November 21, 2018

Colorado Court of Appeals: City Improperly Imposed Use Tax on Purchases from Wholesalers that were Later Sold at Retail

The Colorado Court of Appeals issued its opinion in Big Sur Waterbeds, Inc. v. City of Lakewood on Thursday, October 4, 2018.

Sales and Use TaxDisplayed Furniture—Primary Purpose of Purchase.

The City of Lakewood (Lakewood) imposes use tax on tangible personal property purchased at retail and used in the city. The use tax does not apply to wholesale purchases (i.e., purchases for resale to others). Big Sur Waterbeds, Inc., Denver Mattress Co., LLC, and Sofa Mart, LLC (collectively, plaintiffs) purchase furniture tax-free from wholesalers worldwide and resell it in stores, including in Lakewood. At each Lakewood store, plaintiffs provide a showroom where they display furniture for customers to peruse and try out. Plaintiffs also maintain warehouses where they store the bulk of their inventory. Plaintiffs ultimately sell all the furniture, including the displayed furniture, and fill customer orders from either the warehouses or the showrooms. Plaintiffs’ customers pay Lakewood’s sales tax on each purchase.

Lakewood assessed use tax on plaintiffs’ purchases of displayed furniture from 2012 to 2015, on the theory that plaintiffs purchased the displayed furniture at retail for their own use in advertising their products. Plaintiffs challenged the assessments in the district court, which entered judgment in their favor.

On appeal, Lakewood contended that while plaintiffs’ inventory purchases were initially treated as exempt wholesale purchases, when a portion of this wholesale inventory was withdrawn for use as demonstration and promotion tools, the transactions were properly recharacterized as taxable retail transactions. Lakewood relied on its Initial Use Regulation and regulation 3.01.300(1)(b), pertaining to initial use of property, which focus on the primary purpose of the purchase. The court of appeals employed the “primary purpose” test from A.B. Hirschfeld Press, Inc. v. City and County of Denver, 806 P.2d 917, 918–26 (Colo. 1991), and determined that the totality of plaintiffs’ conduct indicates that they purchased the displayed furniture primarily for resale in an unaltered condition and basically unused. Because plaintiffs purchased the displayed furniture primarily for resale, not for their own use or consumption, the Initial Use Regulation does not apply. Similarly, regulation 3.01.300(1)(b), which pertains to tax-free purchases for resale that are later removed from inventory for the purchaser’s own use, does not apply because the displayed furniture was always available for resale and eventually sold. Therefore, Lakewood’s use tax does not apply to the retailers’ purchases and minor use of the furniture for display.

The judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Marijuana Business Cannot Cultivate Marijuana as Accessory Use When Zoning Code Precludes Cultivation for Primary Use

The Colorado Court of Appeals issued its opinion in Colorado Health Consultants v. City & County of Denver on Thursday, September 6, 2018.

Retail MarijuanaCultivation as an Accessory UseVested InterestEquitable EstoppelTaking.

Colorado Health Consultants, d/b/a Starbuds (Starbuds), is a retail marijuana business located in an I-MX-3 zone, which is a special context zone for industrial mixed use. In 2013, the zoning authority issued Starbuds a zoning permit for retail sales. Starbuds separately applied with the Department of Excise and Licenses (Department) for a retail marijuana cultivation (RMC) license, which was issued in 2014. The following year, Starbuds sought renewal of the RMC license and, following an uncontested hearing required by the Denver Revised Municipal Code (DRMC), the license was renewed.

Starbuds again sought renewal in 2016. The DRMC had been revised and a hearing was no longer required, so the Department immediately renewed the RMC license. Several days later the Department discovered that an interested party had requested a hearing on the renewal application. A hearing was held at which Starbuds argued that under DRMC § 6-214(a)(1), the Department was not authorized to conduct a hearing. In a detailed written recommendation the hearing officer recommended the Department deny the renewal request. She found that plant husbandry was not a permitted use in the I-MX-3 zone and the original license had been issued in error. She also rejected Starbuds’ argument that plant husbandry was a permitted “accessory use.” The Department adopted the findings and denied the renewal.

Starbuds filed a C.R.C.P. 106(a)(4) complaint arguing that the Department did not have the authority to hold a public hearing on the renewal application because plant husbandry was a permitted accessory use. It also alleged that the Department was equitably estopped from denying its renewal application and the denial was an unconstitutional taking. The district court affirmed the Department’s order.

On appeal, Starbuds first contended that the Department abused its discretion and legally erred in concluding that plant husbandry is not a permitted accessory use in an I-MX-3 zone and that its zoning permit did not authorize plant husbandry. An RMC license requires that the retail marijuana establishment be located in a zone “where, at the time of application for the license, plant husbandry is authorized as a permitted use under the zoning code,” with a few exceptions. The parties agreed that plant husbandry is not permitted in the I-MX-3 zone. Starbuds argued, however, that marijuana cultivation is a permitted, unlisted accessory use based on the zoning administrator’s issuance of its retail sales permit. The Department rejected this argument because “retail sales” was the only use permitted by the permit. The court of appeals held that because plant husbandry is prohibited as a primary use, it cannot be an accessory use, so the RMC license renewal application was properly denied.

