The Honorable Bill Owens
Governor
136 State Capitol
Denver, CO 80203-1792
Dear Governor Owens:
Taxpayers for Common Sense Action (TCS Action), a national, non-partisan advocate for
taxpayers, is deeply concerned that Referendum A, the water bond proposal, will become little
more than a parochial slush fund for unjustified and unnecessary water projects. Based on our
own independent review, we are troubled that a lack of oversight will potentially leave Colorado
taxpayers liable for billions of dollars. Meritorious water projects can and have been built
through the normal legislative appropriations process and private and municipal bonding for
water projects.
Water projects that are borne out of “blank check” proposals, such as Referendum A, have a
very dismal financial history of paying off debts. For example, federal taxpayers have received
less than a third of what is owed for U.S. Bureau of Reclamation water projects. According to
the impartial Legislative Council “Blue Book” analysis, the ballot measure does not preclude the
state from bailing out bond holders if a water project defaults. The state is highly unlikely to
allow politically connected, powerful bond holders to be left unpaid, meaning Colorado
taxpayers will be the ultimate backers of the bonds.
The proponents of Referendum A have given little, if any, indication of what projects are being
considered for funding under this program, and the Colorado Water Conservation Board would
open the back door to all sorts of projects that could not otherwise get support in the legislature
or private bond markets. A separate agency, the Colorado Water Resources and Power
Development Authority already has the authority to issue up to $500 million in bonds for water
projects. Fiscally justified and responsible water projects, like the Wolford Mountain project,
have been built in the recent past with broad support.
History has demonstrated that cost-effective and beneficial water projects have little difficulty
receiving financing from the private sector or through the normal legislative process. In fact,
municipalities that would be potential users of the proposed program have indicated they
wouldn’t use it because they can get better financing for their projects. As a believer in free
markets, it is unclear why you would support a bond program that is designed to conveniently
side-step this simple market-based measure of need. A new, unaccountable slush fund is not
necessary and sets a terrible precedent on how other states fund future water infrastructure needs.
One way or another, Coloradans are going to pay dearly for unnecessary projects. They will be
subjected to increased water rates – to pay off the bonds underwriting the projects – or higher
taxes to cover a billion dollar bailout to the bond holders of failed projects.
The lingering issues concerning the bond proposal are significant. The actual interest rates are
not set, so while the maximum principal is $2 billion and the total repayment cost is capped at $4
billion, the cap could be reached with payments at higher interest rates on less than $2 billion of
bond principal. With interest rates likely to rise in the near term, the program could end up
delivering less in terms of water projects, but much more in terms of total interest paid. In the
end, Colorado taxpayers could be paying more for less.
Additionally, there are no established repayment terms, and the program would require at least
one additional staff person to administer it, adding even more costs for the Colorado taxpayer.
And lastly, but potentially most disturbing, if Colorado were to allow default on these bonds, it
could have a negative impact on the state’s bond rating.
Considering the scarcity of state resources, more accountability and oversight for infrastructure
investments must be a major priority. The “blank check” approach fails to target localities with
the greatest water infrastructure needs and where the state can gain the greatest bang for the
buck.
Taxpayers for Common Sense Action urges you to reanalyze all of the information regarding
Referendum A and withdraw your support for the ballot measure. We hope you will work with
us and others to pursue other more transparent and cost-effective solutions to Colorado’s water
issues.
Sincerely,
Steve Ellis
Vice President of Programs
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