No. 93CA1292Colorado Court of Appeals.
Decided March 24, 1994. Rehearing Denied April 28, 1994. Petition for Writ of Certiorari GRANTED October 11, 1994.
Appeal from the District Court of Arapahoe County Honorable Kenneth K. Stuart, Judge, No. 93CV1418
JUDGMENT AFFIRMED IN PART, AND REVERSED IN PART
Page 413
[EDITORS’ NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]Page 414
Tallmadge, Wallace, Hahn, Smith Walsh, P.C., David J. Hahn, John W. Smith, III, Edward J. Walsh, Cynthia A. Calkins, Denver, Colorado; Susan Broyles, Special Counsel to Arapahoe County, Greenwood Village, Colorado, for Plaintiffs-Appellants and Cross-Appellees
Ankele, Icenogle, Norton White, Charles E. Norton, T. Edward Icenogle, Denver, Colorado; Holme, Roberts Owen, Daniel S. Hoffman, Jeffrey A. Chase, Denver, Colorado, for Defendants-Appellees and Cross-Appellants
Division IV
Plank and Marquez, JJ., concur
Opinion by JUDGE ROTHENBERG
[1] Plaintiffs, the Board of County Commissioners of Arapahoe County, John J. Nicholl, in his official capacity as County Commissioner of Arapahoe County and as a resident of Arapahoe County, and Jeannie Jolly, in her official capacity as County Commissioner of Arapahoe County and as a resident of Arapahoe County (Arapahoe County officials), appeal from the judgment of the trial court entered in favor of defendants, E-470 Public Highway Authority, Margaret N. Carpenter, Nadine Caldwell, Donald Hamstra, James R. Sullivan, Harold E. Kite, Greg Lopez, and Thomas R. Eggert, in their official capacities as Directors of the E-470 Public Highway Authority, and the State of Colorado (for simplicity, defendants are hereinafter referred to collectively as the E-470 Authority defendants). The E-470 Authority defendants cross-appeal from the judgment of the trial court entered in favor of Arapahoe County officials on one issue raised in their counterclaim. [2] We hold that because it is an “enterprise” and not a “district,” the E-470 PublicPage 415
Highway Authority is not subject to the election provisions of Colo. Const. art. X, § 20 (Amendment One). We reverse that portion of the trial court’s judgment holding to the contrary. In all other respects, we affirm.
I. [3] The First E-470 Authority
[4] In February 1985, the “First E-470 Authority” was formed by an Intergovernmental Agreement (the IGA) among Arapahoe, Adams, and Douglas Counties. In July 1985, the City of Aurora was added to the First E-470 Authority by an amendment. At the time the First E-470 Authority was formed, the Public Highway Authority Law did not exist and the First E-470 Authority had no express power to issue bonds.
Page 416
for longer or shorter periods which Arapahoe County officials consistently approved by amendment to the bond documents.
II. [13] The Public Highway Authority Law
[14] Approximately one year after the bonds were issued in 1986, the General Assembly passed the Public Highway Authority Law, § 43-4-501, et seq., C.R.S. (1993 Repl. Vol. 17) (the PHA Law). This 1987 law authorized the formation by intergovernmental agreement of political subdivisions known as “public highway authorities,” to finance, construct, operate, or maintain a beltway or other transportation improvements in a metropolitan region.
