June 6, 2001
By Mike Krause
A funny thing happened to the Denver City Council’s and Mayor Webb’s plan to grant a 60 million-dollar corporate welfare subsidy to the proposed convention center hotel. The Hotel and Restaurant Employees Union made good on their vow and raised the necessary signatures to place the issue on the November ballot.
Apparently fearful of setting a bad precedent (who knows what other groups may be inspired to challenge the public subsidy racket), Denver’s corporate welfare proponents have come out swinging, claiming the subsidy is a contract between the City and the Denver Urban Renewal Authority (DURA) and therefore outside the purview of citizen initiatives.
Denver City Councilwoman Cathy Reynolds argues: “If any contract by the city could be overturned by a vote resulting from a citizen petition, who would ever do business with the city again?” Her point would be well taken but for the fact that the Colorado Constitution explicitly forbids corporate welfare, making both the “contract” and the subsidy itself illegal. Under our Colorado Constitution, a contract for corporate welfare is like a contract to sell oneself into slavery. Both contracts are void because they are contrary to the state constitution.
Article XI, Section 2 of the Colorado Constitution has a plain title: “No aid to corporations.” The Constitution insists: “neither the State nor any County, City, Town, Township, or School district shall make any donation or to or in aid of any person, company or corporation, public or private.” Yet this is exactly what the hotel subsidy represents — a donation of tens of millions dollars of tax revenue so that the corporation can borrow money to build the hotel.
The Denver City Council has sought to make Denver taxpayers responsible for a big chunk of the convention hotel’s debt and has the nerve to pitch a fit when someone tries to let the voters decide.
Shouldn’t the financing of the hotel fall to those who will benefit if the project is successful and profitable — the owners?
The Colorado Constitution quite plainly forbids corporate welfare. Contract law says that a contract for an illegal service (e.g., a contract for prostitution, or for the sale of an illegal product) is unenforceable.
It’s true that the lawless Colorado Supreme Court has essentially nullified the state constitution’s ban on corporate welfare. But even though the state court won’t obey the constitution, the Denver City Attorney ought to. After all, there were times when courts refused to enforce the First Amendment’s protection of free speech, or the Fourteenth Amendment’s ban on segregation laws. Just because some judges abdicate their duty to the constitution doesn’t mean that government attorneys should abdicate their own duties.
Unfortunately, the Denver City Attorney office has taken the “corporate welfare is a contract” theory into Denver District Court, in order to prevent the people of Denver from voting on the welfare plan.
In other words, the City Attorney is seeking to quash the right of citizens to challenge an unconstitutional act by the City.
The founders of Colorado were right to outlaw corporate welfare. It’s unfair to tax businesses and individuals in order to give money to a private business. Corporate welfare distracts companies from trying to succeed by selling the best products and services to consumers who voluntarily decide to buy. Instead, companies get rich by raking in money from politicians, who take money from consumers are taxed involuntarily. Companies are encouraged to “invest” in campaign contribution rather than to invest in better service to the customer.
The ballot initiative shouldn’t be necessary in the first place because Colorado governments aren’t supposed to be giving out corporate welfare, ever. But they are. If the City of Denver is not going to honor the boundaries of the constitution, then the least Denver can do is honor the legwork of the petitioners, and let the people decide.
Mike Krause is a Research Associate the Independence Institute, a free market think tank in Golden, https://i2i.org.
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