January 30, 2025
Via Electronic Mail
Julianne M. Woldridge MacDougall & Woldridge, P.C. 18401 Highway 24, Suite 211 Woodland Park, CO 80863 jwoldridge@waterlaw.tv | Charles Cavanagh Park Lawless & Tremonti LLP 515 South Flower Street, 18th Floor Los Angeles, CA 90071 ccavanagh@parklawless.com |
RE: Lower South Platte Water Conservancy District’s Resolution No. 02-1-2025 (Draft 1.14.2025) Submitted to Plaintiffs via Email January 18, 2025
Dear Ms. Woldridge:
Plaintiffs received the draft resolution from the Lower South Platte Water Conservancy District (“LSPWCD”). We write that James Aranci, Jack Darnell, Charles Miller, William Lauck, and Curtis Werner (“Residents”) have several grave concerns with the LSPWCD’s proposed repayment plan (“Proposed Resolution”) and object to the current draft as unacceptable and not in compliance with Colorado’s Taxpayer Bill of Rights (“TABOR,” Colo. Const. art. X, § 20).
The Residents remind the LSPWCD that its repayment is mandatory and is a seven-figure debt owed to the taxpayers of the District. As such, all due diligence and speed should be applied to the immediate repayment of all funds owed. Doing so benefits all involved in this case. The taxpayers have a right to get their money back after years of illegal exaction. The County Treasurers will no longer need to implement any repayment scheme once this tax debt is paid. The LSPWCD will save possibly thousands of dollars in interest by repaying the debt quickly. The District Court will also no longer need to monitor any repayment scheme once the debt is paid too, saving valuable judicial and taxpayer resources.
As the Proposed Resolution is currently drafted, the LSPWCD gives priority to whatever other projects the Board chooses to engage in—some of which are not directly water conservation—rather than repayment to the taxpayers. This is unacceptable when the District owes its citizens millions of dollars. Furthermore, what projects the LSPWCD currently engages in, or plans to engage in, with the doubled mill levy collection has not been developed in the record of this case and the Residents reserve the right for discovery on these issues if a workable resolution to the repayment issue cannot be reached.
The Proposed Resolution also repeatedly asserts that identifying the taxpayers is too difficult and costly. That is odd given that LSPWCD is funded by property taxes paid by members of the community. Land does not move. Every year LSPWCD can find the property owners to tax them.
With these general insights in mind, the Residents highlight problems with the Proposed Resolution by the following:
I. The Repayment Calculations Problems
The LSPWCD claims the illicit tax collection “totaled $1,661,445 in principal.” Proposed Resolution at 2. Furthermore, the Proposed Resolution claims these amounts are “conclusive.” Id. at 5, § 2(b); see also § 2(c). The Residents believe this total is inaccurate and an undercount of the total illegally raised. As such, it is manifest error in the Proposed Resolution as currently drafted. Given the likely inaccurate principal total, the currently accrued simple interest is therefore inaccurate as well. See Proposed Resolution at 2; id. at 5, § 2(c) (calculation of simple interest based on asserted principle amount). It will need to be further modified as will the total to-date debt to the taxpayers.
The District is also reminded of the role of judicial review of this repayment plan. See Colo. Const. art. X, § 20(1) (“Subject to judicial review, districts may use any reasonable method for refunds under this section…”) (emphasis added). The Residents are prepared to seek judicial review of these factual assertions.1 The Residents maintain the right to any discovery on the actual amount due to all the taxpayers in the district and to seek judicial review of the LSPWCD’s factual assertions. While the exact number remains in the possession of either LSPWCD or the County Treasurers, the Residents will need some proof of the amount of the overcollection—possibly in the form of depositions and document productions from the LSPWCD Board of Directors if not voluntarily handed over.
II. Claimed Impracticality of Quick Repayment
The Board claims that “it is impracticable and not fiscally responsible to refund the full Current Refund Amount in one year.” Proposed Resolution at 2. Taxpayers will need some proof there is insufficient funds—possibly in the form of depositions and document productions from the LSPWCD Board of Directors, audited financials, and the like in the underlying civil case—if not voluntarily handed over. The Residents are prepared to seek judicial review of these factual assertions.
The Board has never said where the money went from the doubled mill levy rate. Indeed, counsel for the LSPWCD refused to answer a similar question before the Court of Appeals. See Aranci v. Lower South Platte Water Conservancy District, Oral Arg. at 24:02 (Dec. 12, 2023) available at: https://www.coloradojudicial.gov/court-appeals/live?topic=77&wrapped=true (search for case number 23 CA 138). Presumably and absent any accounting for where the doubled taxed collection went, the money is mostly intact and should be immediately refunded to the taxpayers. In any event, even if only a portion of funding from the doubled rate remains, it should be dedicated to immediate repayment for what was unconstitutionally collected from the taxpayers of the District. This will lessen the burden of repayment of the balance and may allow for quicker resolution of this matter.