[19] In November 1988, the electors of the counties within the E-470 Public Highway Authority’s voting boundaries approved the collection of a vehicle registration fee to fund E-470. [20] In December 1988, the parties to the Establishing Contract entered into the Second Amendment to the Establishing Contract. Under its terms, the parties deleted from the Establishing Contract: (1) the requirement of ratification by all parties and approval of the preliminary design and construction plans for E-470; and (2) approval of “the issuance or assumption of any Bonds or the incurrence of any indebtedness, including the terms thereof, and including refundings thereof.” [21] On January 1, 1989, Arapahoe County officials entered into the Delegation and Substitution Agreement (the Delegation Agreement) with Adams and Douglas Counties and the City of Aurora. Pursuant to the Delegation Agreement, the parties agreed “to delegate all of their rights and responsibilities under the Memorandum of Understanding to the original Authority on the condition that the original Authority redelegate such rights and responsibilities to the [E-470 Public Highway Authority].” That delegation occurred in an attachment to the Delegation Agreement. [22] On February 28, 1989, proceeds of the Series 1986D bonds in the amount of $63,260,000 were released from the pledged account and remarketed, backed by a pledge of E-470 Public Highway Authority revenues that included motor vehicle registration fees, tolls, and excess investment earnings (arbitrage profit) from the bond proceeds. In addition, a letter of credit from Union Bank of Switzerland secured the Series 1986D bonds. The proceeds of the Series 1986D bonds were then used to pay a portion of the construction costs and related expenses for segment I of E-470. This use of bond proceeds for construction is known as a “roll out.” The balance of the bonds remained secured by separate pledged accounts.further the intent of the governmental units that the [E-470 Public Highway] Authority shall be entitled to all rights and privileges, and shall assume all obligations and liabilities, of Arapahoe County with respect to bonds previously issued by Arapahoe County for the planning, designing, engineering, acquisition, installation, construction and reconstruction of E-470.
Page 417
[23] From February 28, 1989, through March 1, 1993, the remaining $658,750,000 in principal amount of bonds were remarketed, either at the six-month interest rate period or for shorter or longer periods routinely approved by Arapahoe County officials. [24] For the remarketings which occurred in February 1989, August 1990, February 1991, and March 1992, Arapahoe County officials adopted supplemental resolutions immediately before each remarketing. Those supplemental resolutions contained amendments to the Master Resolution and the First Supplemental Resolution to facilitate the upcoming remarketing and to release bond proceeds from escrow as soon as possible. [25] In connection with the remarketings, Arapahoe County officials executed closing certificates and other documents. Arapahoe County officials also indirectly participated in all of the remarketings. [26] After removing the bonds from escrow in 1989, the E-470 Public Highway Authority proceeded with construction of Segment I of E-470, which opened to traffic in June 1991. The E-470 Public Highway Authority has collected tolls since 1991 from users of the road. III. [27] The Current Controversy
[28] In May 1993, the E-470 Public Highway Authority developed a plan for assessing the financial markets to enable the construction of E-470 to proceed (the Plan of Finance). One element of the plan is to convert all or a part of the 1986 bonds to a fixed rate of interest as provided in the First Supplemental Resolution and to release the proceeds from the pledged accounts and use them to fund construction and related costs.
Page 418
seeking a declaration that: (1) H.B. 1316 is constitutional; (2) Amendment One is not applicable to the remarketing or the implementation of E-470’s Preliminary Plan of Finance dated July 7, 1993; and (3) the E-470 Public Highway Authority is not a “district” as defined in Amendment One and therefore not subject to its restrictions.
[36] The trial court entered judgment in favor of the E-470 Authority defendants finding that: (1) H.B. 1316 is constitutional; and (2) although the E-470 Public Highway Authority is a “district” and subject to Amendment One, the E-470 Public Highway Authority was not required to hold an election before remarketing the 1986 bonds or implementing the 1993 Plan of Finance. The court denied the E-470 Authority defendants’ petition for writ of mandamus as unnecessary, finding that “since the County has already assigned to the [E-470 Public Highway] Authority all of its rights and privileges regarding the bonds, the [E-470 Public Highway] Authority, as assignee of [Arapahoe] County, is able to execute documents necessary for bond remarketing.” [37] In a post-trial order, the trial court also granted the E-470 Authority defendants’ motion to alter or amend judgment and ruled that “the collection and spending of revenues as proposed in the 1993 Plan of Finance is not subject to the election provisions of Amendment One.” IV. Applicability of Amendment One
[38] Arapahoe County officials first claim the trial court erred in finding that Amendment One does not apply to the E-470 Public Highway Authority’s 1993 Plan of Finance. According to Arapahoe County officials, the re-issuance of bonds under the 1993 Plan of Finance is the creation of debt subject to the election requirements of Amendment One. We do not agree.
A. The E-470 Public Highway Authority is an enterprise
[40] Importantly, Amendment One applies to, and requires voter approval for, only those entities that meet the definition of a “district.” Amendment One provides:
[41] Amendment One defines a district as “the state or any local government, excluding enterprises.” Amendment One defines an “enterprise” as:[D]istricts must have voter approval in advance for: . . .
