City of Northglenn v. Adams County Board of County Commissioners

COLORADO COURT OF APPEALS 2016COA181

Court of Appeals No. 15CA1743
Adams County District Court No. 15CV30862
Honorable F. Michael Goodbee, Judge

City of Northglenn, Colorado, a Colorado municipality; City of Aurora,
Colorado, a Colorado municipality; City of Commerce City, Colorado, a
Colorado municipality,

Plaintiffs-Appellants and Cross-Appellees,

v.

Board of County Commissioners, Adams County, Colorado, a Colorado
statutory county,

Defendant-Appellee and Cross-Appellant.

JUDGMENT REVERSED

Division VII
Opinion by JUDGE BERGER
Terry and Booras, JJ., concur

Announced December 15, 2016

Hoffman Parker Wilson & Carberry P.C., Corey Y. Hoffman, Denver, Colorado,
for Plaintiff-Appellant and Cross-Appellee City of Northglenn, Colorado

Michael Hyman, City Attorney, Teresa L. Kinney, Assistant County Attorney,
Daniel L. Money, Assistant County Attorney, Aurora, Colorado, for Plaintiff-
Appellant and Cross-Appellee City of Aurora, Colorado

Robert D. Sheesley, City Attorney, for Plaintiff-Appellant and Cross-Appellee
Colorado, City of Commerce City

Heidi M. Miller, County Attorney, Jennifer D. Stanley, Assistant County
Attorney, Brighton, Colorado, for Defendant-Appellee and Cross-Appellant
¶1 In 2012, Colorado voters adopted Amendment 64, which

legalized recreational marijuana use as a matter of state law, under

particular circumstances. To effectuate Amendment 64, the

General Assembly enacted the retail marijuana sales tax, sections

39-28.8-101 to -606, C.R.S. 2016, which Colorado voters approved

through Proposition AA. The retail marijuana sales tax authorizes

the state to levy a statewide special sales tax on retail marijuana.1

¶2 In 2014, Adams County voters approved a resolution

authorizing the county to levy a countywide special sales tax on

retail marijuana.2 Three home rule cities in Adams County

challenged the Adams County tax, claiming that it was

unauthorized by Colorado law. Adams County asserted that the

1 “‘Retail marijuana’ means all parts of the plant of the genus
cannabis whether growing or not, the seeds thereof, the resin
extracted from any part of the plant, and every compound,
manufacture, salt, derivative, mixture, or preparation of the plant,
its seeds, or its resin, including marijuana concentrate.” § 39-28.8-
101(7), C.R.S. 2016.
2 A general sales tax applies to “all sales and purchases of tangible

personal property at retail.” § 39-26-104(1)(a), C.R.S. 2016. A
special sales tax only applies to certain sales and purchases of
tangible personal property at retail. See, e.g., § 29-2-103.5(1)(a),
C.R.S. 2016. Both general and special sales taxes can apply to the
same sale or purchase. Id.
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cities did not have standing, and, on the merits, that the county tax

was authorized by the retail marijuana sales tax.

¶3 We conclude that the district court correctly determined that

the cities had standing to bring their claims. On the merits, we

hold that Adams County does not have either constitutional or

statutory authorization to impose a special sales tax on retail

marijuana. Accordingly, we hold that the Adams County special

sales tax is invalid and reverse the judgment.

I. Relevant Facts and Procedural History

¶4 Following the passage of Amendment 64, Colorado voters

approved a number of special sales taxes on retail marijuana. At

the state level, the General Assembly enacted and voters approved

the retail marijuana sales tax, imposing a statewide special sales

tax. At the county level, the Adams County Board of County

Commissioners (the County) proposed a countywide special sales

tax, which Adams County voters approved. At the municipal level,

voters of the cities of Aurora, Northglenn, and Commerce City

(collectively the Cities) also approved special sales taxes.

¶5 These special sales taxes, which only apply to retail

marijuana, were imposed in addition to all pre-existing general

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sales taxes, which apply to the sale of any good or service, including

retail marijuana. As a result, retail marijuana sold in the Cities was

subject to a special sales tax at the city, county, and state levels, in

addition to general sales taxes.

¶6 While the Cities anchored their authority to enact special sales

taxes to their constitutionally granted powers as home rule cities,

the County claimed its authority emanated from sections 39-28.8-

101 to -606, C.R.S. 2016 (the retail marijuana sales tax), and

section 29-2-103, C.R.S. 2016 (its general sales tax authority).

