Utility rates could jump higher with Amend. 60

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CSU’s Southern Delivery System’s pipeline, which would be taxed under Amendment 60, would originate at the Pueblo Reservoir.

CSU’s Southern Delivery System’s pipeline, which would be taxed under Amendment 60, would originate at the Pueblo Reservoir.

Colorado voters this November will decide whether to approve Amendment 60, which would require Colorado Springs Utilities and other government-owned enterprises statewide to begin paying property taxes.

That’s the intended aim of the initiative. The unintended consequence?

While rolling back property taxes for homeowners, the amendment will at the same time force CSU to raise its utility rates to cover the property taxes it would owe. The dollars involved could amount to tens, if not hundreds, of millions a year in new, higher rates.

Amendment 60 is one of a trio of measures backed by a shadowy group widely thought to be inspired and possibly directed and funded by Colorado Springs resident Douglas Bruce, the author of the 1992 TABOR Amendment. Bruce has denied any connection to the group.

Because they would severely limit government’s ability to collect certain taxes or issue debt, the amendments have been widely condemned by organizations and elected officials ranging from the Associated General Contractors of Colorado to the right-leaning El Paso County commissioners. But early polling by opponents is said to show all three amendments “polling well” statewide and leading in El Paso County.

Under Amendment 60, CSU would begin to pay taxes not only in El Paso County but also in other Colorado counties where it owns substantial property. CSU doesn’t serve those counties, so any rate hikes it would need to impose to pay its taxes would be seen in El Paso County alone.

CSU is not the only such enterprise that would be affected by the amendment. Municipal water systems in Denver, Aurora, Boulder, Fort Collins and Pueblo will also have to begin paying property taxes, as will scores of smaller water providers. Denver and Aurora may be particularly hard-hit, since both have extensive infrastructure outside of their service areas.

Denver Water, the state’s largest water provider, is working to get a better understanding of how the amendment will affect its bottom line. “We expect to release a report within a week or so,” spokeswoman Stacy Chesney said this week.

In April, CSU officials estimated the utility would have to pay approximately $60 million in property taxes if Amendment 60 passes.

That estimate, utility officials conceded this week, may be far lower than the actual total.

“Our (April) calculations assumed a system value of $2.6 billion,” said CSU official Nancy Briscoe. “(But) the number could be significantly higher.”

Moreover, much of the total, whether $60 million or several times that number, would be owed to other counties.

That’s because CSU’s vast water-collection, storage and transportation infrastructure extends through 11 Colorado counties including Chaffee, Crowley, Lake, Park, Pueblo and Teller. If the appraised value of the system is even a small percentage of its replacement cost, CSU ratepayers can expect huge rate increases.

Residents of these other counties, particularly Lake and Teller, would receive substantial windfalls.

Assuming the assessed value of the utility’s taxable assets in these counties came in at $2 billion, the 11 counties would collect approximately $110 million annually.

That figure is a guesstimate, based on El Paso County rates, and could be even higher. But one thing is certain.

“There will be a transfer of wealth from Colorado Springs ratepayers to taxpayers in other counties,” said CSU finance chief Bill Cherrier.

Cherrier pointed out that CSU’s Nixon and Front Range power plants are located in El Paso County, but are not in the city. That would mean county taxpayers would get a tax break, funded by higher electric rates paid by city utility customers.

CSU properties in other counties that would be taxable include:

More than 30 water-storage structures including the Turquoise, Mongomery, Homestake and Rampart reservoirs, as well as Twin Lakes, Lake Meredith and Lake Henry.

Hundreds of miles of collection and delivery pipelines and associated structures, including pump stations, buildings and land.

15, 239 acres of land on the slopes of Pikes Peak.

Fractional interests and partnerships with Aurora in the massive Homestake I project, which includes a 5.5-mile tunnel beneath the continental divide.

Senior rights to more than 150, 000 acre-feet of water, recently estimated to be worth $10,000 per acre-foot.

How much in taxes will CSU — and, by extension, CSU ratepayers — be obliged to pay on these properties?

CSU CEO Jerry Forte said that question isn’t easily answered.

“It would be very difficult, if not impossible, to estimate the value (of CSU’s water-related assets),” he said. “You couldn’t duplicate them for any amount of money.”

Property appraisers use cost, income and comparative sales approaches or some combination of the three to arrive at value. But the job won’t be up to county appraisers.

“Colorado Springs Utilities would probably become a state-assessed property,” said El Paso County Assessor Mark Lowderman. “It would fall in the category of railroads, or wind farms, entities that have property in multiple counties. It’s an enormously complex problem — I wouldn’t even know where to begin.”

Bret Poole, president of the Colorado chapter of the Appraisal Institute, agreed finding the right value would be a tall order.

“I assume that you’d look at the depreciated replacement cost of the system,” he said. “It’d be an enormous amount of brain damage. You’d have to get cost engineers to estimate the replacement cost of the assets, and then work from there. It’s not as if there have been sales transactions of utility systems to guide you.”

Lowderman said that CSU would be required to provide state assessors with a list of its properties throughout the state, and that the state tax commission would allocate tax revenues to the various counties based on the value of CSU’s assets in their boundaries.