SALIDA, Colo.- In November 2022, it was brought to the attention of the Chief Financial Officer of the Salida Hospital District (the "District") that the District may have been setting its mill levy for operating purposes in a manner that did not comply with the Taxpayer's Bill of Rights ("TABOR"). Lesley Fagerberg, the District's Chief Financial Officer, began an internal investigation. At the time of the District's formation in 1963, a hospital district was authorized under state law to impose a maximum of 2 mills for operating purposes. In 1987, state law changed to remove that 2 mill cap, but required voter approval to impose a levy to exceed that cap. There is no evidence that the District held such an election, but continued imposing an operating levy that did not exceed 2 mills.
In 1992, the voters of the State of Colorado approved TABOR, which, among other things, set revenue and spending limits, and required voter approval for any tax increase. The mill levy the District imposed in 1992 for collection in 1993 should have been the District's new mill levy limit, but the District continued its past practice of imposing a mill levy for operating purposes that did not exceed 2 mills. Under a different state law, a District's property tax revenue cannot increase by more than 5.5% from the prior year. With this limit in mind, which limit was in place prior to TABOR, the District adjusted the mill levy up and down (but never exceeding 2 mills) to maximize property tax revenue.
The issue is that under TABOR, property tax mill levies, once decreased, cannot be increased again without voter approval. There is no evidence that the District obtained this voter approval. Over the last several weeks, Ms. Fagerberg has been investigating the issue to determine what occurred. As a result of that investigation, it has been determined that the District has been collecting property taxes that were in excess of the amount allowed by TABOR, with the lowest property tax levy occurring in 2001. Any increase in mill levy rates after that year were not in compliance with TABOR. Under TABOR, tax revenues collected above what is authorized are required to be returned to property tax payers, but the liability is limited to the prior 4 years. As this was just discovered, the District is working internally and with its auditor to determine the exact amount of the over collection. As soon as that amount is known it will be communicated to the public.
TABOR is complex, multi-faceted, and difficult to interpret. The Board was notified of this issue in executive session on December ?O, 2022, and what had been discovered at that time. Information on the possible miscalculation was presented to the Board along with possible outcomes and options. The Board has approved the mill levy for collection in 2023 at the rate imposed in 2001, which is the rate that complies with TABOR. The District will investigate this issue further and complete a factual and legal review. Upon determination of the extent of the issue, the Board and the District will communicate the information to the public.
The District does not have all the answers today. The District and its consultants are reviewing potential liabilities and options to address what has occurred.
The investigation is ongoing and will take time. TABOR is complex and challenging to interpret. This communication is made to ensure the District's residents and taxpayers of the District's desire for transparency and to communicate information fully and factually.
The District is currently continuing to compile and collect information, consulting with legal counsel on options, and looking at the constraints under TABOR. Any property tax payer who owns property within the District as of January 1, 2023 will be issued a refund based on amounts determined to be owing under TABOR.
Please direct any questions to the Chief Executive Officer or Chief Financial Officer.
