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A vehicle travels a long stretch of highway on U.S. 6 near Haxtun, Colorado, on Wednesday, April 3, 2019. (Austin Humphreys, Special to The Colorado Sun)

By the end of the new fiscal year, Colorado state lawmakers will have pumped a record-setting $1.7 billion extra into transportation over a two-year stretch, with over $1 billion more on the way.

But they also made history in another way, to little fanfare: For the first time, lawmakers are sending money from the state’s general fund to cities and counties to help pave local roads as well.

On its face, the arrangement seems unsustainable. Effectively, a state budget that’s proved insufficient to handle state highway needs is now being tapped to help local governments with their unmet funding responsibilities, as well.

And to Republican critics, it’s an unwelcome development. The state, they argue, should take care of the state’s responsibilities first and foremost.

“People are complaining, I think, about I-70 and I-25,” said Sen. John Cooke, a Republican from Greeley. “Those need to be fixed. The congestion and the maintenance on those roads, I think, have a higher priority than local city streets or bike lanes that towns want to put in.”

But Democrats argue that Colorado’s entire transportation network is facing the same funding crisis. The state’s $9 billion in identified project needs are matched by a similar amount at the local level. And drivers don’t care whether they hit a pothole on a state highway or a local road: They just want it fixed.

“When I’m driving around in my car, I’m not taking note of whether I’m on a state highway, or something maintained by a city or county,” said Sen. Jeff Bridges, a Democrat from Greenwood Village. “I think it’s the state taking responsibility for the state of our roads — across the state.”

Politically, it may have a side benefit as well: Keeping intact the coalition of state and local officials that Democrats see as essential to raising taxes statewide for transportation.

Booming growth, shrinking revenue

The distinction may seem like a technical one — after all, the state already shares the gas tax and vehicle registration fees with local governments. But sending state general fund money to local governments had never been done before last year, according to legislative budget analysts. And, if the shift becomes the new norm, it could have long-lasting implications for how the state funds its roads.

First, some history: State transportation spending has long ebbed and flowed with the economy. In good times, investments from the general fund have surged, helping finance major capital projects, like building a new state highway or adding lanes to an interstate. In bad, general fund transfers have been eliminated, a casualty of budget balancing while lawmakers juggle competing demands like schools, prisons and higher education. But the Colorado Department of Transportation always had a steady revenue stream to fall back on: The state and federal gas tax.

Trouble is, the federal gas tax hasn’t been increased since 1994. The state gas tax hasn’t changed since 1991, and the 22-cents per gallon it generates has lost about half its value since then thanks to rising inflation and better gas mileage.

That’s left CDOT in the situation it’s in today. The money it generates through the gas tax and fees can’t even keep up with maintaining the roads it has — much less add the highway capacity needed to support a growing population. So when lawmakers after the recession stopped providing CDOT with general fund dollars for six straight years, CDOT stopped building, spending $0 on new lanes from 2010 to 2015, according to department budget analysts.

“With the elimination of those funding sources we largely went back to a budget that was insufficient even to maintain the current conditions of our assets,” Jeff Sudmeier, CDOT’s chief financial officer, told the Sun in an interview. “So I think the Transportation Commission at the time really said, in the absence of this funding for strategic transportation projects, we need to put our resources toward maintaining our existing assets.”

In this Jan. 7, 2018, file photo, traffic backs up on Interstate 70 near Silvethorne, a familiar scene on the main highway connecting Denver to the mountains. (AP Photo/Thomas Peipert, File)

CDOT scaled back right as Colorado’s population growth went into overdrive. Colorado’s population has grown by more than 50% since 1991, but added just 2% more lane capacity, choking major state thoroughfares.

Now that the economy’s booming again, lawmakers are tapping the general fund more than ever before. But not only are those dollars needed to add highway lanes for the first time in a decade, they’re also being tapped for maintenance shortfalls. Transit, too, is receiving a growing share, championed by the left as a necessary part of any effort to mitigate congestion. And for the first time, according to legislative budget analysts, lawmakers also set aside funding to help local governments, who face daunting funding gaps of their own.

“It’s not just the state that’s suffering.”

Morgan Cullen, a policy advocate for the Colorado Municipal League, says local governments are fighting financial headwinds similar to those faced by the state.

A 2018 CML survey of its 270 member cities and towns tallied $3 billion in unfunded projects, on top of a $750 million maintenance shortfall. Throw in county governments, and the unmet local need approaches the state’s own $9 billion wishlist.

And much like the state, as the gas tax loses buying power, “the money that municipalities do have is going to maintaining the current infrastructure that they already have,” Cullen said.

