In addition to city council seats, Littleton voters will answer a tax question on the November ballot.

The question will ask voters to allow Littleton to retain about $6 million of extra revenue generated by the 3A sales tax and other city revenue sources in 2022.

If approved, Littleton would use the extra 3A revenue for its intended purpose to continue funding capital improvement projects, as approved by voters in 2021.

If the measure fails, the city will be required to return extra revenue dollars to taxpayers and reduce its sales tax rate.

The ballot question was triggered by the city’s recent realization that they gathered more revenue than they predicted in the first year of the 3A sales tax increase.

Because of TABOR, or the Taxpayers Bill of Rights, the city must either return extra revenue they received beyond their estimates to taxpayers or ask for voter approval to keep the dollars to use.

On Sept. 5, just three days before the deadline for municipalities to certify ballot content for the upcoming election, Littleton’s six present city council members voted unanimously to put the question on ballot.

At-Large Councilmember Pam Grove was absent.

Why does the city have extra revenue?

When the city proposed the 3A sales tax increase to voters in 2021, they estimated the tax would bring in about $9.8 million in its first year.

The tax increase ended up bringing in about $1.1 million more than expected, according to city documents.

Per TABOR, the city also had to estimate how much money it would bring in through other revenue sources in the first year of 3A. This number is known in TABOR language as “fiscal year spending,” but it is really measured by revenue, Finance Director Tiffany Hooten said in a special meeting on Aug. 29.

The city overestimated their overall revenue by about $4.8 million, according to city documents.

“We exceeded both of these estimates, and that is clearly as a result of how quickly our economy came back from COVID,” Hooten said, adding that the estimates were made in the late summer of 2021.

“We were giving our good faith estimate on what we thought those revenues would be, and those revenues did come back very quickly — much more quickly than anyone ever anticipated, which is ultimately why we did exceed these caps," she said.

Hooten said unexpected sources of revenue — including $1.2 million in Stadium District Funds the city received as a result of the Denver Broncos being sold — also contributed to the extra revenue the city received during the year.

TABOR’s role

If the ballot measure does not pass, TABOR requires the city to return the dollars to voters and reduce the city’s sales tax rate from 3.75% to 3.33%.

Littleton resident Frank Atwood spoke in favor of TABOR regulations at the Sept. 5 city council meeting.

“TABOR is the nagging spouse that keeps our municipalities fiscally healthy,” he said. “None of us like it, but it works.”

Mayor Kyle Schlachter said he thinks this particular rule of TABOR is unnecessarily punitive.

He said it would make sense for the city to have to take action on the $1.1 million extra it collected from the 3A tax. But the fact that the city is also required to act on the extra money it received from other revenue sources throughout the year — which brings their total overage to almost $6 million — is inappropriate.

“This is not just a nagging spouse … this is a spouse that is trying to kidnap you, lock you in the basement and suffocate you, basically, strangle you,” he said. “I think it's important that our voters understand that we do not have this flush surplus of cash. This is not a huge excess. This is asking (for) us to not be punished for having a small oversight due to a kind of economic weird times with COVID.”

If the ballot measure does not pass, returning the money to voters could take different forms, City Manager Jim Becklenberg said, from direct checks to discounts on utilities.

Hooten said returning the money “could be devastating to important planned capital projects” the city is hoping to complete.

She listed street reconstruction, the project at Santa Fe Drive and Mineral Avenue, the downtown streetscape project, public works facility upgrades, museum and library improvements and public safety facility improvements as some projects that could be impacted if the city has to reduce its tax rate and return funds.

Support of ballot issue

Several councilmembers spoke in favor of the ballot measure, emphasizing the fact that the city would continue to use the extra 3A funds for their intended, voter-approved, purpose.

“We are, in the infrastructure and engineering industry, trying to outrun inflation on kind of every scale,” District 3 Councilmember Stephen Barr said. “This money is not going to go to waste. It is going to go to what the voters approved in 2021.”

District 2 Councilmember Jerry Valdes said he thinks TABOR is important to ensure that municipalities aren’t increasing taxes without approval. He said his vote to put the measure on the ballot is not a vote against TABOR.

“I don't think TABOR is necessarily a bad thing,” he said. “In this case, this is an additional thing that our citizens have already approved.”

At an earlier meeting, Becklenberg assured council that the city's accounting procedures had been updated to ensure that checking for estimate comparisons is part of the process going forward when the city has new taxes. He noted that 3A was Littleton's first tax increase in decades.

The state of Colorado will be presenting a similar question to voters in November due to overcollection on tobacco taxes.