Additionally, the LSPWCD should look at other sources of cash. Given that the debt owed as a result of the Court of Appeals and District Court decisions, the District should move with all haste in utilizing any non-taxpayer sources of income, such as any management liability insurance (e.g. Directors and Officers Insurance, etc.) that the District may carry to cover the wrongful acts of the LSPWCD’s leadership.
The LSPWCD should also examine any new purchases made with the illicit tax collection—new offices, equipment, vehicles, etc. These real or chattel property should be considered for sale given they were funded by taxpayers by an unconstitutional tax rate increase. In short, the District should surrender the fruits of a illegally-doubled mill levy. This will not “cripple the government’s ability to provide services” as the Proposed Resolution at 4 suggests, but rather simply the consequences of a tax illegally levied and reset the LSPWCD’s assets to what it would have afforded but for its TABOR violation.
Once the LSPWCD has used these other options then and only then should the District move to other repayment methods. Note that all this does is reset the government’s position back to the services it rendered in 2019, before illegally doubling the mill levy. Given that the LSPWCD operated for decades on 0.5 mill levy rates and the rapidly increasing value of the land throughout Colorado, there is no danger to any of the core operations of the LSPWCD.
III. Repayment Methodology 1: Temporary Tax Credits or a Mill Levy Reduction
Contrary to the title of the Proposed Resolution’s Section 2(d), it does not actually put place either a plan for temporary tax cuts nor a mill levy reduction—it merely commits the LSPWCD to consider how it might do so and leaves all discretion to the Board to pay or not pay as it sets its budget each year. There is no standard provided for tax credits in any calculable amount, nor does it assert how much the mill levy will be reduced. Such details are critical to a workable repayment plan. Otherwise, it remains an illusory promise to maybe pay if the Board feels like doing so. That is not what TABOR demands.
The Proposed Resolution also uses non-standard accounting in its scheme to repay taxpayers: namely, it says that principal will be paid first rather than interest. Any homeowner or business owner would love for their debts to have such a repayment scheme—it manifestly reduces the interest paid. See Proposed Resolution § 2(d)(ii). But this “savings” is illusory, for it cheats the taxpayers of the interest they are due while the LSPWCD tries to repay what was illegally collected. The taxpayers are the ones owed the interest, and it does not save any taxpayer money to deny that interest in any manner other than quick repayment. In other words, this Proposed Resolution conflates the money in possession of the LSPWCD with that of the taxpayers. Due to the District’s own actions, all taxpayers in the LSPWCD are owed money. The taxpayers, in effect, are now creditors of the District and are owed full payment of interest under TABOR. Cheating the taxpayers of their due interest is unacceptable.
While temporary Tax Credits are one method Colorado courts have approved for repayment plans, we note that this Proposed Resolution does not guarantee any amount of tax credit or rate of repayment but rather only a window of the LSPWCD possibly issuing temporary tax credits. This is not good enough to assure the taxpayers, who are owed a substantial amount of money from the LSPWCD. This principal amount is further subject to TABOR’s 10% interest rate. If the tax credits are not enough to cover the interest amount, then the ten-year window would close without full repayment.
Every dollar taken in violation of TABOR over the years needs to be refunded as TABOR demands. The District would need to commit to a minimum amount of tax credits per year under an amortization schedule using Generally Accepted Accounting Principles if it wishes to use the “tax credit” methodology. If the LSPWCD wishes to minimize interest payments, the Residents strongly suggest something substantially less than 10 years. A repayment plan of 5 years will save the District thousands of dollars in interest over the life of the debt.
Similarly, § 2(d) of the Proposed Regulations do not spell out any plan for mill levy reductions. And § 3 expressly promises the opposite: that the Board wants every opportunity to raise taxes as it sees fit. Combined, this makes any assertion that the LSPWCD has promised mill levy reductions illusory. It is less a plan for a schedule of mill levy reductions than a plan for a plan. There is no promise that the LSPWCD will reduce the mill levy by any particular amount, and so the public cannot rely on this plan at all. The LSPWCD’s Proposed Resolution does not give any clarity because it refuses to acknowledge that it must prioritize repayment of the illegal tax collection over whatever else it wishes to do with its budget.
Section 3 is also confusing in what it is trying to accomplish. Does the District assert that, at some point, the LSPWCD wishes to increase the mill levy generally? If so, the Colorado Constitution outlines how to ask the citizens of the District for more money—via a TABOR §§3 and 4 vote. See Colo. Const. art. X, § 20(3) and (4).
But, if the LSPWCD is asserting that it may, without a future vote of the public, raise taxes in order to repay taxpayers, that is illogical and violative of TABOR. TABOR only suspends the vote requirements when “annual district revenue is less than annual payments on general obligation bonds, pensions, and final court judgments.” See Colo. Const. art. X, § 20(1). Furthermore, TABOR cannot be read to grant any new taxing powers and expressly forbids emergency property tax increases. See Colo. Const. art. X, § 20(6). But even beyond the state constitution, it makes no sense that the District would increase taxes to repay taxes. Instead, the Board must make hard choices and what programs it operates and find money elsewhere. Residents have already given some suggestions in Section II, supra, to minimize the budgetary pressures on the District while assuring compliance with TABOR’s repayment provisions.
