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Manitou will ask to keep excess weed tax revenue



Back in 2013, Manitou Springs voters approved a ballot measure that placed a 5 percent sales tax on recreational marijuana sales, which city officials expected would raise $122,000.

It turns out they underestimated the draw of local cannabis. That nascent industry counted just one recreational marijuana store in 2014, but the city nevertheless collected more taxes than it had anticipated — enough to subject it to the Taxpayers Bill of Rights, a statewide law written by Colorado Springs' Douglas Bruce that restricts the amount of tax money governments are allowed to retain.

So Manitou's city council has unanimously decided to ask residents if the town can keep the excess revenue, a question that is expected to be placed on the November ballot.

"We still have a fairly healthy general fund," says Mayor Pro-Tem Coreen Toll, "but our goal is not to deplete it because we have so many mitigation projects that are still coming up on the horizon."

Until recently, she says, no one in the city was anticipating the excess taxes to be an issue. The city had planned to keep the money without voter approval, because officials believed it was within their right to do so.

In 1997, Manitou voters agreed to allow their local government to "collect, retain and expend all excess revenues and other funds collected by the city in 1997 and each calendar year thereafter." In essence, it allowed Manitou to work around parts of TABOR.

So Manitou finance director Rebecca Davis says she wasn't aware there would be any problem with excess pot tax revenue until the city's attorney informed her that "de-Brucing" doesn't apply to the first year of tax collections on a new tax — meaning the city needs to refund the excess or ask voters to keep it.

Davis says another law adds a strange twist: The city can't tell voters how much money it is asking to keep.

"Because there's only two businesses [and only one in 2014 when the taxes were collected], we cannot reveal the information about taxes because of the privacy laws regarding taxes," she says.

Basically, revealing the amount of over-collected taxes would make public too much private financial information about the business in question, Maggie's Farm. Bruce, however, says the city's "absurd, dishonest, evasive" proposal violates TABOR in several ways, including by asking to keep tax revenues without revealing the amount.

"They have to inform people what they're asking for," he says. "They can't just say, 'Can we keep a certain amount of money and we're not going to tell you what it is.'"

What's more, he says, TABOR only allows de-Brucing for four years, and it requires governments to reveal not only the projected tax collections from a new tax, but an estimate total spending by the government. Low-balling either number is supposed to result in a lowering of the tax by the amount of the overage.

Manitou hasn't exactly been hurting for revenue lately. A May sales tax report shows the city collected $348,193 through the end of that month, compared to $183,789 at the same time in 2014.

But Toll says the city needs all the money it can get to pay for flood mitigation and repair projects, such as a small neighborhood dam that broke, two bridges that were swept away, and a multitude of crumbling retaining walls.

In all, storm-related damage will take millions of dollars to fix.

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