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DATE FILED: March 12, 2014 6:04 PM FILING ID: 47C0470B9827B CASE NUMBER: 2013CA1621

Mark G. Grueskin (Atty. Reg. #14621) Recht Kornfeld, P.C. 1600 Stout St. Ste. 1000 Denver, Colorado 80202 Phone Number: 303-573-1900; FAX: 303-446-9400 Email: 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 Floor Denver, CO 80203 Telephone: 720-508-6000; FAX: 720-508-6032 E-Mail: E-Mail: E-Mail: *Counsel of Record for Defendant Colorado Bridge Enterprise

Case No. 13CA1621



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


TABLE OF CONTENTS CERTIFICATE OF COMPLIANCE …………………………. STATEMENT OF ISSUES PRESENTED FOR REVIEW….. STATEMENT OF THE CASE………………………………… STATEMENT OF THE FACTS……………………………….. SUMMARY OF ARGUMENT ………………………………… LEGAL ARGUMENT…………………………………………… I. II. STANDARD OF REVIEW………………………… THE BRIDGE SAFETY SURCHARGE IS A FEE, NOT A TAX…………………………….. A. The Bridge Safety Surcharge lacks the necessary indicia of a tax……………………. 1. Does the charge help pay the general costs of government?.................................... 2. What was the legislative purpose for the charge imposed?........................................... B. The Bridge Safety Surcharge possesses the necessary indicia of a fee……………….. 1. As a matter of law, fees need not be proportional to actual use…………………. a. Roadway maintenance fees ……….. b. Transit planning fees ………………... Street lighting fees …………………… i 1 1 2 7 9 9



11 13


16 18 19 20


2. Trial testimony established the Bridge Safety Surcharge is a fee………………… III. CBE is a qualifying “enterprise” under TABOR…. A. B. CBE is a “government-owned business.”…… CBE did not accept State grants in excess of 10% of its revenue………………………… 1. Federal reimbursement of costs was not a grant to CBE……………………………… 2. The transfer of bridges was not a grant to CBE……………………………….. 3. The transferred bridges were correctly valued at an amount that totals less than 10% of enterprise revenue………………… a. Enterprise valuations under state statute………………………………….. b. CDOT’s valuation practices, based on the required use of generally accepted accounting principles………………….. c. TABOR Foundation’s expert testimony on bridge valuation…………………….. d. Inapplicability of “fair market value” to enterprise valuations……………….. IV. Attorney Fees are not warranted here……….….

22 26 26




32 33

34 36 38 40 40

CONCLUSION…………………………………………. …


TABLE OF AUTHORITIES Cases Anema v. Transit Construction Authority, 788 P.2d 1261 (Colo. 1990)………………………………………. Ard v. People, 182 P 892, 893 (Colo. 1919)…….……………….. Barber v. Ritter, 196 P.3d 238, 248 (Colo. 2008)…………………. Bloom v. City of Fort Collins, 784 P.2d 304, 307 (Colo. 1989)……………………………………………………….

19 14 14, 16

12, 16,17, 18, 25

Bolt v. Arapahoe County School Dist. No. 6, 898 P.2d 525, 537 (Colo.1995)…………………………………… 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

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)……………………………………..


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)……………………………………………… Nicholl v. E-470 Public Highway Authority, 896 P.2d 859, 869 (Colo. 1995)………………………………………………………… People v. Laeke, 271 P.3d 1111, 1115 (Colo. 2012)………………..

25, 27

15, 26 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)…………………………………. Colo. Const., art. X, sec. 20(2)(d)………………………………….. Colo. Const., art. X, sec. 20(4)(b)………………………………….. Colo. Const., art. X, sec. 20(4), (7)………………………………..

