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USOC decision: City 2, Colorado Constitution 0

Fri, Sep 17, 2010

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More than a year ago, attorney Lindsay Fischer appealed Judge Scott Sells’ decision that affirmed the legality of the city’s deal with the U. S. Olympic Committee. As some may remember, the deal called for the city to issue $38 million in so-called “certificates of participation,” to be secured by (in effect) mortgaging a fire station and the Police Operations Center.

More than $20 million of the proceeds were used to acquire a building at 27 South Tejon, which the USOC will occupy for the indefinite future, paying the princely sum of $1 per annum in rent. At the end of that period, the building will become the property of the USOC, provided that they have remained in residence for the entire 30-year period.

Fischer argued that the city’s action was unlawful on two counts.

1.) The COPs are in fact bonds, multi-year obligations of the city which can be issued only after being authorized by the voters.

2.) The city’s deal with the USOC constitutes a gift to a private entity, which is flatly prohibited by the Colorado Constitution.

The three-judge panel that heard the case upheld Sells on the first count, noting that the city could in fact refuse to renew the COPs from year to year, although doing so would entail the loss of the two properties.

On the second, the panel found that Judge Sells had erred in deciding the issues together and sent it back to him for reconsideration.

It’s easy enough to predict the outcome. However Sells rules, and however a subsequent appeal is decided, the city and the USOC will sit down and restructure the deal so that it’ll pass muster with the courts. They might, as Lindsay Fischer predicts, “cancel or modify the final gift but leave the rest of the sweetheart deal in place.”

Such sweetheart deals are exactly what the wise men who drafted the Colorado Constitution 134 years ago sought to forbid.

Prior to statehood, fast-talking railroad promoters roamed the state, promising the naïve officials of the towns and cities of the growing territory that they’d run a railroad right through town, bringing growth and prosperity, subject to one minor, insignificant, basically cost-free consideration!

“Just give us a little help by issuing some bonds,” they’d say, “and we’ll use the dough to bring those gleaming silver rails right into town! Of course, if you don’t want to help, I guess we’ll have to take a route 12 miles to the west, right through Dogpatch, your bitter commercial rival. And, of course, we’ll pay off the bonds…”

The little settlements issued the bonds and the promoters took the cash – and never laid a foot of track.

It was a nice little scam, one which all but bankrupted a number of towns.

The Constitutional provision barring gifts from local governments to private entities makes just as much sense today as it did in 1876.

Local governments are still in a competitive scramble for growth. Private companies, whether for-profit or non-profit, still want handouts. It’s a lot easier to weed out the scam artists nowadays (remember the wind energy company that was going to move here a few months ago?), but local government officials are still naïve and ignorant of the ways of the great world, easy marks for entirely legitimate organizations who just want to cut a good deal.

Imagine for a moment that this issue reaches the Colorado Supreme Court, and that the court decides that Colorado governments must hew to the letter and spirit of the Constitutional prohibition upon such gifts.

That would be as astonishing as, say, the United States Supreme Court’s 1988 decision in Hustler Magazine v. Falwell. Falwell had sued Hustler, then published by the ever-notorious Larry Flynt, for claiming that the good reverend’s first sexual experience was with his mother in an outhouse. The court ruled for Flynt, holding that public figures who are subjected to libellous parody cannot recover damages.

The Court’s ruling affirmed that the First Amendment means exactly what it says:

“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”

As North Carolina Sen. Sam Ervin used to say, while brandishing his pocket copy of the United States Constitution:

“The First Amendment says that “Congress shall make no law.” It doesn’t say that congress can make a little bitty law, or that it can sort of make a law – it says no law!”

And here’s the partial text of Section 2, Article XI of the Colorado Constitution.

“Neither the State nor any county, city, town, township or school district shall make any donation or grant to…any corporation or company.” The complete text is much longer, as those who drafted it tried their best to protect future elected officials from the manifold and subtle blandishments of the private sector.

Alas, the courts and lawmakers have carved out so many seemingly reasonable exceptions to those simple words that they might as well be excised from our fundamental document as being archaic and meaningless.

Too bad Sam Ervin’s not around. That great lawmaker, who died in 1985, would be celebrating his 114th birthday on September 26th. Had he been the city’s Mayor, I somehow think that he would have cut a better deal than did the present officeholder.

Like no deal at all.

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