Starbuds then challenged the Department’s subject matter jurisdiction to conduct a hearing under DRMC § 6-214(a)(2) and (3), given that the Department could only have issued the RMC license under § 6-214(a)(1), which contains no hearing provision. The Department separately possessed the discretionary authority to conduct a hearing under DRMC § 32-30. Further, plant husbandry is not a permitted primary or accessory use in an I-MX-3 zone, and therefore Starbuds was never eligible to receive an RMC license in the first instance.

Starbuds further argued that the district court erred in finding that equitable estoppel did not apply to provide it relief, contending that the Department’s decision to hold a hearing caused an injury. First, it was unlikely that Starbuds detrimentally changed its position in reliance on the approval in the nine days between the application approval and its revocation. The record supports the trial court’s finding that the Department mistakenly issued the RMC license in the first place, and Starbuds presented no evidence that its reliance on an unlawfully issued license was reasonable. Moreover, Starbuds was not ignorant of the provision that plant husbandry was not permitted in its zone.

Starbuds last contended that the denial of its RMC license was an unconstitutional taking because it had a reasonable expectation of continued licensure and did not receive due process. There is no vested right in the renewal of a license, and nothing precludes Starbuds’ continued operation as a retail establishment, which was the primary use for which it was zoned. And Starbuds was afforded due process through the renewal hearing. The Department’s denial of Starbuds’ RMC license renewal application did not constitute an unconstitutional taking.

The judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Governmental Immunity May Be Waived for Operation or Maintenance of Public Facility Performed by Independent Contractor

The Colorado Court of Appeals issued its opinion in Lopez v. City of Grand Junction on Thursday, July 12, 2018.

Negligence—Colorado Governmental Immunity Act—Waiver—Independent Contractor—Maintenance Work.

The underground maintenance of a public traffic light in Grand Junction breached a natural gas line. Gas from the ruptured line leaked into the surrounding ground and a sewer main and migrated to a house, resulting in an explosion. Lopez, Pierson, and Gimmeson (plaintiffs) brought negligence claims against the City of Grand Junction (City) for their resultant personal injuries and property damage. Plaintiffs’ complaint alleges, among other things, that the City breached its duty of care to safely maintain its utility, electric, and sewer lines. As pertinent here, the complaint alleged that the City contracted with Apeiron Utility Construction (Apeiron) to upgrade utility lines that powered a traffic light; during this maintenance project Apeiron ruptured a gas line; and the leaking gas resulted in the house explosion. The complaint further alleged that Apeiron’s conduct should be imputed to the City. The City moved to dismiss these negligence claims for lack of jurisdiction under C.R.C.P. 12(b)(1), asserting governmental immunity under the Colorado Governmental Immunity Act (CGIA). The court granted the motion.

On appeal, plaintiffs contended that the district court erroneously concluded that Apeiron’s conduct in maintaining the traffic light was not attributable to the City for purposes of waiving the City’s immunity under C.R.S. § 24-10-106(1)(f). For purposes of the immunity waiver in C.R.S. § 24-10-106(1)(f), a public entity maintains a public facility even if it hires an independent contractor to perform the maintenance. Here, plaintiffs met their burden to establish a waiver of immunity as to their negligence claims against the City.

Plaintiffs next asserted that the district court erred when it dismissed their negligence claim against the City as to its operation and maintenance of its sewer main. Plaintiffs asserted that the City’s failure to keep the main free of invasive roots was a failure to maintain that waived liability under the CGIA. Based on the record, plaintiffs failed to meet their burden to prove a waiver.

The dismissal of plaintiffs’ negligence claim against the City as to its operation and maintenance of its sewer main was affirmed. The dismissal of the negligence claims against the City for Apeiron’s maintenance work on the traffic light was reversed and the case was remanded.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Municipality’s Condemnation of Land Proper to Create Open Space Buffer but Not to Prevent Grocery Store Relocation

The Colorado Court of Appeals issued its opinion in City of Lafayette v. Town of Erie on Thursday, June 14, 2018.

Municipal Law—Eminent Domain—Public Use Purpose—Necessity—Bad Faith.

Lafayette is a home rule municipality, and Erie is a statutory town. Erie annexed Nine Mile Corner, entered into a disposition and development agreement, and identified King Soopers as a potential tenant. Thereafter, Lafayette determined it would condemn 22 acres of the southern portion of Nine Mile Corner to create an open space community buffer and leave the remaining 23 acres of Nine Mile Corner for Erie. Lafayette filed a petition in condemnation, and Erie responded by filing a motion to dismiss, arguing that Lafayette’s condemnation lacked a proper public purpose, thereby depriving the court of jurisdiction. The district court granted Erie’s motion.

On appeal, Lafayette argued that its condemnation had a proper public purpose and that no bad faith motivated its condemnation decision. A municipality may condemn a statutory town’s property because an open space community buffer could be a valid public purpose. Here, Erie met its burden of showing that Lafayette’s condemnation decision was motivated by bad faith, and the district court properly examined Lafayette’s finding of necessity. The district court indicated that Lafayette was motivated to keep King Soopers and its tax revenue within Lafayette and determined that Lafayette’s primary interest in the property was to interfere with Erie’s proposed commercial development. The record supported the determination that the taking for an open space community buffer was pretextual and was not a lawful public purpose.

The judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Supreme Court: Respondents’ Complaint Asserted Timely Claim Seeking Declaration that Ordinance Violated City Charter

The Colorado Supreme Court issued its opinion in City of Boulder v. Public Service Co. of Colorado on Monday, June 18, 2018.

