the repair of public school buildings will go toward paying off current state obligations.
In 1978, the state legislature passed a law to help fund local fire and police pension plans after determining that the plans did not have enough money to cover future retirement benefits. The money provided by Referendum D will satisfy the state's obligation for these plans.
As a result of a lawsuit settlement in 2000, the state is required to pay $190 million to help repair and replace public school buildings. The money provided by Referendum D will go toward this settlement.
Those who supported Referendum D encouraged people to vote for it with these arguments:
1) Now is the time to invest in the important public works projects that were delayed because of the recent recession. State transportation officials report that 39 percent of the state's roads are in poor condition and 474 bridges need to be repaired or replaced. Many of Colorado's public school buildings have health and safety hazards so significant that the state agreed to a $190 million lawsuit settlement to address these issues. During the last three years, state spending on public college and university buildings fell to an average of $4 million a year compared with an average of $136 million a year during the three years prior. As a result, many projects that would keep the state's college and university buildings safe and functioning properly have been delayed. Referendum D targets these needs.
2) Borrowing money to repair and replace schools and roads makes sense. It may cost less than waiting because interest rates on debt are low and construction costs continue to rise. In addition, fixing things now is often less expensive than replacing them in the future. The costs will be spread over time, just as the benefits will be spread over time. Also, Referendum D will complete the state's long-standing obligation to assist local fire and police pension plans.
3) Everyone benefits from safe and reliable roads and schools. Colorado's long-term economic growth and stability are linked to efficient and well-maintained roads and schools. Employers consistently say that good road and school systems are important factors when they decide where to open or relocate a business. People and products are moved more efficiently over roads that are in good condition. Citizens rely on the government to invest public money in these systems.
4) Referendum D allows voters to direct a portion of their tax dollars towards critical needs of the state such as roads and bridges. The Transportation Commission has already approved a list of 55 high-priority projects that benefit citizens in all parts of the state. Also, spending up to $1.7 billion on transportation construction projects will provide a boost to local economies statewide.
Opponents of Referendum D urged a "no" vote, arguing as follows:
1) The state should live within its means and not go into greater debt. Instead of borrowing more money, it has to do a better job of prioritizing the current $13.8 billion budget to meet the needs of Colorado citizens. On top of the money the state will keep from Referendum C, Referendum D essentially increases taxes in the future by up to $100 million a year, even after the debt has been repaid. The state is asking for this money now without even knowing if it is needed in the future.
2) Referendum D is vague about how the money will be used and how long the state will be in debt. Before asking voters to support a $3.225 billion financing plan, the state should say exactly how and when the money will be spent. The transportation projects are not prioritized, could be changed at any time after the election, and have no completion deadlines. Also, a list of school repairs is not available for voters to review. The one specific allocation of money is to shore up a few fire and police pension plans that benefit a small number of people. No one knows how long the state will be paying off the debt or how much it will pay in interest. There is no deadline for borrowing the money, no limit on the interest rate, and no limit on what the state will pay in interest as a share of the total cost.
3) Using general tax dollars for debt payments on roads means that debt payments will be prioritized over everything else in the state budget. Although state law does not require the debt to be repaid, the state's credit rating will suffer permanent damage if even one payment is missed. As a result, other state programs could be cut during an economic downturn to make the debt payments. Using general tax dollars to help pay for roads means that drivers do not pay the entire cost of using the roads. If they were required to do so, they may choose to drive a little less, use more fuel-efficient cars, or use public transportation more often. Further, Referendum D will likely reduce the amount of money the state spends on public transportation projects, compared with how money would be allocated under Referendum C alone.
4) Borrowing money shifts the burden of payment to future generations. In some cases, borrowing will cost the state more than building the projects with existing resources because of interest payments on the debt. In addition, the payback costs may last longer than the benefit. Using long-term debt for fire and police pensions will stretch the state's obligation from 7 years to 25 years. Also, the state already owes nearly $2 billion on money it borrowed during the past five years for transportation projects.
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