The idea first arose in the debate over House Bill 1242, a 2017 bill that would have asked voters to raise sales taxes for transportation and send the proceeds to state and local road projects and grants for alternate forms of travel, like mass transit or bike lanes.

“In 2017, the concept was, if we’re going to go out and ask communities to fork over sales tax, you have to have buy-in from your municipalities, because sales tax is their bread and butter,” said Sen. Rachel Zenzinger, an Arvada Democrat who at the time served on the Transportation Committee.

That proposal was defeated, but once local governments had a seat at the negotiating table, Democrats insisted they get a piece of future allocations, whether sales taxes were involved or not.

Zenzinger, who serves on the Joint Budget Committee, is under no illusion that the state can afford to meet state and local needs under its current budget. But she still supports helping here and there.

“It’s not just the state that’s suffering — our local municipalities were as well,” Zenzinger told the Sun. It’s something she saw firsthand when she served on the Denver Regional Council of Governments. “More and more communities were fighting over smaller and smaller dollars.”

The biggest measure approved in recent years — the $2 billion in borrowing approved in 2017 — is going entirely to CDOT, with 10% earmarked for transit. But cities and counties shared a 20% cut of the $645 million lawmakers sent to transportation in 2018’s Senate Bill 1, with transit-related grants receiving another 20%. And this year, they got 40% of the $100 million approved for roads in Senate Bill 262, while transit received nothing.

If the practice becomes the norm, it could have policy implications for years to come. CDOT’s funding policy has long been to expand in good times, and hold down the fort in the bad. If local governments get a share, that leaves that much less for CDOT to work with, in an era when the “good times” aren’t delivering what they used to.

“We argued at the time (in 2018), ‘No, don’t set that precedent because we can’t even pay for our own roads at the state level,’ ” said Sandra Hagen Solin, a spokeswoman for Fix Colorado Roads, a business coalition that advocates for transportation funding.

In 2019, it happened again, seemingly confirming her fears. “It became like, ‘OK, here we go.’ This is how it starts,” she said.

What’s next? There’s no clear consensus.

In some ways, the partisan split over whether to help local governments is a reflection on each side’s view of the state’s ability to take care of its own responsibilities.

To Republicans, who envision the state general fund taking on a larger role in funding state highways, trying to address the needs of local governments as well represents an obvious impediment to that goal.

“We did not like that idea because cities and counties have the ability to raise taxes for transportation needs,” said Cooke, the Greeley senator who serves on the Transportation Committee. “It was money that, in my opinion, should have been appropriated to just CDOT.”

But to Democrats, helping local governments here and there makes sense precisely because the state can’t afford to solve its transportation problems, anyway. They see value in cooperating with local governments, in part to keep intact a coalition that can lobby voters for a statewide tax.

Without some state support, Zenzinger said she was worried local governments — particularly in the Denver metro area — would take matters into their own hands and form regional transportation authorities to raise taxes for transportation improvements. That would make it harder politically for the state to go to voters for new taxes in the future. And it would leave rural Colorado behind.

“It was important that the General Assembly recognize the state and local partnership that needs to exist for a statewide solution on transportation,” said Kevin Bommer, executive director  of the Colorado Municipal League. “None of the revenue sources are going to solve all of our transportation problems, but any trip a person makes begins on a municipal street or county road, so cutting them out of the equation is not a great prospect for long-term success.”

But now that a proposed tax hike and a separate bonding measure without new taxes have failed at the ballot, there’s not a clear consensus on the next step for transportation funding.

Democrats have their sights set on a measure to permanently eliminate the state spending caps, with whatever money is generated being split between roads, K-12 schools and higher education.

But most Republicans oppose it, and Solin said her group doesn’t plan to support it, citing what happened when the state spending caps were put on pause through a measure known as Referendum C.

“Transportation fared miserably under Referendum C,” Solin said. “There were promises that were made and never kept.”

In 2020, another transportation bonding referendum is planned that would generate an additional $837 million for CDOT. But it’s not clear there will be much momentum to mount a campaign for it in a presidential election year. 

Zenzinger worries that Colorado’s transportation funding problems have been allowed to multiply for so long at all levels of government, the ultimate “fix” still won’t be very satisfying.

“We cannot build our way out of this,” she said. “If we add another lane today on I-25 it would not matter. The only promise that we could make to people for raising their taxes is we’ll try not to make things worse.”

Brian Eason writes about the Colorado state budget, tax policy, PERA and housing. He's passionate about explaining how our government works, and why it often fails to serve the public interest. Topic expertise: Public finance, tax policy,...