Declaratory Judgment Actions—C.R.C.P. 57—C.R.C.P. 106—Municipal Ordinances—Finality.

This case arises out of respondents’ challenge to petitioner city’s attempt to create a light and power utility. Respondents assert that the ordinance establishing the utility violates the city’s charter. Respondents thus seek a declaratory judgment deeming that ordinance null and void. The city asserted that respondents’ complaint was, in reality, an untimely C.R.C.P. 106 challenge to a prior ordinance by which the city had concluded that it could meet certain prerequisites for the formation of the utility as prescribed by the city charter. The district court agreed with the city and dismissed respondents’ complaint for lack of jurisdiction. A division of the court of appeals, however, vacated the district court’s judgment, concluding that neither of the pertinent ordinances was final and therefore respondents’ complaint was premature.

The supreme court reversed the division’s decision and remanded the case for further proceedings on respondents’ declaratory judgment claim. Although the court agreed with the city that the division erred, contrary to petitioners’ position and the premises on which the courts below proceeded, the court agreed with respondents that the complaint asserted a viable and timely claim seeking a declaration that the ordinance establishing the utility violated the city charter. Accordingly, the court concluded that the district court had jurisdiction to hear respondents’ declaratory judgment claim, and the court remanded the case to allow that claim to proceed.

Summary provided courtesy of Colorado Lawyer.

Bills Requiring Elected Officials to Swear by “Everliving God,” Providing Representation to Indigent Defendants in Municipal Courts, and More Signed

On Friday, June 1, 2018, Governor Hickenlooper signed 10 bills into law and vetoed three bills. On Monday, June 4, the governor signed seven bills and vetoed two. To date, he has signed 367 bills into law, sent two to the Secretary of State without a signature, and vetoed five bills.

Some of the bills signed include a bill requiring elected officials who choose to swear their oath of office, rather than affirm, to do so by the “everliving God” while raising their hand, a bill allowing transportation services for foster children in order to improve high school graduation rates, a bill allowing independent representation for indigent defendants in municipal courts, and more. Some of the bills vetoed include a bill allowing out-of-state electors to participate in Colorado elections, a bill restricting parties able to receive autopsy reports for minors, and a bill allowing a credit for tobacco products shipped out of state. The bills signed and vetoed Friday are summarized here.

