Proposition 110 proposes amending the Colorado statutes to:

increase the state’s sales and use tax rate from 2.9 percent to 3.52 percent for 20 years;

distribute the new tax revenue for transportation as follows: 45 percent to the state; 40 percent to local governments; and 15 percent for multimodal transportation projects; and

permit the state to borrow up to $6.0 billion for transportation projects and limit the total repayment amount, including principal and interest, to $9.4 billion over 20 years.

Current state highway funding. Maintenance and construction of state highways are funded through the Colorado Department of Transportation (CDOT). CDOT receives most of its revenue from federal and state gasoline and diesel fuel taxes and from state vehicle registration fees, as shown in Figure 1. For state budget year 2017-18, CDOT spent approximately $1.2 billion, or roughly 85 percent of its revenue, on state highway maintenance and operations and $220.5 million, or 15 percent, on construction.

Sales and use tax. The state sales tax is paid on the purchase price of most items. Some items are exempt, such as food bought at grocery stores, prescription drugs, household utilities, and gasoline. The tax applies to some services, including telephone service, food and drink service at restaurants and bars, and short-term lodging. The state use tax is paid when sales tax was due but not collected. In addition to the state’s 2.9 percent rate, most cities and counties also have sales and use taxes. Combined state and local sales tax rates in Colorado range from 2.9 percent to 11.2 percent, depending on where a purchase is made

Amount of the tax increase. Beginning January 1, 2019, the measure increases the state sales tax rate from 2.9 percent to 3.52 percent for 20 years. The measure is estimated to raise about $767 million in the first year that it applies. Under the measure, the average amount of sales tax paid by a Colorado family with an average income of $74,374 is estimated to increase by $131.

Use of new tax revenue for transportation. The additional tax revenue collected under Proposition 110 is dedicated to the following uses:

45 percent to CDOT for state transportation projects, including debt repayment;

40 percent to local governments for transportation projects; and

15 percent for multimodal transportation projects.

The state’s share of the additional tax revenue will be spent by CDOT on state transportation projects that address safety, maintenance, and congestion and to repay borrowing under this measure for transportation projects. The Transportation Commission, an 11-member body appointed by the Governor to prioritize statewide transportation needs, will determine the use of these funds. The local share of the additional revenue will be distributed to every city and county for transportation projects based on an existing formula in state law. The additional tax revenue identified for multimodal transportation projects will mostly be spent by local governments. Multimodal transportation provides additional transportation options and includes bike paths, sidewalks, and public transit, such as buses, rail, and rides for the elderly and disabled.

Bond sale and repayment. Proposition 110 permits CDOT to borrow up to $6.0 billion by selling transportation revenue bonds. The total repayment amount, including principal and interest, is limited to $9.4 billion over 20 years, and the state must reserve the right to repay the bonds ahead of schedule without penalty. Assuming the repayment schedule is for the full $9.4 billion over 20 years, the average annual repayment cost will be $470 million. Actual repayment amounts will vary depending on the terms of the revenue bonds. The measure creates a citizen oversight commission to annually report on the use of the bond proceeds.

Past bond sale and repayment for transportation projects. In 1999, voters approved the sale of $1.5 billion worth of bonds for transportation projects. The state was required to use the borrowed money to pay for up to 24 transportation projects across the state. Repayment costs for the 1999 bonds totaled $2.3 billion. The debt was fully repaid through various state and federal sources in December 2016.