Arapahoe County just fired a fiscal warning shot across the bow.

In a little-noticed news release issued this month, Colorado’s third-largest county painted a dire picture of “critical services at risk” for its 655,000 residents “without modernizing finances.”

A further read shows that what Arapahoe County is in fact doing is teeing up a request for “additional funding” — i.e. a tax hike or permission from voters to keep millions of dollars beyond what the Taxpayer’s Bill of Rights, or TABOR, allows. It is, in large part, an acknowledgment by the county that fundamental changes to the way it raises revenue are needed if basic governmental functions are to continue at current levels.

“The county has always prized fiscal conservatism and keeping a tight belt,” Commissioner Jessica Campbell-Swanson said minutes after addressing a crowd of hundreds at the Arapahoe County Fairgrounds last week during the State of the County address. “We’ve been able to patch (the budget) with ARPA (American Rescue Plan Act) dollars but meanwhile our roads continue to degrade and growth continues to happen.”

Arapahoe is among a dwindling number of counties in the state that have yet to significantly “de-Bruce,” a colloquialism used to describe the process by which governments in Colorado — municipalities, counties or the state itself — ask voters if they can set aside TABOR’s revenue limits.

The term derives from TABOR’s main architect, former state lawmaker and anti-tax crusader Douglas Bruce, who helped put it into the Colorado Constitution in 1992.

On the other side of the metro area, Jefferson County is also hamstrung by the constraints of TABOR. The county refunded more than $17 million to taxpayers in 2022 and will refund nearly $40 million this year, due to TABOR dictates. Director of Strategy and Budget Dan Conway said the county can muddle through this year and next “but after that, we are certainly looking at some difficult choices.”

While de-Brucing would bolster the health of a county budget by allowing it to retain millions of taxpayer dollars beyond what TABOR’s formula permits, Robert Preuhs, chair of the political science department at Metropolitan State University of Denver, said this might be about the worst time to come to voters with hat in hand.

Ongoing inflation, a potential recession and the recent revelation that the median rise in residential property values in Colorado over the last two years — described by county assessors as “historic” and “unprecedented” — will saddle homeowners with much higher property tax bills next year, generosity among the electorate won’t be in high order.

“How do we pay more taxes and still have a county with fiscal problems?” Preuhs said, predicting voter sentiment. “That’s hard for voters to get their heads around.”

Most counties have de-Bruced

No other state in the country has a law like Colorado’s Taxpayer’s Bill of Rights.

It requires voter approval for any proposed tax increase or bond measure put forth by schools, cities, counties and the state. It also limits how many tax dollars governments can keep using a formula that adjusts each year based on population and inflation. It’s called the TABOR cap, and anything a government collects above the cap gets returned as a TABOR tax refund.

It’s why 51 of Colorado’s 64 counties have de-Bruced, according to the Colorado Fiscal Institute, allowing them to spend money beyond the strict limits of TABOR. Included in the list of de-Bruced counties are conservative, tax-averse counties like Douglas and El Paso.

“I think most counties and local governments have de-Bruced so that they have the flexibility to do what they need to do within the tax revenues that their voters approve,” said Kathy White, executive director of the institute. “The counties that haven’t de-Bruced, like Jefferson and Arapahoe, can run into a lot of unintended consequences.”

That includes forgoing federal grant money for infrastructure and environmental programs, as that money is counted as part of a county’s overall revenues, White said.

“I wonder how much money these counties leave on the table because of TABOR,” she said.

Jefferson County could be forced to turn down some state monies because it would put them over their TABOR cap, Conway said.

“It limits your ability to have a diverse revenue structure,” he said.

It’s not for lack of trying that Arapahoe and Jefferson counties have come up short. Both tried to raise additional funds in the 2019 election — Jefferson County through a proposed de-Brucing measure. Both measures failed.

Jefferson County tried to de-Bruce again last year and voters once again said no, despite the county having turned decidedly blue on the electoral map in recent years. Jesse Mallory, state director for the Colorado chapter of Americans for Prosperity, a group that advocates for low taxes, said political affiliation doesn’t always align with voters’ fiscal sensibilities.

“Party registration used to mean a lot, but when it comes to tax issues it tells you nothing,” he said. “When we look at economic insecurity and inflation, voters might say they’ll vote for Joe Biden and Democrats but they will also vote for lower taxes.”

That certainly proved true in 2019, when voters rejected an attempt to end all TABOR refunds statewide in what was a headlong attack on one of the law’s main tenets. And that was just a year after a blue wave hit Colorado during the 2018 election, with Democrats taking full control of state government.

Besides Arapahoe and Jefferson counties, Weld and Mesa counties are still constrained by TABOR. But each handles the situation in their own way.

Weld County thrives off of taxes on oil and gas production, which is the most robust in Colorado by far. Cheryl Pattelli, the county’s chief financial officer, said the “positive financial impact” from energy sector activity has allowed Weld County to give taxpayers a credit on their property taxes, obviating the need to issue TABOR refunds.

“Instead of issuing refund checks, the county has found the 7 mill property tax credit a much more efficient way to ‘give back’ revenue we could have collected from our taxpayers,” she said. “It is on the front end so citizens never have to pay the extra property tax.”

Pattelli said that arrangement has saved Weld County taxpayers approximately $1 billion over 20 years.

Across the state, Mesa County voters have approved tax increases beyond the TABOR cap for specific purposes, like a 0.37% sales tax increase to fund county and municipal public safety services in 2017. The following year, voters approved exempting from TABOR limits state grants and any funds the county receives and passes through to other organizations, said county spokeswoman Stephanie Reecy.

“At its core, TABOR is about getting permission from the voters to raise taxes, and Mesa County commissioners support that,” she said.

Last year was the first time the Western Slope county had to mail a TABOR refund to its residents, having taken in approximately $12.7 million in excess revenues. Each active registered voter in Mesa County received a refund check of $122.98.

“In Mesa County, we have been successful in planning with a conservative forecast with COVID, the risk of recession, and factoring in our TABOR refunds throughout the budget process,” Reecy said.

50-50 chance of tax ask

Whether Arapahoe County goes to the ballot box with a tax increase request or a de-Brucing ballot measure — or both — this fall is “50-50,” according to Campbell-Swanson, the commissioner.

Todd Weaver, the county’s finance director, said a 0.25% sales tax increase could bring in $40 million to $45 million to Arapahoe County’s coffers. Meanwhile, a successful de-Brucing measure could net the county another $40 million.

“It could be huge for us,” Campbell-Swanson said.

Infrastructure maintenance in Arapahoe County is underfunded by $15 million annually, she said, and a voter-approved funding increase hasn’t been granted for at least two decades. With Arapahoe County’s population expected to leap to 800,000 by the end of the decade, maintaining the budgetary status quo won’t just result in more potholes and crumbling bridges but could include devastating impacts to public safety, human services and mental health programs.

Campbell-Swanson recognizes the challenges of putting tax request measures on the ballot this November in the current economic environment, but she said it needs to be done.

“You miss all the shots you don’t take,” she said.

Stay up-to-date with Colorado Politics by signing up for our weekly newsletter, The Spot.

Update 11:30 a.m.: This story was updated to correct the amount of tax money returned under TABOR to residents of Jefferson County in 2022 and how much will be returned in 2023. The update also corrects which funding is exempt from the TABOR cap — federal monies are exempt — and removed an errant explanation for a 2019 Jefferson County tax measure.