Signed

  • SB 18-003 – “Concerning the Colorado Energy Office,” by Sen. Ray Scott and Reps. Chris Hansen & Jon Becker. The bill repeals several programs providing energy grants for schools, and specifies several preferred energy methods.
  • SB 18-200 – “Concerning Modifications to the Public Employees’ Retirement Association Hybrid Defined Benefit Plan Necessary to Eliminate with a High Probability the Unfunded Liability of the Plan Within the Next Thirty Years,” by Sens. Jack Tate & Kevin Priola and Reps. KC Becker & Dan Pabon. The bill makes changes to the hybrid defined benefit plan administered by PERA with the goal of eliminating, with a high probability, the unfunded actuarial accrued liability of each of PERA’s divisions and thereby reach a 100% funded ratio for each division within the next 30 years.
  • SB 18-203 – “Concerning the Provision of Independent Counsel to Indigent Defendants in Municipal Courts, and, in Connection Therewith, Making an Appropriation,” by Sen. Vicki Marble and Rep. Susan Lontine. The bill requires each municipality, on and after January 1, 2020, to provide independent indigent defense for each indigent defendant facing a possible jail sentence for a violation of a municipal ordinance. Independent indigent defense requires, at minimum, that a nonpartisan entity independent of the municipal court and municipal officials oversee the provision of indigent defense counsel.
  • SB 18-219 – “Concerning the Rates a Motor Vehicle Dealer Charges a Motor Vehicle Manufacturer for Work Performed by the Dealer in Accordance with a Warranty Obligation,” by Sen. Jack Tate and Rep. Tracy Kraft-Tharp. The bill requires motor vehicle manufacturers to fulfill warranty obligations. A manufacturer must compensate each of its motor vehicle dealers in accordance with a set of standards designed to reflect the current market rate for labor and the profit margin on parts the dealer can expect to obtain. Dealers must submit certain repair orders to the manufacturer as required by the bill to establish compensation rates.
  • SB 18-230 – “Concerning Modification of the Laws Governing the Establishment of Drilling Units for Oil and Gas Wells, and, in Connection Therewith, Clarifying that a Drilling Unit may Include more than One Well, Providing Limited Immunity to Nonconsenting Owners Subject to Pooling Orders, Adjusting Cost Recovery from Nonconsenting Owners, and Modifying the Conditions upon which a Pooling Order may be Entered,” by Sen. Vicki Marble and Reps. Lori Saine & Matt Gray. Current law authorizes ‘forced’ or ‘statutory’ pooling, a process by which any interested person–typically an oil and gas operator–may apply to the Colorado oil and gas conservation commission for an order to pool oil and gas resources located within a particularly identified drilling unit. The bill clarifies that an order entered by the commission establishing a drilling unit may authorize more than one well.
  • SB 18-242 – “Concerning the Swearing of a Public Official Oath of Office,” by Sens. Vicki Marble and Reps. Timothy Leonard & Stephen Humphrey. The bill requires a person swearing an oath of office for a public office or position to do so by swearing by the everliving God. The bill also requires the person swearing the oath of office to do so with an uplifted hand.
  • SB 18-243 – “Concerning the Retail Sale of Alcohol Beverages, and, in Connection Therewith, Making an Appropriation,” by Sens. Chris Holbert & Lucia Guzman and Reps. Daneya Esgar & Hugh McKean. Under current law, effective January 1, 2019, the limitation on the maximum alcohol content of fermented malt beverages, also referred to as ‘3.2% beer’, is eliminated, thereby allowing grocery stores, convenience stores, and any other person currently licensed or licensed in the future to sell fermented malt beverages for consumption on or off the licensed premises to sell fermented malt beverages containing more than 3.2% alcohol by weight or 4% alcohol by volume, referred to as ‘malt liquor’. The bill modifies laws governing the retail sale of fermented malt beverages, which will be synonymous with malt liquor as of January 1, 2019.
  • SB 18-276 – “Concerning an Increase in the General Fund Reserve,” by Sens. Kevin Lundberg & Millie Hamner and Reps. Kent Lambert & Dave Young. For the fiscal year 2018-19, and each fiscal year thereafter, the bill increases the statutorily required general fund reserve from 6.5% to 7.25% of the amount appropriated for expenditure from the general fund.
  • HB 18-1006 – “Concerning Modifications to the Newborn Screening Program Administered by the Department of Public Health and Environment, and, in Connection Therewith, Making an Appropriation,” by Reps. Millie Hamner & Larry Liston and Sens. Bob Gardner & Dominick Moreno. The bill updates the current newborn screening program to require more timely newborn hearing screenings. The department of public health and environment (department) is authorized to assess a fee for newborn screening and necessary follow-up services. The bill creates the newborn hearing screening cash fund for the purpose of covering the costs of the program.
  • HB 18-1185 – “Concerning Changes to the State Income Tax Apportionment Statute Based on the Most Recent Multistate Tax Commission’s Uniform Model of the Uniform Division of Income for Tax Purposes Act,” by Reps. Tracy Kraft-Tharp & Cole Wist and Sens. Tim Neville & Dominick Moreno. For income tax years commencing on and after January 1, 2019, the bill generally replaces the method for sourcing of sales for purposes of apportioning the income of a taxpayer that has income from the sale of services or from the sale, lease, license, or rental of intangible property in both Colorado and other states from the cost-of-performance test in the case of services and the commercial domicile test in the case of intangible property to a market-based sourcing system.
  • HB 18-1187 – “Concerning the Lawful Use of a Prescription Drug that Contains Cannabidiol that is Approved by the United States Food and Drug Administration,” by Reps. Janet Buckner & Lois Landgraf and Sens. Dominick Moreno & John Cooke. The bill amends the definition of ‘marijuana’ to exclude prescription drug products approved by the federal food and drug administration and dispensed by a pharmacy or prescription drug outlet registered by the state of Colorado. The bill also specifies that the change does not restrict or otherwise affect regulation of or access to marijuana that is legal under Colorado’s statutory or constitutional scheme or industrial hemp and its derivatives.
  • HB 18-1244 – “Concerning the Creation of a Submarine Service License Plate to Honor the Service of Submarine Veterans, and, in Connection Therewith, Making an Appropriation,” by Rep. Jessie Danielson and Sens. Nancy Todd & Bob Gardner. The bill creates the submarine service license plate. In addition to the standard motor vehicle fees, the plate requires 2 one-time fees of $25. One fee is credited to the highway users tax fund and the other to a fund that provides licensing services.
  • HB 18-1270 – “Concerning Energy Storage, and, in Connection Therewith, Requiring the Public Utilities Commission to Establish Mechanisms for Investor-Owned Electric Utilities to Procure Energy Storage Systems if Certain Criteria are Satisfied,” by Reps. Chris Hansen & Jon Becker and Sen. Jack Tate. The bill directs the public utilities commission to adopt rules establishing mechanisms for the procurement of energy storage systems by investor-owned electric utilities, based on an analysis of costs and benefits as well as factors such as grid reliability and a reduction in the need for additional peak generation capacity.
  • HB 18-1271 – “Concerning the Authorization of Economic Development Rates to be Charged by Electric Utilities to Qualifying Nonresidential Customers,” by Reps. Matt Gray & Yeulin Willett and Sen. Jack Tate. The bill allows the public utilities commission to approve, and electric utilities to charge, economic development rates, which are lower rates for commercial and industrial users who locate or expand their operations in Colorado so as to increase the demand by at least 3 megawatts.
  • HB 18-1286 – “Concerning Allowing School Personnel to Give Medical Marijuana to a Student with a Medical Marijuana Registry Card while at School,” by Rep. Dylan Roberts and Sens. Irene Aguilar & Vicki Marble. Under current law, a primary caregiver may possess and administer medical marijuana in a nonsmokeable form to a student while the student is at school. The bill allows a school nurse or the school nurse’s designee, who may or may not be an employee of the school, or school personnel designated by a parent to also possess and administer medical marijuana to a student at school. The bill provides a school nurse or the school nurse’s designee or the school personnel designated by a parent protection from criminal prosecution if he or she possesses and administers medical marijuana to a student at school.
  • HB 18-1306 – “Concerning Ensuring Educational Stability for Students in Out-of-Home Placement, and, in Connection Therewith, Making an Appropriation,” by Rep. Dafna Michaelson Jenet and Sens. Don Coram & Dominick Moreno. The bill aligns state law with federal ‘Every Student Succeeds Act’ (ESSA) provisions relating to students in foster care, referred to in state statutes as ‘students in out-of-home placement’. ESSA permits students in out-of-home placement at any time during the school year to remain in their school of origin, as defined in the bill, rather than move to a different school upon placement outside of the home or changes in placement, unless the county department of human or social services determines that it is not in the child’s best interest to remain in his or her school of origin.
  • HB 18-1430 – “Concerning the Requirement that a State Agency Prepare a Long-Range Financial Plan,” by Reps. Kevin Van Winkle & Dave Young and Sen. Kevin Lundberg. The bill requires each state agency to develop a long-range financial plan on or before November 1, 2019, and to update the plan each of the next 4 years thereafter. The department of state, the department of treasury, the department of law, and the judicial branch shall each publish the required components of the plan for their respective state agencies. The office of state planning and budgeting shall publish the required components of the plan in its annual budget instructions for all other state agencies.