¶7 The Cities disagreed with the County’s reading of the retail

marijuana sales tax and claimed that it did not expressly grant the

County authority to impose a special sales tax and, therefore, the

tax was invalid. Both the Cities and the County sought legislative

clarification from the General Assembly on this question, but the

General Assembly declined to enact any clarifying legislation with

respect to county special sales taxes.3

3 Because there may be multiple reasons why the General Assembly
does not enact legislation, drawing inferences of legislative intent
from what it does not enact is subject to considerably more
speculation than drawing inferences of legislative intent from what
it does enact. People v. Adams, 2016 CO 74, ¶ 22 n.2. Accordingly,
3
¶8 After the County enacted ordinances and regulations

implementing the countywide special sales tax, the Cities sued the

County, seeking an injunction and declaratory judgment against

the tax. The Cities moved for a preliminary injunction and the

County moved to dismiss for lack of standing and for failure to state

a claim upon which relief could be granted. The district court held

that the Cities had standing, but denied their motion for a

preliminary injunction, finding that they had not met several of the

requirements for a preliminary injunction.

¶9 The district court converted the County’s motion for failure to

state a claim upon which relief could be granted into a motion for

summary judgment and granted summary judgment to the County.

The court concluded that there was sufficient legislative authority to

support the countywide special sales tax.

II. The Cities Have Standing

¶ 10 Because standing is a threshold jurisdictional question, we

must address it first. City of Greenwood Village v. Petitioners for

Proposed City of Centennial, 3 P.3d 427, 436 (Colo. 2000).

our analysis does not rely upon the fact that the General Assembly
declined to pass such legislation.
4
¶ 11 Plaintiffs seeking a declaratory judgment must demonstrate

that there is “an existing legal controversy that can be effectively

resolved by a declaratory judgment, and not a mere possibility of a

future legal dispute over some issue.” Bd. of Cty. Comm’rs v.

Bowen/Edwards Assocs., Inc., 830 P.2d 1045, 1053 (Colo. 1992).

They must show that (1) they will suffer an injury in fact from the

challenged regulation and (2) the injury will be to a legally protected

interest. City of Greenwood Village, 3 P.3d at 437. Colorado courts

have held that this two-pronged test has traditionally been

“relatively easy to satisfy.” Ainscough v. Owens, 90 P.3d 851, 856

(Colo. 2004). We address each element of the test in turn.

¶ 12 First, we must determine whether the County’s special sales

tax would cause the Cities to suffer an injury in fact. The district

court heard testimony from the interim deputy city manager for the

city of Aurora and the director of finance for the city of Northglenn

on this question. Both cities claimed the County’s special sales tax

would impair their tax revenues because it would place retail

marijuana businesses in the cities at a competitive disadvantage to

retail marijuana businesses in other jurisdictions, such as Denver,

which only imposed the state and local special sales taxes.

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¶ 13 Considering this testimony, we conclude, like the district

court, that the County’s special sales tax likely would harm the

fiscal interests of the Cities by reducing their tax revenues. Like in

Denver Urban Renewal Authority v. Byrne, “the general fund of [the

Cities] will arguably be directly and substantially affected.” 618

P.2d 1374, 1380 (Colo. 1980).4

¶ 14 On this record, the Cities suffered at least prospective

economic harm from the imposition of the County’s special sales

tax. Present or threatened economic harm constitutes an injury in

fact. Ainscough, 90 P.3d at 856; see also Byrne, 618 P.2d at 1381.

¶ 15 Second, the Cities suffered an injury to a legally protected

interest. The Cities are home rule cities and “[t]he Colorado

Constitution confers upon a home rule city a legally protected

interest in its local concerns.” Byrne, 618 P.2d at 1381. “[C]ity

budgeting and the assessment and collection of taxes for municipal

purposes” are local concerns and each city has a legally protected

4 We reject the County’s argument that Denver Urban Renewal
Authority v. Byrne, 618 P.2d 1374 (Colo. 1980), and the other cases
the Cities rely on to demonstrate standing are inapposite. To the
contrary, in Denver Urban Renewal Authority, like the Cities here,
the home rule cities exercised their constitutional authority to
protect their fiscal integrity. Id. at 1380.
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interest in them. City of Colorado Springs v. State, 626 P.2d 1122,

1127 (Colo. 1980). Put another way, the fiscal integrity of a home

rule city is a legally protected interest of the city. The imposition of

the County’s special sales tax would create a nonspeculative risk

that the Cities’ tax collections would be impaired, which in turn

would harm the fiscal integrity of the Cities. These circumstances

are sufficient to conclude that the Cities would suffer an injury to a

legally protected interest.