26 26, 28 26 31


C.R.S. § 24-30-202(12)………………………………….. C.R.S. § 24-77-101(1)(b)…………………………………
C.R.S. § 24-77-101(1)(d)…………………………………………. C.R.S. § 24-77-101(1)(f)…………………………………………. C.R.S. § 24-77-101(2)(a)…………………………………………. C.R.S. § 24-77-101(2)(b)…………………………………………. C.R.S. § 24-77-101(2)(e)…………………………………………. C.R.S. § 24-77-101(2)(f)…………………………………………. C.R.S. § 24-77-102(7)(a)…………………………………………. C.R.S. § 24-77-102(7)(b)(I), (III)………………………………… C.R.S. § 42-3-103(1)(a)………………………………………….. C.R.S. § 43-1-210………………………………………………… C.R.S. § 43-1-210(5)(a)(II), (V)…………………………………. C.R.S. § 43-4-801………………………………………………… C.R.S. § 43-4-802(2)(b)………………………………………….. C.R.S. § 43-4-805(2)(c)………………………………………….. C.R.S. § 43-4-802(2)(d)…………………………………………..

34 31
31 31 30 31 34 34 28, 30 29, 30 16 33 33, 36 2 15 2, 11, 154 15

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.

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, 170:23171:1; 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,

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. §43-4803(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


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).

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).

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).


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’

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.


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

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

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

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

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 to finance 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 general governmental spending, then it is a tax. Moreover, the fact that a fee incidentally or indirectly raises revenue does not alter its essential character as a fee, transforming it into a tax.


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 complete designated bridge projects, to impose a bridge safety surcharge and issue revenue bonds… will improve the safety and efficiency of the state 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 the acquisition of land to the extent required in connection with any designated bridge project… (and) to pay (CBE’s) operating costs and expenses. 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.


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. § 43-4805(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.


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 TABOR Foundation notes that the fee is not voluntary and that the District Court so observed. Opening Brief at 20, n.4. It is settled law in Colorado that a charge does not need to be voluntary in order to qualify as a “fee.” Bloom, supra, 784 P.2d at 310-11; Bruce, supra, 131 P.3d at 1190. The cases relied on by TABOR Foundation in footnote 4 of the Opening Brief were distinguished by the Court in Bloom and thus are not persuasive precedent here.

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

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's Constitution, this Court rejects the use of out-of-state precedent to resolve this question. 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 that state’s constitutional provisions, was persuasive in TABOR lawsuit), cert. denied.


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”).


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

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.

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

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 43:1744:2. 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

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, given her statements at deposition about family members’ use of these vehicles. Trial CD 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’ use of 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.


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

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

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.

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


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, as an immediate court of appeals, would take. Bruce, supra, 131 P.3d at 1191.

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

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

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

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

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. § 2477-101(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. § 24-77101(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

of article X as it relates to state government.” C.R.S. § 24-77101(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 totals less 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-11AB 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.


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

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. § 24-77101(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”

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. 180:16182:14; 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

CD at 825 (Order at 5). The Court further observed that the use of the GASBapproved 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.

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 onethird 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


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

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.

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.


RESPECTFULLY SUBMITTED this Wednesday, March 12, 2014. Respectfully submitted, RECHT KORNFELD, P.C. By: s/ Mark G. Grueskin____________ Mark G. Grueskin 1600 Stout Street, Suite 1000 Denver, CO 80202 Phone: 303-573-1900, Fax: 303-446-9400 e-mail: 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 Center 1300 Broadway, 10th Floor Denver, CO) 80203 Attorneys for Defendants Colorado Transportation Commission and Members of the Colorado Transportation Commission *Counsel of record for Defendant Colorado Bridge Enterprise


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 Foundation 2596 S. Lewis Way Lakewood, 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.


C.R.S. §43-4-803(10)…………………………………………….. C.R.S. § 43-4-805………………………………………………… C.R.S. § 43-4-805(2)……………………………………………… C.R.S. § 43-4-805(2)(c)…………………………………………… C.R.S. § 43-4-805(3)……………………………………………… C.R.S. § 43-4-805(3)(a)…………………………………………… C.R.S. § 43-4-805(3)(c)…………………………………………… C.R.S. § 43-4-805(5)(g)(I)………………………………………… C.R.S. § 43-4-805(5)(g)(VI)……………………………………….

2,3 2 42 10, 11, 14 5 13, 15 5 4 4

Other Authorities Op. Att’y Gen. No. 95-07 (Dec. 22, 1995)…………………………. 28