Vetoed

  • SB 18-179 – “Concerning Adjustments to Total Gross Purchases for Purposes of Calculating the Excise Tax on Tobacco Products, and, in Connection Therewith, Making an Appropriation,” by Sens. Owen Hill & Angela Williams and Reps. Edie Hooten & Dan Pabon. Currently and until September 1, 2018, a distributor can claim a credit for taxes paid on tobacco products that are shipped or transported by the distributor to a consumer outside of the state. The bill would have made the credit permanent and requires the distributor to maintain certain records related to the out-of-state sales to consumers. “While the bill’s economic benefits appear minimal, the negative health effects of cheaper tobacco are both significant and compelling,” said Governor John Hickenlooper in the veto letter. “These concerns remain from when we vetoed SB 17-139.”
  • SB 18-223 – “Concerning the Circumstances Under Which an Autopsy Report Prepared in Connection with the Death of a Minor may be Released to Certain Parties,” by Sen. Bob Gardner and Reps. Matt Gray & Terri Carver. The bill specified that an autopsy report prepared in connection with the death of a minor is confidential and may be disclosed by the county coroner to any other person or entity only in accordance with certain exceptions. “Transparency can lead to enhanced government protections, greater public and private resources, and heightened public understanding and demand for change,” wrote Governor John Hickenlooper in the veto letter. He went on to say, “An informed public has societal benefits for all at-risk children, present and future.”
  • HB 18-1181 – “Concerning Measures to Expand the Ability of Nonresident Electors to Participate in the Governance of Special Districts, and, in Connection Therewith, Allowing Nonresident Electors Who Own Taxable Property Within the Special District to Vote in Special District Elections And Allowing Such Electors to Serve on Special District Boards in a Nonvoting Capacity,” by Rep. Larry Liston and Sen. Jack Tate. The bill would have expanded the definition of ‘eligible elector’, as used in reference of persons voting in special district elections, to include a natural person who owns, or whose spouse or civil union partner owns, taxable real or personal property situated within the boundaries of the special district or the area to be included in the special district and who has satisfied all other requirements in the bill for registering to vote in an election of a special district but who is not a resident of the state. “Allowing non-Coloradans to vote in Colorado elections to select our elected representatives is poor public policy,” said Governor John Hickenlooper in the veto letter. “Out-of-state landowners enjoy Colorado’s great views, activities, and economy. While we are grateful to our out-of-state neighbors and their love of Colorado, we are unpersuaded that the State should allow those who spend days or weeks in Colorado to make decisions impacting those who make it their home each and every day.”
  • HB 18-1258 – “Concerning Authorization for an Endorsement to an Existing Marijuana License to Allow for a Marijuana Accessory Consumption Establishment for the Purposes of Consumer Education, and, in Connection Therewith, Making an Appropriation,” by Reps. Jovan Melton & Jonathan Singer and Sens. Tim Neville & Stephen Fenberg. The bill would have  authorized each licensed medical marijuana center or retail marijuana store to establish one retail marijuana accessory consumption establishment that may sell marijuana, marijuana concentrate, and marijuana-infused products for consumption, other than smoking, at the establishment. “Since Colorado approved Amendment 64 in 2012, this Administration implemented a robust regulatory system to carry out the intent of this voter-initiated measure,” said Governor John Hickenlooper in the veto letter. “Amendment 64 is clear: marijuana consumption may not be conducted ‘openly’ or ‘publicly’ on ‘in a manner that endangers others’ We find that HB 18-1258 directly conflicts with this constitutional requirement.”
  • HB 18-1427 – “Concerning a Prohibition on Conflicts of Interest of Members of the Sex Offender Management Board,” by Reps. Leslie Herod & Cole Wist and Sen. Jerry Sonnenberg. The bill would have prohibited members of the sex offender management board from receiving a direct financial benefit from the standards or guidelines adopted by the board. “We all support proper handling of conflicts. We veto this bill today, however, because it is redundant and overbroad,” wrote Governor John Hickenlooper in the veto letter. He went on to say, “Despite the issues with HB 18-1427, recent media reports raise important issues as to the need for better conflict of management interests.”

For a complete list of Governor Hickenlooper’s 2018 legislative decisions, click here.

Colorado Court of Appeals: Municipality Cannot Remove Property from Regional Transportation Authority Simply by Annexing Property

The Colorado Court of Appeals issued its opinion in Wal-Mart Stores, Inc. v. Pikes Peak Rural Transportation Authority on Thursday, May 17, 2018.

