2014-03-12 18-02-04 final march 12 joint answer brief

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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

mailto:[email protected]













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]



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]



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]



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]



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]



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]



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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

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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.

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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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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.

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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

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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



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.

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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.

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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

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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



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

2014-03-12 18-02-04 final march 12 joint answer brief

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