IV. Repayment Methodology 3: Direct Refunds via Checks
If the LSPWCD has the funds to do so, then it should immediately refund the taxpayers by sending refund checks. This will minimize the TABOR 10% interest rate and resolve this case expeditiously. But the methodology proposed in the Proposed Resolution § 2(f) is unacceptable as it violates the due process rights of taxpayers by using the absolute bare minimum notice method—that has been routinely rejected by courts in other repayment contexts.
The Proposed Resolution would give notice only by its own website and “in a newspaper of general circulation within the District.” Proposed Resolution at 6, §2(f). Of course, the encompasses multiple counties—and this newspaper notice can be in almost any publication in any of the counties. Should the people of Brush be on notice for what’s published in Sterling? Does the LSPWCD really expect that ordinary citizens read its website frequently? Of course this is ridiculous. Instead, notice should be through multiple channels: websites, calls, text messages, advertisements, billboards, and the like are used throughout Colorado and across the country to assure actual notice. Indeed, the County Treasurers send out notices to the entire district each time taxes are due—notification of how to apply for a refund included in that would be far superior. And notification via tax bill does not even require any more costs for postage than are already incurred.
Of course, such notifications only help those who still live in the District’s boundaries. But the LSPWCD has illegally collected the doubled tax rate for five years (tax years 2020, 2021, 2022, 2023, and 2024). Surely some citizens have moved away in that time—indeed, some taxpayers, according to the LSPWCD’s own court filings, have had their property foreclosed for tax sales. Those that lost their homes surely deserve a refund of what illegally collected.
Instead, § 2(f) proposes to deem any tax refunds unclaimed after 90 days as a “donation” to the district. This is not permitted by TABOR and the Residents strongly object to this provision. Citizens do not “donate” tax money—it was an exaction they were required to pay at the threat of the loss of their homes, farms, and businesses. As such Colorado has long recognized that unclaimed funds should be handed over to the State Treasurer, who has the duty to find those who moved away. Called the “Great Colorado Payback,” this system is far fairer, because it allows taxpayers to maintain their rights to their money and find easy ways to claim it. More information can be found here: https://colorado.findyourunclaimedproperty.com/. For unclaimed refunds, the LSPWCD is obligated by state law to use the State Treasurer’s system and should closely model its repayment system to be similar. In no event should a taxpayer’s funds be deemed a “donation.” TABOR provides a right to be refunded.
V. Locating Taxpayers
The Proposed Resolution repeatedly asserts that it will be too difficult for the LSPWCD to locate all the taxpayers it illegally collected from. That seems like a stretch given that the District is funded by property taxes which presupposes a reliable way of reaching the taxpayer: mailing something to the property address. If the County Treasurers can locate the taxpayers for the sake of payment of the mill levy, surely the LSPWCD can use similar methods to locate taxpayers for the sake of refunds. This is all the easier in the age of the Internet and quick research capabilities created by interstate cooperation of sharing databases (such as voter registration sharing, etc.). The mechanism of class certification is also an available and frequently-used remedy for this.
And Residents caution that the case defending the TABOR rights of the taxpayers is not over. The Residents brought this case as a class action, given that every taxpayer of the district was harmed by the LSPWCD’s illegal doubling of the mill levy rate. The question of class certification still remains and there are important due process protections on notice to those whose rights are affected by the case. The District cannot side step these protections merely for the convenience of the LSPWCD (or the hopes that people do not ask for a refund in time). These protections require more than mere newspaper notice and short claims windows. The LSPWCD should be eager to repay what is due, rather than open itself to more constitutional litigation based on an unwillingness to repay what Courts have found are due to the taxpayers.
VI. Effective Date and Judicial Review
The Proposed Resolution asserts that the repayment plan is “effective immediately upon approval of the Board.” Proposed Resolution at 7, § 4. That is not precisely accurate, for it will still be subject to judicial review to ensure the factual assertions are accurate and that the plan conforms with TABOR. It should therefore say, “This Resolution shall be effective upon approval of the Board and final approval by the District Court, Logan County, Colorado.”
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The Residents appreciate the LSPWCD’s first attempt at creating a repayment plan. Counsel for the Residents looks forward to an open dialogue with the LSPWCD and County Treasurers to assure the accuracy of information and the quick resolution of the repayment plan issues. Doing so now will avoid costly litigation and is offered in the spirit of cooperation. Please feel free to contact us at the information below to further refine this process and minimize the need for further judicial resources.
| Respectfully submitted, /s/ Tyler Martinez Tyler Martinez Joseph D. Henchman National Taxpayers Union Foundation 122 C Street NW, Suite 700 Washington, DC 20001 Telephone: 703.683.5700 tmartinez@ntu.org jbh@ntu.org
Counsel for Plaintiffs |
1 As of the submission of this letter, the LSPWCD has not responded to the Residents’ informal request for this information. It is unknown if the LSPWCD responded to a similar inquiry from counsel for the County Treasurers.