Annexation—Colorado Constitution Article XX, section 6—Regional Transportation Authority—Sales Tax—Use Tax—Matter of Mixed Local and State Concern.

Colorado’s Regional Transportation Authority law (RTA Law) allows municipalities, counties, special districts, and the state to combine to provide regional transportation services and to collect sales and use taxes to pay for such services. In 2014, the City of Fountain annexed a parcel of vacant land (the Property) from unincorporated El Paso County. The Property was within the boundaries of the Authority when it was formed in 2004. Fountain, a home rule city in El Paso County, has never been a member of the Authority. After the Pikes Peak Rural Transportation Authority (Authority) announced its intention to collect a 1% sales tax from recently built retail businesses on the Property, the operators of the businesses, Wal-Mart Stores, Inc. and Sam’s West, Inc. (collectively, plaintiffs) filed a declaratory judgment action against the Authority and the Colorado Department of Revenue (DOR), which collects sales tax on behalf of both Fountain and the Authority. Plaintiffs sought a declaration that defendants could not collect sales and use taxes on the Property because the Property was now part of Fountain, which was not a member of the Authority. On cross-motions for summary judgment the district court declared that the taxes could be collected and entered summary judgment for defendants.

On appeal, plaintiffs first argued that Fountain’s annexation of the Property removed it from the Authority’s boundaries and that the Authority’s attempt to tax retail sales outside of its boundaries violates the RTA law. A municipality may annex property from unincorporated parts of the county in which it lies. However, that annexation power does not permit a municipality to automatically remove territory from other political subdivisions of the state. The Property remained within the Authority’s boundaries.

Plaintiffs’ also argued that under C.R.S. § 43-4-603(2)(d) the Property was no longer within the boundaries of the Authority due to its annexation by Fountain, which is not a “member of the combination” constituting the Authority and must be deemed to be outside the Authority’s boundaries under RTA Law. The court of appeals concluded that the legislature intended the statute to define the boundaries of an authority at its inception, not to define requirements for changing those boundaries thereafter. Further, the RTA law defines a specific procedure for how territory may be removed from an established authority, which was not followed here. Fountain’s annexation of the Property did not remove it from the Authority’s boundaries.

Plaintiffs further contended that the Authority’s statutory power to tax is preempted by Article XX, section 6 of the Colorado Constitution, which they argued gives home rule cities “plenary” and “sole” authority over local concerns such as municipal taxation and supersedes state statutes that conflict with local laws in these areas. Colorado case law has long recognized that transportation regulation is generally a matter of mixed local and state concern, and the Colorado Constitution does not give home rule cities sole authority over taxation within their boundaries. The provision of transportation services to the Property and the imposition of taxes to pay for such services is not a matter of purely local concern that under article XX, section 6 would supersede conflicting state law. Further, plaintiffs failed to establish that the state statute granting the Authority the right to impose such a tax conflicts with Fountain’s power to impose its own taxes. The district court did not err in rejecting plaintiffs’ preemption argument and concluding that the Authority’s sales tax on eligible transactions on the Property was valid.

Lastly, the court rejected plaintiffs’ argument that the district court erred by failing to address all of the factors that courts frequently consider in determining whether an issue is a matter of local, mixed, or state concern.

The judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Supreme Court: Road Condition Did Not Create “Unreasonable Risk,” Therefore CGIA Applied

The Colorado Supreme Court issued its opinion in City & County of Denver v. Dennis on Monday, May 21, 2018.

Colorado Governmental Immunity Act—Sovereign Immunity.

The supreme court considered whether the City and County of Denver waived its immunity under the Colorado Governmental Immunity Act (CGIA). After a motorcycle accident, plaintiff sued the City and County of Denver, and alleged that Denver had waived its immunity under the CGIA because the road on which plaintiff was traveling constituted a dangerous condition that physically interfered with the movement of traffic. To prove a dangerous condition, a plaintiff must prove four elements, one of which is that the road constituted an unreasonable risk to the health and safety of the public.

The court defined “unreasonable risk” in this context as a road condition that creates a chance of injury, damage, or loss that exceeds the bounds of reason. This determination will be fact specific, and in this case, the road did not create an unreasonable risk to the health and safety of the public. Nor did the condition of the road physically interfere with the movement of traffic.

The court reversed the court of appeals’ judgment.

Summary provided courtesy of Colorado Lawyer.

Colorado Supreme Court: Aspen’s Bag Surcharge is Cost Aimed at Waste Reduction, Not Tax Subject to TABOR

The Colorado Supreme Court issued its opinion in Colorado Union of Taxpayers Foundation v. City of Aspen on Monday, May 21, 2018.

Taxation—Constitutional Law—Local Government Law.

The supreme court considered whether a $0.20 charge on paper bags is a tax subject to the Taxpayer’s Bill of Rights (TABOR). The court held that if the primary purpose of a charge is to raise revenue for the general expenses of government, the charge is a tax. Conversely, the court concluded that a charge is not a tax if the primary purpose of a charge is to defray the reasonable direct and indirect costs of providing a service or regulating an activity, because such a charge does not raise revenue for the general expense of government.

After analyzing the charge in this case, the court held that this charge is not a tax. Aspen imposed this charge as part of a regulatory program aimed at waste management, and the $0.20 charge for the right to use a paper bag bears a reasonable relationship to Aspen’s cost of permitting that use. Because this charge is a not a tax, it is exempt from TABOR’s requirements.

