On Thursday, Denver, Boulder, Pueblo, Westminster and Commerce City filed a lawsuit against the State of Colorado and Gov. Jared Polis.
Their argument: The state should butt out of these home-rule cities’ decisions on who to tax. In this case, the municipalities want to levy sales-and-use taxes on construction supplies used to build schools, something prohibited at the state level.
Why is this issue coming up now?
The whole flap is over House Bill 22-1024, which Polis signed in April and which goes into effect in August. The law tells home-rule cities that they have to quit levying taxes on construction supplies used to build and improve public schools. The goal of the law is to make it cheaper to build and fix schools to improve education.
But home-rule cities, which have a charter that allows them to set their own rules and taxes, don’t like the state trying to take away their local power.
Why does this matter to Denver?
At the state level, sales and use taxes are not levied on construction materials when they’re used for public works projects like roads and schools.
This new law undermines Denver’s and other home-rule cities’ constitutionally protected ability to establish local tax rules that differ from state policy, argued Denver’s City Attorney Kristen Bronson. These cities want to decide who they can tax without the state government setting their agenda — even when it comes to public-school construction.
“The authority to levy sales and use taxes to raise revenue is the heart of home rule municipalities and a critical function of municipal operations,” said Bronson. “HB 22-1024 unlawfully intrudes on the Colorado Constitution, and the residents of home rule municipalities have the full right of self-governance in local and municipal matters.”
Of Colorado’s dozens of home-rule municipalities that control taxation, Denver, Boulder, Commerce City, Pueblo and Westminster do not waive sales and use taxes on the sale of construction materials used in public schools. City officials say they need the money to keep municipal government running.
Every year, Denver brings in between $2 million and $4 million in revenue by taxing construction supplies used in the building and renovation of schools, according to Bronson’s office.
From Polis’s perspective, these cities need to quit making it more expensive to build schools.
“At a time of rising construction costs, it is ridiculous that Denver is trying to force schools to pay more,” said Polis spokesperson Melissa Dworkin. “We should be doing more to reduce the costs of building classrooms and updating our schools with needed repairs and technology, and this tax exemption is a good start.”