¶ 16 For these reasons, the district court correctly held that the

Cities have standing.5

III. A County May Only Impose a Special Sales Tax When There Is
Express Constitutional or Legislative Authority to Do So

¶ 17 It is important to distinguish what is at issue in this case from

what is not at issue. The Cities have not challenged the County’s

authority to impose a general sales tax that taxes all goods or

services, including retail marijuana, sold in the County. Instead,

the Cities only challenge the County’s authority to impose a special

sales tax that taxes only retail marijuana.

5Because we conclude that the Cities have traditional standing, we
do not address the Cities’ argument that they also have parens
patriae standing.
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¶ 18 Colorado counties are political subdivisions of the state. Bd.

of Cty. Comm’rs v. Love, 172 Colo. 121, 125, 470 P.2d 861, 862

(1970). As such, “they possess only those authorities expressly

conferred upon them by the state and those incidental implied

powers reasonably necessary to carry out their expressly granted

powers.” Colorado Mining Ass’n v. Bd. of Cty. Comm’rs, 199 P.3d

718, 729 (Colo. 2009).

¶ 19 In Colorado, a grant of taxation authority, either to the state

itself or to one of its political subdivisions, must be explicit. “The

taxing power of the state is exclusively a legislative function, and

taxes can be imposed only in pursuance of legislative authority,

there being no such thing as taxation by implication.” Skidmore v.

O’Rourke, 152 Colo. 470, 473, 383 P.2d 473, 474 (1963) (quoting

City & Cty. of Denver v. Lewin, 106 Colo. 331, 336, 105 P.2d 854,

858 (1940)). Thus, a county has no power to impose a tax unless

the General Assembly or the Colorado Constitution directly

authorizes it. Skidmore, 152 Colo. at 474-75, 383 P.2d at 475.

¶ 20 The County makes no claim of authority under the Colorado

Constitution. Instead, the County relies on its general sales tax

authority, section 29-2-103, and the retail marijuana sales tax as

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the sources of its authority to enact a special sales tax on retail

marijuana.

IV. The County General Sales Tax Authority Does Not Confer
Express Authority on Colorado Counties to Enact a Special Sales
Tax

¶ 21 While the County appears to contend in the text of its special

sales tax resolution that its general sales tax authority, contained in

section 29-2-103, also confers authority to impose a countywide

special sales tax on retail marijuana, the context of Article 2, Title

29, within which section 29-2-103 resides, demonstrates that it

authorizes only a general and not a special sales tax. Moreover, the

county conceded at oral argument that it does not rely upon section

29-2-103 as stand-alone authority to impose a special sales tax.

V. The Colorado Retail Marijuana Sales Tax Does Not Confer
Express Authority on Colorado Counties to Enact a Special Sales
Tax

¶ 22 The question presented here is whether the retail marijuana

sales tax, specifically section 39-28.8-203(1)(a)(VI), C.R.S. 2016,

grants the County express authority to enact its special sales tax.

This is a question of statutory interpretation.

¶ 23 Statutory interpretation presents a question of law we review

de novo. Sperry v. Field, 205 P.3d 365, 367 (Colo. 2009). “When

9
interpreting a statute, we must ascertain and effectuate the intent

of the General Assembly.” Vanderborgh v. Krauth, 2016 COA 27,

¶ 8. To do so, we look first to the statutory language, giving words

and phrases their plain and ordinary meanings according to the

rules of grammar and common usage. § 2-4-101, C.R.S. 2016; Krol

v. CF & I Steel, 2013 COA 32, ¶ 15.

¶ 24 “We read the language in the dual contexts of the statute as a

whole and the comprehensive statutory scheme, giving consistent,

harmonious, and sensible effect to all of the statute’s language.”

Krol, ¶ 15. After doing this, if we determine that the statute is not

ambiguous, we enforce it as written and do not resort to other rules

of statutory construction. Id.