The court affirmed the court of appeals’ judgment.

Summary provided courtesy of Colorado Lawyer.

Bills Signed Regarding Ground Water Commission Approval of Aquifer Storage and Recovery Plans, Repealing Procedures to Fill Municipal Vacancies, and More

On Monday, April 9, 2018, Governor Hickenlooper signed 12 bills into law. To date, he has signed 126 bills into law and sent one to the Secretary of State without a signature. The bills signed Monday include a bill to increase transparency in higher education statutes concerning military service, a bill repealing procedures to fill vacancies in candidate nominations for municipal elections, a bill allowing the Colorado Oil and Gas Commission to roll-over its year-end balances in order to facilitate financing, and more. The bills signed Monday are summarized here.

  • SB 18-107 – “Concerning the Repeal of Procedures to Fill Vacancies in Candidate Nominations for Elections Conducted under the ‘Colorado Municipal Code of 1965,'” by Sen. Rachel Zenzinger and Rep. Dan Thurlow. The bill repeals the process by which a vacancy in nomination may be filled for an election conducted under the ‘Colorado Municipal Code of 1965’ and makes conforming amendments.
  • HB 18-1098 – “Concerning the Expanded Ability of the Colorado Oil and Gas Conservation Commission to Finance the Remediation of Oil and Gas Locations,” by Reps. Lori Saine & Matt Gray and Sen. Vicki Marble. Under current practice, expenditures by the Colorado oil and gas conservation commission to address the mitigation of adverse environmental impacts of oil and gas operations are paid from the environmental response account of the oil and gas conservation and environmental response fund, and the year-end balance of the account transfers into the fund. The bill specifies that the year-end balance of the account remains in the account.
  • HB 18-1112 – “Concerning Covered Health Care Services Provided by a Pharmacist,” by Reps. Jon Becker & Daneya Esgar and Sen. Larry Crowder. The bill requires a health benefit plan to provide coverage for health care services provided by a pharmacist if the services are provided within a health professional shortage area and the health benefit plan provides coverage for the same services provided by a licensed physician or advanced practice nurse.
  • HB 18-1134 – “Concerning Eligibility of Kindergarten Students Funded through Early Childhood At-risk Enhancement Positions,” by Reps. Brittany Pettersen & James Wilson and Sens. Michael Merrifield & Beth Martinez Humenik. If a district chooses to use early childhood at-risk enhancement (ECARE) positions to enroll children in the district’s full-day kindergarten program, children using the ECARE positions must satisfy at least one of the eligibility requirements of the Colorado preschool program.
  • HB 18-1145 – “Concerning the Repeal of Laws Regulating Ballot Issue Petition Circulators that have been Permanently Enjoined from Enforcement,” by Rep. Edie Hooten and Sen. Dominick Moreno. The bill repeals laws ordered permanently enjoined from enforcement in Independence Inst. v. Gessler , 936 F. Supp. 2d 1256 (D. Colo. 2013).
  • HB 18-1148 – “Concerning the Prohibition Against a Carrier Requiring Step Therapy for Covered Persons with Stage Four Advanced Metastatic Cancer,” by Rep. Dafna Michaelson Jenet and Sen. Larry Crowder. The bill prohibits a carrier that issues a health benefit plan that covers treatment for stage four advanced metastatic cancer from requiring a cancer patient to undergo step therapy prior to receiving a drug approved by the United States food and drug administration if use of the approved drug is consistent with best practices for treatment of the cancer and as long as the drug is on the carrier’s prescription drug formulary.
  • HB 18-1172 – “Concerning Money Allocated from an Appropriation from the Marijuana Tax Cash Fund to a Designated Managed Service Organization to Implement its Community Action Plan,” by Rep. Dave Young and Sen. Kent Lambert. The bill amends the ‘Increasing Access to Effective Substance Use Disorder Services Act’ to clarify that a designated managed service organization (designated MSO) may use money allocated to it from the marijuana tax cash fund for expenditures for substance use disorder services and for any start-up costs or other expenses necessary to increase capacity to provide such services and may allow allocations to roll forward.
  • HB 18-1199 – “Concerning a Process for the Ground Water Commission to Use for Approving Aquifer Storage-and-Recovery Plans, and, in Connection Therewith, Requiring that the Ground Water Commission Promulgate Rules Governing its Implementation of the Process,” by Reps. Marc Catlin & Barbara McLaughlin and Sen. Don Coram. The bill authorizes a person to apply to the ground water commission (commission) for approval of an aquifer storage-and-recovery plan and requires the commission to promulgate rules governing the application process and the requirements that an aquifer storage-and-recovery plan must meet to be approved.
  • HB 18-1228 – “Concerning Increasing Transparency in Higher Education Statutes Relating to Military Service,” by Reps. Justin Everett & Dafna Michaelson Jenet and Sen. Leroy Garcia. The bill creates a new article 7.4 in title 23, Colorado Revised Statutes, with the article heading ‘Military Members, Veterans, and Dependents’, in order to locate physically within the same article, whenever practicable, higher education provisions relating to the military.
  • HB 18-1238 – “Concerning the Continuation of the Wildland-Urban Interface Training Advisory Board, and, in Connection Therewith, Implementing the Recommendations of the 2017 Sunset Report by the Department of Regulatory Agencies,” by Reps. Dominique Jackson & Marc Catlin and Sen. Vicki Marble. The bill implements the recommendation of the Department of Regulatory Agencies to sunset the wildland-urban interface training advisory board.
  • HB 18-1246 – “Concerning Updates to the “Colorado Nursery Act”, and, in Connection Therewith, Modernizing the Act and Protecting Agriculture from Pests, Diseases, and Noxious Weeds,” by Rep. Jessie Danielson and Sen. Don Coram. The bill updates the ‘Colorado Nursery Act’, last amended in 2009, to protect nursery stock.
  • HB 18-1293 – “Concerning Payment of Expenses of the Legislative Department,” by Reps. Crisanta Duran & Patrick Neville and Sens. Kevin Grantham & Lucia Guzman. The bill makes appropriations for matters related to the legislative department for the 2018-19 state fiscal year.

