Recreation Advisory Board Agenda and Packet 2019 06 24

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Louisville City Council Finance Committee June 11,2018 Page 2 of 4 spending without the increase." TABOR §20(3)(b)(iii). For 2018, the first year of collection of the recreation tax, the notice estimated the dollar amount of the increase to be $575,000. It estimated 2018 fiscal year spending without the increase to be $33,470,000. A copy of the notice is attached. Currently, the Finance Department estimates that 2018 revenues from the recreation tax will be $908,900, and that 2018 fiscal year spending will be $37,903,000, both in excess of the estimates in the ballot issue notice. The actual amounts cannot be confirmed until after the end of the year. TABOR includes a specific provision addressing amounts in excess of estimates contained in the ballot issue notice, which states as follows: Except by later voter approval, if a tax increase or fiscal year spending exceeds any estimate in (b)(iii) for the same fiscal year, the tax increase is thereafter reduced up to 100% in proportion to the combined dollar excess, and the combined excess revenue refunded in the next fiscal year. District bonded debt shall not issue on terms that could exceed its share of its maximum repayment costs in (b)(iv). Ballot titles for tax or bonded debt increases shall begin, "SHALL (DISTRICT) TAXES BE INCREASED (first, or if phased in, final, full fiscal year dollar increase) ANNUALLY...?" or "SHALL (DISTRICT) DEBT BE INCREASED (principal amount), WITH A REPAYMENT COST OF (maximum total district cost), ...?" TABOR §3(c)(emphasis added). Thus, absent "later voter approval," this provision appears to require two actions to be taken if a tax increase or fiscal year spending exceeds an estimate in the ballot issue notice: (1) a refund of the excess revenue collected; and (2) a rate reduction in proportion to the excess revenue collected. These issues are discussed in turn. Refund of Excess Revenue. While there is currently pending litigation regarding TABOR's refund language (discussed below), Section (3)(c) of TABOR has generally been interpreted to require, in this instance, that the City refund amounts collected in 2018 in excess of $575,000, unless the voters approve another ballot issue allowing the City to retain the excess revenue. If the City Council determines to make a refund, the following are some pertinent points: • TABOR Section 3(c) requires excess tax revenue to be refunded "in the next fiscal year." For the recreation tax, this means before December 31, 2019. • If excess tax revenue is not refunded by the end of the next fiscal year, TABOR Section 1 authorizes enforcement actions to force the refund of "[r]evenue collected, kept, or spent illegally since four full fiscal years before the suit is filed." In other words, if the City did not obtain voter approval to retain the excess revenue collected in 2018 and failed to refund that revenue by December 31, 2019, a plaintiff with standing could bring a suit to force the refund at any time prior to December 31, 2023. • Section 1 of TABOR permits municipalities to use "any reasonable method" to refund excess revenue, and provides that "[r]efunds need not be proportional when prior payments are impractical to identify or return." ' TABOR does not prohibit the receipt of excess revenue in the first place; that is, the City is not required to reduce the tax rate or take other action to forestall the receipt of excess revenue in the first year, though it could do so if desired in an effort to keep collections under the estimate.