(b) Except for refinancing district bonded debt at a lower interest rate . . . creation of any multiple-fiscal year direct or indirect district debt or other financial obligation whatsoever without adequate present cash reserves pledged irrevocably and held for payment in all future fiscal years. (emphasis added)
[42] Colo. Const. art. X, §§ 20(2)(b) and (d). [43] It is uncontroverted that the E-470 Public Highway Authority is authorized to issue its own revenue bonds, see § 43-4-509, C.R.S. (1993 Repl. Vol. 17), and according to the evidence introduced at trial, over 90% of the E-470 Public Highway Authority’s revenues come from tolls and vehicle registration fees which it collects directly. Thus, the E-470 Public Highway Authority receives less than 10% of its annual revenues in grants. [44] As a result, the key remaining issue is whether the E-470 Public Highway Authority is a “government-owned business.” [45] Although the term is not separately defined in Amendment One, generally, a “business” is an activity engaged in for gain, benefit, advantage, or livelihood. Black’sa government-owned business authorized to issue its own revenue bonds and receiving less than 10% of annual revenue in grants from all Colorado state and local governments combined.
Page 419
Law Dictionary 179 (5th ed. 1979). Cf. § 7-60-102(2), C.R.S. (1986 Repl. Vol. 3A) (As defined under the Uniform Partnership Law, business includes “every trade, occupation, or profession”); Finlay v. Storage Technology Corp., 764 P.2d 62, 65 (Colo. 1988) (for purposes of workers’ compensation law, business is “that calling which one pursues for livelihood or gain.”).
[46] The E-470 Public Highway Authority was created for a specific purpose: to finance, construct, operate, and maintain a toll road. It is authorized to impose fees, tolls, rates, and charges for the privilege of traveling on the toll road. Section 43-4-506(1)(d), C.R.S. (1993 Repl. Vol. 17). It thus provides a service for a fee. [47] In addition, the E-470 Public Highway Authority is designed to be self-supporting and its assets are owned by the individual constituent governments. It is authorized to accept and hold the assets needed to construct, operate, and maintain the toll road, and, according to the terms of the Establishing Contract, the fixed assets are to be distributed to each participating unit of government that has territory where the assets are located. [48] In sum, the E-470 Public Highway Authority possesses the primary characteristics of a business. The business is government-owned, it has the authority to issue its own revenue bonds, and it receives less than 10% of its annual revenue in grants. [49] Accordingly, we hold that the E-470 Public Highway Authority falls within Amendment One’s definition of an “enterprise” and is not subject to the election requirements of Amendment One. [50] In reaching this conclusion, we reject Arapahoe County officials’ contention that Submission of Interrogatories on Senate Bill 93-74, 852 P.2d 1 (Colo. 1993) requires a different result. In that case, our supreme court determined that the Great Outdoors Colorado Trust Fund Board was not an enterprise. However, there, the board in question did not have the power to issue revenue bonds and its revenues consisted exclusively of money collected by the Colorado Lottery Commission and distributed by the State treasurer. Thus, we do not view the case as dispositive.B. [51] Creation of the Debt
[52] Even if we were to assume that the E-470 Public Highway Authority was a district rather than an enterprise, we would nevertheless reach the same result because we agree with the trial court that the remarketing of the revenue bonds as proposed in the 1993 Plan of Finance does not constitute the creation of a new debt. For this alternative reason, we hold that the election provisions of Amendment One do not apply here.
(1970) (“Public revenue bonds do not create debt if there is no pledge of private property.”). [55] In addition, when the bonds were originally issued, there was no taxpayer burden, and there is none under the proposed 1993 Plan of Finance for remarketing the bonds. Nor is there any new tax burden created for Arapahoe County. Finally, the method for calculating interest as set forth in the Plan of Finance is the same as was provided for in the First Supplemental Resolution adopted in 1986. [56] In sum, releasing the 1986 bond proceeds from escrow does not create any new debt, impose any tax, or expose the taxpayers of Arapahoe County to any new liability or obligation. Accordingly, it does not constitute a “creation of debt” requiring voter approval in
Page 420
advance. See Submission of Interrogatories on Senate Bill 93-74, supra, at 4 (“As presented to the electorate, [Amendment One] was designed to protect citizens from unwarranted tax increases.”). See also Ginsberg v. Denver, 164 Colo. 572, 436 P.2d 685 (1968) (revenue bonds do not create a debt or indebtedness under [Colo. Const. art. XI, § 8]); Metropolitan Water District of Southern California v. Dorff, 138 Cal.App.3d 388, 188 Cal.Rptr. 169 (1982) (Proposition 13 requiring voter approval of bond issues does not extend to include approval for increase in interest rates on the already approved bonds.).
