Drainage district votes to refund 'tax'

Drainage district votes to refund 'tax'

• CHARLES ASHBY

The Grand Valley Drainage District will not appeal a recent court ruling that said a stormwater drainage fee it has been charging for the past three years is actually a tax. As a result, the district is to pay back the money it's already collected because it was done so without voter approval.

The district's three-member board of directors voted 2-1 Tuesday to forego any legal challenge to District Judge Lance Timbreza's ruling last week, saying there was no guarantee they would prevail in an appeal and they didn't want to subject district businesses and residents to more legal uncertainty.

As a result, the board said it would refund the $7.2 million it's collected so far — plus interest — to the 40,000 property owners who have been assessed the tax since 2016, but exactly how that will happen is yet to be determined.

That's partly because the district has already spent about $2.2 million of the money, and isn't yet sure how much in interest it is obligated to pay.

The district's board and staff is to spend the next couple of weeks trying to figure all that out, said district manager Tim Ryan.

First, the district staff has to figure out how much in interest it is obligated to pay, and then — because it doesn't have the cash to cover the entire refund and interest — how it will do so. That could involve taking out a loan, laying off some workers, declaring bankruptcy of the enterprise fund the district formed to finance the stormwater improvements, or a combination of those options.

Under the state's Taxpayer's Bill of Rights, any overcollected tax that isn't refunded within a year requires a 10 percent interest payment along with it, Ryan said.

"The ruling was (the fee) exceeded TABOR, and that it's an extra tax, so those who paid it are entitled to what they paid plus 10 percent," he said. "It's no longer a fee, that's the conundrum. Now we have to go back to 2016 and 2017. Those are the years that require interest because we've held their money for over a year. Everybody else will get their refunds within a year."

While board member Mary Brophy was adamantly opposed to appealing the decision, and Jim Grisier cast the lone dissenting vote against not going ahead with one, board chairman Cody Davis stood somewhere in the middle.

While he ultimately cast the deciding vote not to appeal, Davis said part of him wanted to because there are aspects to Timbreza's ruling that he saw as incomplete. The judge ruled that unlike fees charged in other jurisdictions that were for specific purposes, such as Aspen's grocery bag fee, this fee was for a core function of the district's mission, to handle drainage needs.

"I see a lot of holes in Mr. Timbreza's declaratory judgment," Davis said. "I don't think he did a good enough job in fleshing out all of the issues that were talked about in court."

Neither Ryan nor the existing board were at the district when the fee was imposed.

Davis said the best way for the board to proceed now is to put all that behind it and focus on the problem that started the entire debate — how to pay for needed stormwater collection improvements that the board felt wasn't part of its original mandate when the district was created.

Doing so will require getting all parties together, including Mesa County, the 521 Drainage Authority and the Grand Junction Area Chamber of Commerce, which filed the lawsuit against the district along with the county challenging the legality of the fee.

"We have a problem and we're going to have to spend the next several weeks trying to figure out how best to deal with that," Grisier said. "I think an appeal is necessary. We have an obligation to the public in our district, and the county and the city to deal with this drainage issue."

Grisier said appealing the decision would give the district a "heavy stick" in dealing with other entities in the valley to find ways to finance stormwater drainage needs. He said the district could always withdraw its appeal at a later time.

Davis, however, said to have a productive discussion with those entities requires the district to lay down that stick.

"It's less of an honest discussion if you carry a big stick," Davis said. "If you leverage them, they tend to fight back with greater fervor. Let's fix this issue as a group. It's goodwill toward those who have not had any toward us to fixing the problem. Call me an eternal optimist, but I am."

In the meantime, the district's staff will crunch numbers to determine just exactly what interest is owed, and how best to repay it.

Ryan said the longer that takes, the more expensive it will become.

"There's some really, really difficult decisions we're going to have to make," he said. "I don't have the ability to lay off $2 million worth of people. The scenario is more like half a million a year, which is five or six people. That's the cold, hard facts, and I don't know how we're going to get there."

Some of those decisions include whether to put the enterprise fund that the district created from the fee into bankruptcy, whether to lay off staff, try to get a loan to come up with the money to repay it, or ask for a tax increase to pay for everything. Under TABOR, the district would have to ask voters for permission to go into debt or raise taxes.