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They pay to play, and profit well

Opinion Editorial
May 2, 2004

By Jon Caldara

For the Boulder Daily Camera

When I was on the RTD Board of Directors seven years ago, the board passed one of my resolutions. Miracles do happen. (Actually I got several things passed, including funding for Boulder’s Skip service)

It was an election year and the Regional Transportation District was pimping for a 67-percent tax increase. (Everything old is new again.) And you wouldn’t believe who was pumping nearly all the money into the campaign to make your taxes skyrocket. The companies that would directly profit from it.

Land speculators who owned property by the proposed trolley stops, the developers, the company who made the trolley cars, the companies who made the tracks and the power poles and the electricity, the engineers and consultants, the builders, the tax attorneys and, of course, the bond dealers poured in hundreds of thousands of dollars.

What an investment for them! A company gives say $50,000 to the campaign and if the tax increase passes they get a huge slice of the billions and billions in contracts. Now that’s what you call a return.

It’s known as “Pay-to-Play,” or “Greenmail.” That is, companies will dump money, directly or indirectly, into the election and when it passes, they get the business.

RTD board members who wanted the tax increase and those of us who didn’t agreed that Pay-to-Play shouldn’t play a part in the election

The resolution we passed simply said that anyone who gave more than $200 to either side of the issue wouldn’t receive a contract from RTD for any of the projects.

Pay-to-Play is more the rule than the exception. Just look at any mill-levy increase election, whether it’s for a new firehouse or school building, companies like bond dealers are there from the beginning and are usually the driving financial force for the tax hike. It’s a small price to pay to get a big piece of the action.

Russ Caldwell is an investment banker in Denver and an outspoken critic of Pay-to-Play. He says it is endemic, and for a banker to compete he must play the game. To land a contract, bond dealers must promise things that are not part of their job.

Even small governments use Greenmail. A recent story in the Bond Buyer, a trade publication for bond dealers, points to a Request for Proposal from the tiny Mesa County Library District. In the RFP, they ask prospective bond dealers to describe what campaign services they will deliver, for which they expect to be reimbursed. That means polling services, campaign consultants, and yes, cash contributions.

Caldwell says that in official hearings, prospective government clients have been so brazen as to ask him how much his company will kick into the campaign and whom he will provide to be a political consultant to their election.

Caldwell puts it simply: “They’re not hiring a banker. They’re hiring a political hack.”

When RTD passed the resolution in 1997, the companies that profit wildly from Pay-to-Play went into hyper-tantrum mode. The lawsuit was quickly filed. And a judge issued an injunction, saying it limited free speech.

But the cause lives on.

A bill has been introduced in the state Legislature to attempt to end this practice in all levels of government in Colorado. Senate Bill 248 would prevent any contracts going to anyone who put more than $200 into a campaign for or against any tax or debt increase.

Some might compare this to campaign-finance law that limits how much a person or entity can give to a candidate’s campaign. The comparison is only partly accurate. In Colorado, you can only give $200 to someone running for the state Legislature.

But, unlike campaign-reform regulations, this bill places no limit on what you can give. It doesn’t limit how much you can express yourself by spending bucket-loads of cash in an election. It just says you can not directly reap a huge payback for it.

And while RTD’s resolution was struck down by a judge, since then the Supreme Court has upheld the McCain-Feingold law limiting campaign contributions. Senate Bill 248 might not meet the same fate as the RTD resolution did seven years ago in court.

As of the writing of this column, the bill was still quite alive. By the time you read this, who knows?

Interesting that seven years ago, RTD officially worked to end Pay-to-Play. This year RTD officials testified against the proposed law to end it.

I guess now it doesn’t matter how you win a tax increase or who gets rich off of it, so along as you win.