C. Collection and Spending of Revenues
[57] Arapahoe County officials also claim the trial court erred in finding that the collection and spending of revenues proposed in the 1993 Plan of Finance is not subject to the election provisions of Amendment One set out in Colo. Const. art. § 20(7)(d). Again, we disagree.
V. Delegation of rights and obligations
[62] Next, Arapahoe County officials contend the trial court erred in finding that Arapahoe County assigned and delegated to the E-470 Public Highway Authority all of its rights and obligations regarding the Trust Fund Bonds and the alignment of the highway. In the alternative, they contend that the trial court erred in finding Arapahoe County has no substantive rights under the Colorado Constitution to be free from legislative impairment of contracts. We disagree with both contentions.
A.
[63] Arapahoe County officials do not claim the Delegation Agreement is ambiguous. Nevertheless, they ask the court to go outside the document and consider the intent of the parties in assigning the rights and responsibilities for the bonds.
Page 421
the highway. The Delegation and Substitution Agreement recited the provision of the then recently enacted Public Highway Authority Law, which allowed the formation of highway authorities “with power, among others, to finance, construct, and operate public highways, such as E-470, and to impose various taxes and fees.”
[66] Also, in the Delegation Agreement, the participating governments expressed their “desire that the [E-470 Public Highway Authority] assume more responsibility for the financing, construction and operation of E-470 and for the Bonds.” It also provided:[67] The Memorandum of Understanding included, among other things, the obligation of Arapahoe County to issue and maintain the 1986 Bonds. On January 31, 1989, the E-470 Public Highway Authority accepted this delegation of responsibilities and rights in an attachment to the Delegation and Substitution Agreement. [68] Accordingly, the trial court correctly concluded that, under the plain and unambiguous language of the Delegation Agreement, Arapahoe County assigned and delegated to the E-470 Public Highway Authority its rights and obligations, including its rights regarding the trust fund bonds and the alignment of the highway. Arapahoe County officials’ contention to the contrary is without merit.Pursuant to . . . the [Memorandum of Understanding], the Participating Governments hereby mutually consent and agree to delegate all of their rights and responsibilities under the [Memorandum of Understanding] to the Original Authority on the condition that the Original Authority redelegate such rights and responsibilities to the [E-470 Public Highway Authority]. . . .
B.
[69] Also without merit is Arapahoe County officials’ alternate assertion that the Establishing Contract entered into between the parties which created the E-470 Public Highway Authority cannot be altered because of Colo. Const. art. XIV, § 18(2).
[71] This provision preserves the authority of the General Assembly over political subdivisions created pursuant to it. The General Assembly defines the powers of each contracting entity and, as such, it may alter those rights. And, except to the extent that the Colorado Constitution authorizes a county to act upon a subject, a county has only those powers that are expressly, or by necessary implication, delegated to it by the General Assembly. See Oborne v. Board of County Commissioners, 764 P.2d 397 (Colo.App. 1988). [72] A municipal corporation has no privileges or immunities under the state constitution. Moreover, electors derive no such rights enforceable in behalf of the county and the city. Enger v. Walker Field, 181 Colo. 253, 508 P.2d 1245 (1973). [73] Here, since neither the General Assembly nor the constitution has delegated to a municipality the constitutional right to be free from legislation that impairs the obligations of contracts, Arapahoe County officials cannot assert a constitutional right which they do not possess.(a) Nothing in this constitution shall be construed to prohibit the state or any of its political subdivisions from cooperating or contracting with one another or with the government of the United States to provide any function, service, or facility lawfully authorized to each of the cooperating or contracting units, including the sharing of costs, the imposition of taxes, or the incurring of debt.
