If someone asked me before this game to bet if Jeter would get a hit, I might’ve taken that bet – and I would’ve lost. But in Colorado, tax revenue from sports betting at least funds water projects.
At its simplest, passing Proposition JJ would allow the State of Colorado to retain and spend sports betting tax revenue, in amounts above the $29 million yearly that voters authorized in 2019 for use on statewide water projects with Proposition DD. If the measure fails, revenue collected in excess of the $29 million would be refunded to licensed sports betting organizations that contributed tax revenue, not to individual bettors. It’s a statewide statutory measure, not Constitutional, and would pass with a simple majority.
The Colorado General Assembly referred what is now Prop JJ to the ballot by passing House Bill 24-1436. The bill passed the House 59-1 and the Senate 33-2, and Gov. Jared Polis signed it into law. Both the House and Senate Finance committees approved the bill unanimously, while both the House and Senate Appropriations committees each had two “no” votes.
Under Colorado’s Taxpayer Bill of Rights (TABOR), taxing entities must estimate the amount of revenue a new tax is likely to generate in a full year, and this amount of money must be stated in the ballot measure title presented for voter approval. If actual revenue comes in above the stated amount of money, entities must either refund the excess money or make revenue adjustments like reducing tax rates. It’s also possible to run “de-Brucing” ballot measures like Prop JJ, which can allow entities to keep and spend “excess” revenue above the TABOR cap.
How Does The State Turn Gambling Into Water (projects)?
According to the fiscal note for HB 24-1436, sports betting is currently taxed at a rate of 10 percent on casinos’ net sports betting proceeds. The revenue is then distributed to pay for the following in the order listed below:
- All sports betting administrative costs incurred by DOR’s Division of Gaming first;
- Six percent to a “hold harmless fund” to reimburse recipients of current casino gaming tax revenue for any potential loss in revenue due to the legalization of sports betting, including local governments where there are casinos, the State Historical Fund, or Colorado community colleges; and
- The remaining amount to the Water Plan Implementation Cash Fund to fund water projects under the State Water Plan. Readers can find more information about the Water Plan or just an executive summary at this link.
The third bullet point is probably the most relevant component when considering what JJ would tangibly accomplish. Proposition DD established the Water Plan Implementation Cash Fund, and the Colorado Water Conservation Board has the authority to approve or deny grants for water projects, whether funding comes directly from sports betting or from other sources. The image below shows projections of revenue a few years into the future:
For an idea of the types of projects that get funded, here are a few examples directly from a 2024 Colorado Water Conservation Board press release:
- South Platte River Basin Salinity Study (Agricultural, $464,361): Colorado State University will conduct a comprehensive study on salinization across seven regions in the South Platte River Basin, to understand the severity and variability of salinity in water and land resources.
- Denver One Water Plan Implementation Phase 2 (Conservation & Land Use, $200,000): Mile High Flood District will continue Phase 2 of Denver’s One Water Plan, which promotes coordination and collaboration among various city departments, organizations, and agencies in charge of managing all aspects of the urban water cycle.
- Watershed PenPal Program (Engagement & Innovation, $136,947): Roaring Fork Conservancy will connect communities across the Roaring Fork Valley and Front Range, fostering understanding of water challenges through discussion, letter writing, and shared experiences.
- Park Creek Reservoir Expansion (Water Storage & Supply, $1,750,000): The North Poudre Irrigation Company will expand the Park Creek Reservoir, increasing water storage capacity by 3,010 acre-feet to benefit agricultural use and water management.
- South Boulder Creek Watershed Restoration Phase 3 (Watershed Health & Recreation, $1,000,000): Colorado Trout Unlimited will build upon previous phases of this project to support final design and permitting for multiple in-stream diversion structures in South Boulder Creek in Boulder, Colorado.
Or, readers who want to geek out on Colorado water might appreciate a look at this document describing current projects in greater detail.
Prop JJ Pro
- Colorado must manage its water resources carefully, because the state’s population is increasing while precipitation is not always guaranteed.
- Prop JJ would help fund water projects that could help Colorado better manage its finite water supplies.
- Prop JJ does not increase taxes, it simply allows the state to keep and use revenue that it’s already collected above a cap established back in 2019.
Prop JJ Con
- It’s debatable as to whether the state should fund legitimate core needs with “sin taxes” like those from sports betting.
- Sports betting can be a harmful activity if people develop gambling addictions, or lose money in amounts that keep them from meeting normal expenses.
- The tax-remitting sports betting organizations might benefit from getting money back under TABOR.
Richard’s Take
I’ll probably vote for JJ, but I have one particular concern that I don’t normally express with incremental de-Brucing measures. Sports betting in Colorado has grown substantially since it was first authorized, and according to the state fiscal note for HB 24-1436, tax revenues available for water projects might increase about 40% between collections from FY 2022-23 and projected revenues for FY 2025-26.
This makes me wonder if it might be time to take a fresh look at the issue see if our current program linking sports betting and water projects is somewhat close to what the voters intended in the first place, and if it’s serving the state optimally. I’m definitely not saying the state doesn’t need money for water projects, especially since certain areas of the state are in really precarious positions as population and the needs of our population increase, and parts of Colorado have been in various stages of drought really often in recent years. Even after examination, water projects might still be the best or only use for the steadily growing pool of sports betting money, but I’d consider taking a second look.
This isn’t the first time I’ve written about sports betting in a voter guide, and in 2019 some people said they’d vote against DD out of moral opposition to sports betting. I don’t particularly love sports betting either, but I also don’t see that defeating JJ will change peoples’ gambling behavior. We have the opportunity to use the tax revenue for beneficial purposes, and if gambling is going to happen anyway Colorado might as well use that revenue like it uses other “sin taxes” on tobacco, alcohol, and marijuana.
In 2019, there were also people who also took issue with certain types of water projects, notably damming rivers. Like with the gambling, I see dam projects as potential legitimate concerns, but I don’t see defeating JJ as a way to prevent damming, especially since many existing Water Plan projects don’t involve damming rivers anyway. In my opinion, people who have concerns about water projects can or should contact state legislators, state departments, and/or the Water Conservation Board – or even take issues to water court. Prop JJ involves relatively modest amounts of revenue in the grand scheme of things, so I’d recommend other venues instead of holding up this Prop JJ TABOR override for those who care about broader water policy issues.
I might be interested in re-considering amounts of money or intended uses, but sports betting money has helped enable a number of water projects in our semi-arid state, and gambling is a common activity even if people have moral objections. I just don’t see strong reasons to vote against JJ.
