Signs of good times were everywhere. Thousands of homes popped up east and northeast of Colorado Springs while businesses flocked to Powers Boulevard.

Growth was seen by some residents as a double-edged sword as the city and El Paso County wrestled with zoning issues, drainage problems and a crowded jail.

The county’s assessed value nearly doubled to $6.5 billion since 1998, and sales tax revenues soared by the tens of millions.

When the economy tanked last year, so did sales tax revenues, which comprise a significant part of city and county budgets. The county’s 1 percent sales tax generates about $68 million, or 28 percent, of its budget. The city’s 2.5 percent sales tax brings in about $125 million, or 35 percent of its budget.

But it’s not just the recent recession that’s squeezed local government. Other factors have been bearing down for years.

While the city and county budgets have grown faster than inflation since 1998, an array of forces have kept revenue from growing even faster.

Chief among them is the Taxpayer’s Bill of Rights, a constitutional measure that limits revenue growth and requires tax increases and debt be approved by voters. It was adopted statewide by voters in 1992, a year after city voters adopted a local version.

But TABOR isn’t the only culprit.

“It’s the whipping boy, but it’s not what’s kept our revenues where they are,” El Paso County Commissioner Dennis Hisey said, noting there are other influences.

TAX LIMITATION

In 1913, the Colorado Legislature adopted the Mill Levy Law, which limits property tax revenue growth to 5.5 percent per year.

“Sometimes TABOR gets all the credit,” said El Paso County Assessor Mark Lowderman. “But back when Colorado was a new state our forefathers said, ‘We need to do something to keep government in check.’ TABOR refined it and made it more restrictive, but the Mill Levy Law has been on the books for years.”

Seventy-nine years later, TABOR further restricted government growth by imposing revenue limits based on inflation and new construction.

Today, the city and county must adhere to whichever law is more restrictive.

Under these tax limitation measures, a booming economy and growth add to city and county tax revenues, but it’s not the bonanza one might expect. When property values increase, city and county governments are forced to lower their property tax rates to avoid collecting more revenue than is allowed under TABOR and the Mill Levy Law.

When times are tight, they’re stuck with the lower rate unless voters approve a tax increase.

The boom times forced the county’s property tax rate down by 20 percent, to 7.583 mills, since 1998. Had the rate not changed, the county would have collected $12 million more in property taxes this year than it could keep.

The city’s property tax rate dropped by 12 percent, to 4.944 mills, since 1998, translating to a loss this year of roughly $3.2 million in property taxes.

Some say TABOR works fairly well during periods of growth. But once the economy turns downward, property values stall or decline, and few new houses are built. That leaves the city and county powerless to raise more property tax money without voters’ OK.

VOTERS

Ballots for city and county revenue measures during the past decade-plus show a mishmash of results: “Yes” to taxes for more parks and cops, “no” to debt for a new jail, “no” to higher taxes for roads and drainage.

City voters phased out a half-percent sales tax in the early 1990s that would have brought in more than $370 million in the years since. Phasing out the tax saved taxpayers about $83 per person last year.

BUSINESS TAXES

At the business community’s behest, the county commissioners phased out the Business Personal Property Tax starting in 1997, sacrificing roughly $44.8 million in tax revenue.

DEBT

The city and county have amassed a combined $238 million in debt, most of it issued in the past decade without voter approval using a financing tool called certificates of participation.

Colorado Springs’ biggest obligation was established in 1999, when voters approved the second of two rounds of the Springs Community Improvements Program. Without a tax increase, the city borrowed $88 million against existing revenues for 29 road, drainage and parks projects, the last one completed in 2004.

Most of the money came from sales tax revenues, $7.8 million this year, with $57.7 million still to be repaid. Other debt payments this year will come from property taxes, proceeds from the state lottery and the city’s general fund. In 1998, the city’s debt totaled $29.5 million.

Late last year, the city announced it would take on $27.5 million in additional debt as part of a package of incentives to dissuade the United States Olympic Committee from leaving town. The payment: $1.7 million for 25 years.

El Paso County’s debt, largely due to the jail and courthouse expansions – projects voters didn’t approve – stood at $123 million in 2008, up from $4.2 million debt in 1998.

Annual debt payments, in turn, have increased 12-fold. This year, $8.4 million is due, enough to fund the Health Department, treasurer, assessor and coroner combined.

Payments increase to $9.5 million from 2011 to 2017 before declining to $5.9 million in 2029. Those payments must be carved from existing revenues, because no new taxes were enacted to fund those projects.

Colorado Springs owes $16.4 million in debt payments this year, more than enough to cover the cost of keeping the city’s 4,000-vehicle fleet running. After the debt is issued for the Olympic Committee deal, the city won’t pay off its last loan until 2034.

DEFICIT SPENDING

The county’s solution to its desire to spend more than it brought in was to dip into reserves.

Commissioners have used county reserves to balance the budget eight out of the past 11 years at a cost of $29.6 million.

Former Commissioner Jeri Howells, who served from 1989 to 2005, said reserves were so large that commissioners decided to spend the money instead of asking voters for more.

“Why ask voters for more of their tax dollars if you already have a significant amount of their tax dollars?” she said, adding that commissioners knew deficit spending couldn’t go on indefinitely and that a new source of revenue would be needed.

As of 2008, the county held $15.8 million in reserve, although most of that is for cash flow purposes, finance director Nicola Sapp said. The county’s reserves have dipped so low at times, she said, that the county had to hold back bills until it could afford to pay.

According to 2007 budget documents, the county’s days of available cash flow, a measure of fiscal health, dropped from 151 days in 1997 to 36 days in 2007, just over a third of the recommended 90 days, Sapp said.

“You can’t run government like a business,” County Administrator Jeff Greene said, “but you have to instill business practices into government. You would never allow a business to deficit spend.”ENTERPRISES

The city has taken a number of steps to increase services even while its resources were committed elsewhere. Probably the biggest, and the most controversial, was the formation of the Stormwater Enterprise, which in 2007 started collecting fees from property owners to pay for improvements to the city’s drainage system.

Stormwater collects about $15.8 million a year in fees. Initially, the city still spent the $2.3 million it used on stormwater projects annually from its general fund but this year canceled that spending for use on other needs.

The city has 10 other fee-supported enterprises, including cemeteries, golf courses, the airport and utilities.

The city also has raised fees for sports leagues, development review and parking.

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