(b) Nothing in this constitution shall be construed to prohibit the authorization by statute of a separate governmental entity as an instrument to be used through voluntary participation by cooperating or contracting political subdivisions. (emphasis added)
VI. Constitutional challenges
[74] Arapahoe County officials also assert a number of additional constitutional challenges to H.B. 1316, all of which we reject below.
Page 422
[75] However, initially we note Arapahoe County officials raise for the first time on appeal the argument that the E-470 Authority defendants are estopped from denying the applicability of the provisions of the Colorado Constitution to the rights of Arapahoe County. Since this argument was not raised in the trial court, we do not address it. Tenney v. Board of Assessment Appeals, 856 P.2d 89 (Colo.App. 1993). [76] A legislative act is presumed to be constitutional. The party challenging an act bears the burden of proving beyond a reasonable doubt that the act is unconstitutional. See Firelock, Inc. v. District Court, 776 P.2d 1090 (Colo. 1989).A. Special Legislation
[77] Arapahoe County officials claim that H.B. 1316 is special legislation in violation of Colo. Const. art. V, § 25. We disagree.
[79] If an act is challenged as special legislation, and an enumerated prohibition is implicated, the threshold question is whether the classification adopted by the General Assembly is a real or potential class, or whether it is logically and factually limited to a class of one and thus illusory. If there is a genuine class, the next question is whether the classification is reasonable. Legislation is not prohibited special legislation if there is a genuine class and if the classifications are reasonable. In re Interrogatory on House Bill 91S-1005, 814 P.2d 875The general assembly shall not pass local or special laws in any of the following enumerated cases . . . for . . . laying out, opening, altering or working roads or highways . . . granting to any corporation, association or individual any special or exclusive privilege, immunity or franchise whatever. In all other cases, where a general law can be made applicable no special law shall be enacted.
(Colo. 1991). [80] A law is not special when it is general and uniform in its operation upon all in a similar situation. City of Montrose v. Public Utilities Commission, 732 P.2d 1181 (Colo. 1987). [81] Here, the trial court found there is a genuine class which is not limited to one, and H.B. 1316 applies to all public highway authorities, whether existing or to be created in the future; nothing in the bill restricts it to the E-470 Public Highway Authority. See In re Interrogatory on H.B. 91S-1005, supra (bill structuring incentives to bring United Airline’s facility to Colorado was not special legislation; even though United was the only facility to meet the statutory criteria, court found that another aviation-related entity could meet the statutory criteria in the future). Cf. In re Senate Bill No. 95, 146 Colo. 233, 361 P.2d 350 (1961) (legislation passed to allow Denver to annex Glendale involuntarily was special legislation because it was limited to characteristics that could describe only Glendale and provided for its automatic repeal in one year so that there was no possibility of it applying to any other municipality). [82] Also, the legislation is reasonably related to the Public Highway Authority Law’s stated purpose which is to promote the “health, safety, and welfare of the citizens of [Colorado] by securing for them more adequate transportation.” Section 43-4-502, C.R.S. (1993 Repl. Vol. 17). Thus, H.B. 1316 is not special legislation.
B. Imposition of A New Liability
[83] Next, Arapahoe County officials claim that application of H.B. 1316 to Arapahoe County’s bonds is contrary to Colo. Const. art. XV, § 12 because it imposes on Arapahoe County new liabilities with regard to transactions or considerations already past. However, this constitutional provision is not applicable to municipal corporations or governmental subdivisions of the state or county. School District No. 1 v. School District No. 7, 33 Colo. 43, 78 P. 690 (1904).
C. Retrospective Legislation
[84] We also disagree with Arapahoe County officials’ claim that H.B. 1316 is
Page 423
retrospective legislation contrary to Colo. Const. Art. II, § 11 and therefore unconstitutional.
[85] Legislation is prospective when it operates on transactions that occur after its effective date. Legislation is presumed to have prospective effect unless a contrary intent is expressed by the General Assembly. Ficarra v. Department of Regulatory Agencies, 849 P.2d 6(Colo. 1993). [86] Here, the remarketing of bonds and release of bond funds and the vote to realign the highway are acts which occurred after the effective date of H.B. 1316.
D. Release of liability
[87] Finally, Arapahoe County officials contend that the application of H.B. 1316 is contrary to Colo. Const. art. V, § 38. Again, we disagree.