¶ 25 In enacting the retail marijuana sales tax, the General

Assembly enacted a statewide retail marijuana sales tax as well as a

mechanism to share that tax revenue with local governments. In so

doing, the General Assembly also provided that the new sales tax on

marijuana would not pre-empt or displace other authorized local

government taxes on retail marijuana:

Nothing in this paragraph (a) shall be
construed to prevent a local government from
imposing, levying, and collecting any fee or any

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tax upon the sale of retail marijuana or retail
marijuana products or upon the occupation or
privilege of selling retail marijuana products,
nor shall the provisions of this paragraph (a)
be interpreted to affect any existing authority
of a local government to impose a tax on retail
marijuana or retail marijuana products to be
used for local and municipal purposes;
however, any local tax imposed at other than
the local jurisdiction’s general sales tax rate
shall not be collected, administered, and
enforced by the department of revenue
pursuant to section 29-2-106, C.R.S., but
shall instead be collected, administered, and
enforced by the local government itself.

§ 39-28.8-203(1)(a)(VI).

¶ 26 The County argues that this section gives it the express

authority to enact a special sales tax on retail marijuana. We

conclude that this statutory language does not bear the weight of

the County’s claim.

¶ 27 Essentially, the County argues that because the statute does

not prohibit it from imposing a special sales tax, the statute

necessarily authorized it to impose such a tax. This argument runs

squarely into, and violates, two principles: (1) that the grant of

taxing authority must be explicit not implied, Skidmore, 152 Colo.

at 474-75, 383 P.2d at 475; and (2) that counties only have those

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powers expressly conferred by the state, Colorado Mining Ass’n, 199

P.3d at 729.

¶ 28 Every statute cited by the parties that authorizes a county to

impose a sales tax, and every such statute that we have

independently found, share common attributes. Each of the

statutes explicitly states that the counties are “authorized to levy”

or “may levy” a county sales tax. See, e.g., § 29-2-103.5(1)(b),

C.R.S. 2016; § 30-11-107.5(1), C.R.S. 2016. This essential feature

is not present in section 39-28.8-203(1)(a)(VI).

¶ 29 The absence of any limitation whatsoever on the tax rate that

could be imposed by Colorado counties further supports our

conclusion that no express taxation authority is conferred by

section 39-28.8-203(1)(a)(VI). Every other legislative grant of special

sales tax power of which we are aware has rate parameters or caps.

For instance, the special sales tax for the rental of personal

property limits the county to levying a tax of “one percent of the

amount of the rental payment paid or charged to persons who rent

such personal property.” § 30-11-107.7(2)(a), C.R.S. 2016.

¶ 30 We cannot infer that the General Assembly granted unlimited

special sales tax authority to counties because such a grant could,

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and likely would, frustrate the operation of Amendment 64, which

is a matter of compelling state interest. Under the County’s

argument, it could impose a special retail marijuana sales tax at

such a level that it would essentially prohibit the sale of marijuana

in home rule cities, whose citizens had voted to permit the sale of

marijuana. That result would violate the constitutional structure

created by Amendment 64.

¶ 31 For all of these reasons, we hold that section 39-28.8-

203(1)(a)(VI) does not authorize the County to impose a special sales

tax on retail marijuana.6 Therefore, the county special sales tax is

invalid.

VI. The Election Approving the County’s Special Sales Tax Does
Not Constitute Legislative Authority to Impose the Tax

¶ 32 The County nevertheless argues that, because it held a valid

election authorizing the special sales tax, we do not have the

6 In contrast, home rule cities, such as Northglenn, Aurora, and
Commerce City, enjoy “the full right of self-government in both local
and municipal matters.” Colo. Const. art. XX, § 6(h); see also Webb
v. City of Black Hawk, 2013 CO 9, ¶ 4. Because the question is not
before us, we do not decide whether they have the constitutional
authority to impose their own special sales tax on the sale of retail
marijuana. See Colo. Const. art. XX, § 6; see also Berman v. City &
Cty. of Denver, 156 Colo. 538, 400 P.2d 434 (1965).
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authority to overturn the election results and enjoin the collection

of the tax.

¶ 33 We reject this argument because whether the County held a

valid election is irrelevant to whether it had the legislative power to

impose a special sales tax. Unless the General Assembly or

Colorado Constitution authorized the County to impose such a tax,

the County simply does not have the power to enact such a tax,

irrespective of a valid election.

VII. Collection of the County Special Sales Tax

¶ 34 Because we hold that the special tax is invalid, we need not

and do not address whether the County has the authority to

promulgate regulations in connection with the collection of such a

tax.

VIII. Conclusion

¶ 35 The County’s special sales tax on the sale of retail marijuana

is invalid. Accordingly, the district court’s judgment is reversed.

JUDGE TERRY and JUDGE BOORAS concur.

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