For a list of all of Governor Hickenlooper’s 2018 legislative decisions, click here.

Colorado Court of Appeals: Civil Service Commission Must Defer to Hearing Officer’s Findings of Fact

The Colorado Court of Appeals issued its opinion in Johnson v. City & County of Denver on Thursday, March 22, 2018.

Police Officer DisciplineUse of ForceStandard of Review in Disciplinary Appeals.

Johnson, a Denver police officer, worked off-duty at a nightclub in downtown Denver. One night Brandon and his friends left the nightclub and began arguing with Johnson about Johnson’s earlier interaction with one of their friends. Johnson moved the group under a High Activity Location Observation (HALO) camera, which video-recorded their interactions (no audio was recorded). The video revealed that everyone in the group was visibly intoxicated. Eventually only Brandon and another man remained. Johnson then told Brandon he was going to detox and to turn around to be handcuffed. Brandon profanely told Johnson not to touch him. Johnson then suddenly moved toward Brandon and shoved him with both hands near the neck. Brandon fell backward onto some stairs and was handcuffed.

Brandon filed a disciplinary complaint against Johnson. The Chief of Police determined that Johnson had violated Denver Police Department Rules and Regulations RR-306 (inappropriate force) and suspended him for 30 days without pay. The Manager of Safety (MOS) approved the discipline imposed. Johnson appealed to a civil service commission hearing officer. The hearing officer reversed the suspension because (1) the MOS had erroneously applied the deadly force rather than the non-deadly force standard to Johnson’s conduct, and (2) the MOS had failed to present sufficient evidence to create a reasonable inference that finding a violation of RR-306 was correct.

The City appealed to the Civil Service Commission (Commission). The Commission reversed the hearing officer. The district court affirmed the Commission.

On appeal, Johnson contended that the Commission abused its discretion when it made its own findings of fact from a video recording of events at issue and rejected contrary facts found by the hearing officer. The “video exception” was created in a prior Commission case and is described as “statements an officer makes in direct contradiction to objectively verifiable facts in an otherwise authenticated video of the scene are not entitled to a presumption of truth.” Both the Denver City Charter’s and the Denver Civil Service Commission Rules’ standards of review govern the Commission’s review of the MOS’s order and the hearing officer’s findings, and they require the Commission to defer to the hearing officer’s findings of fact. They do not address a video exception, which is beyond the Commission’s authority to make. The video exception is contrary to law and invalid, and both the Commission and district court erred in relying on it to reverse the hearing officer’s decision.

The Court of Appeals further held that the Denver Police Department’s use of force policy articulates a single standard for reviewing an officer’s use of force and that separate standards do not exist for deadly and non-deadly force. Accordingly, the Commission correctly determined that the hearing officer erred in her application of the use of force standard.

Despite finding that the Commission erred in relying on the video exception to reverse the hearing officer’s decision, the Commission nevertheless reached the right result because (1) the hearing officer erroneously concluded that separate standards existed for deadly and non-deadly force, and (2) the hearing officer did not properly defer to the MOS’s findings as required by the clearly erroneous standard of review applicable to hearing officers and as set forth in the Commission’s rules. The hearing officer erred in substituting her own findings for those of the MOS.

The judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Supreme Court: Hospital Has No Private Right of Action Against Police Department for Cost of Treatment

The Colorado Supreme Court issued its opinion in City of Arvada ex rel. Arvada Police Department v. Denver Health & Hospital Authority on Monday, October 9, 2017.

Prisons—Costs of Incarceration.

Arvada police arrested a severely injured man and sent him to Denver Health Medical Center. Denver Health and Hospital Authority (Denver Health) sued Arvada for the cost of care, claiming that C.R.S. § 16-3-401, which says that persons in custody “shall be . . . provided . . . medical treatment,” required Arvada to pay the hospital for the detainee’s care. Here, the Colorado Supreme Court clarified that (1) whether a statute provides a private right of action is a question of standing, and (2) the same test for a private right of action under Allstate Insurance Co. v. Parfrey, 830 P.2d 905 (Colo. 1992), applies for claims against both governmental and non-governmental defendants. Applying Parfrey to Denver Health’s statutory claim, the court held that C.R.S. § 16-3-401 does not provide hospitals a private right of action to sue police departments for the cost of providing healthcare to persons in custody. Accordingly, it concluded that the trial court erred by granting summary judgment to Denver Health on the statutory claim. The court remanded the case for consideration of Denver Health’s unjust enrichment claim based on Arvada’s statutory duty to provide care for persons in custody.

Summary provided courtesy of Colorado Lawyer.