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Joel Judd

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Gaylord Subsidy

Posted: 10/03/11 11:58 AM ET

There's a hole in the bucket.

You probably know a Colorado kid. You may even be one. In Colorado we have around 800,000 in the public schools. We'll spend about $5.2b this year to teach these kids reading, writing, arithmetic and some of the tools they'll need to operate the society we'll start handing them when they graduate.

About 60 percent of that money comes from the state's general fund -- basically the 4.63 percent income tax and 2.9 percent state sales tax you pay. The other 40 percent is raised by 178 local school districts -- mostly from local property taxes.

You may remember passing Amendment 23 in 2000 -- increase school funding 1 percent a year for ten years, then adjust for inflation. We actually complied with that most of the time I was in the legislature. As revenue dropped in the 2008 recession, we just couldn't do it anymore. We found a way to weasel out. This year the legislature cut Amd. 23 funding by $776m. (SB 11-230)

The University of Denver says those cuts are going to get a lot worse.

One approach is to pour some more money in the school finance bucket. Senator Rollie Heath and a bunch of others are going this route with Proposition 103. It evens out the state income and sales tax rates to 5 percent and 3 percent for five years, raising $515m the first year. That still leaves the schools $261m under Amd. 23. and in a really big hole after the five years. But it helps. Most folks will vote by mail. You'll get your ballot in a couple weeks. Vote yes.

Another idea is to stop punching holes in the bucket.

For about thirty years we've used a formula to split school cost between the 178 local districts and the state. We start with a base amount per kid; this year $5,634.77. We add a bunch of adjustments -- how many kids need special education or to learn English, etc. We come up with a total per kid, more or less $6,500 each. October 1 the school districts count the number of rear ends in seats and multiply by $6,500. The district raises as much as it can from local property taxes (27 mill max). The state makes up the difference. See School Finance in Colorado.

If you're from another state you're probably used to paying about twice that much per kid. We're kind of frugal here in Colorado.

Colorado allows each local school district to hand property tax money back to local real estate developers. This is called Tax Increment Financing (TIF). It doesn't bother the school district; the state makes up the difference.

Sometimes there's a plausible argument for TIF -- a rundown neighborhood will never generate much property tax as is. Borrow the money to fix it up. It will generate a lot of additional property tax. Use the extra property taxes to pay off the borrowed money. Sometimes the argument is less plausible.

Gaylord Entertainment proposes building a hotel entertainment complex near DIA; purportedly free enterprise at its best. Except, first it wants $522m in TIF subsidies over 25 years; $273m comes from the local school district, Brighton 27J.

This is Gaylord's argument: The empty fields near DIA generate almost no property tax revenue today -- true. Those fields never will generate any property taxes -- not so true.

There is essentially no chance prime development property in the shadow of DIA will remain empty for the next 25 years. In the 1930's we built Stapleton an unimaginable distance out from Denver. 40 years later it was landlocked -- completely surrounded by (taxpaying) development. Fifteen year old DIA won't be any different.

Just like Stapleton, without Gaylord, true free enterprise developers will end up developing everything around DIA with projects that pay property taxes the same as everyone else. With the subsidy, Gaylord skates on $522m in property tax and the state cuts another $273m out of the schools. Gaylord's subsidy comes from kids in Denver, Jefferson County, the San Luis Valley, etc. Denver has about 10% of the state's kids. Over the 25 year life of Gaylord's subsidy, Denver kids will lose about $27m -- roughly $1m a year.

Gaylord will punch a $273m hole in our kids' school finance bucket.

Time to stop punching holes in the bucket.

Solyndra's loan loss riles many;
Still some push Gaylord's subsidy.
Expect a different result?

Until next time,

Joel