Area counties face a Sept. 14 deadline to decide whether to join a class-action lawsuit that could let them recover underpayments by the U.S. government between 2015-17 under a program designed to help offset the lack of property tax collections involving federal lands.
Garfield and Mesa counties are among those currently considering the matter, which involves the federal Payment in Lieu of Taxes program. Garfield County could collect more than $121,000, minus attorney fees, if it participates, officials there say. Mesa County Administrator Frank Whidden said the estimate he's heard for Mesa County is $117,000.
Those would be among the larger payments collected under the suit, according to the law firm Smith, Currie & Hancock LLP, which is handling the suit. It estimates that recovery amounts could range from $100 or less to a high of $130,000 or more.
Judge Elaine Kaplan of the U.S. Court of Federal Claims has held the federal government liable for the underpayments, although that decision is subject to appeal.
The case was brought by Kane County, Utah.
The PILT program is administered by the Interior Department based on the PILT Act, which prescribes a formula for computing annual payments based on annually adjusted per-acre and population variables, according to Interior Secretary Ryan Zinke's letter to Gov. John Hickenlooper announcing this year's payments in Colorado.
The program was fully funded this year, resulting in about 1,900 jurisdictions receiving nearly $553 million in PILT payments, up from $464.6 million last year. Payments in Colorado this year topped $40.1 million, up from $36.6 million last year.
Mesa County received the most of any government in the state this year — nearly $3.6 million, involving more than 1.5 million acres of land. Garfield County came in second, at about $3.2 million for nearly 1.2 million acres.
The underpayments occurred because in the pertinent years, Congress appropriated too little money to satisfy PILT obligations.
The court ruling doesn't include the amount of underpayment in 2015 that resulted from a congressional requirement that the Treasury Department "sequester" amounts exceeding annual spending caps.
"Kane County did not seek to recover the additional underpayment resulting from sequestration because the Court of Federal Claims had ruled in an earlier lawsuit that units of local government are not entitled to recover that portion of PILT funds eliminated by sequestration," Smith, Currie & Hancock LLP says in a frequently-asked-questions section on the case on its website.
In Kaplan's ruling, she rejected the government's argument that the Interior Department's obligation was limited by the failure of Congress to appropriate enough money. She also disagreed that the PILT law is ambiguous and the court should defer to Interior's regulations when it comes to its payment obligations when there is an appropriations shortfall.
Garfield County commissioners gave initial consideration to the matter this week but decided to hold off on a decision whether to participate in the class-action suit so they could confer with their lobbyist.
Whidden said Mesa County Attorney Patrick Coleman joined in a conference call Thursday on the matter.
"We really haven't had a chance for the county attorney to review that material, analyze it and then present it to the board" of county commissioners, he said.
He said he thinks a decision by the county might be made before the end of next week.
Governments that don't participate could pursue the underpayments issue on their own. Smith, Currie & Hancock says on its website that joining the class-action suit would be the cheaper option.
"Lower litigation costs for each Class Member is a principal advantage of a class action lawsuit," the firm says.
Smith, Currie & Hancock plans to ask the court to approve attorney fees equaling a third of the amounts recovered by entities that opted in to the suit, plus miscellaneous expenses not expected to exceed a fraction of a percent of recovered amounts.
Participants would pay nothing if the government successfully appeals.
Gini Pingenot, legislative director of Colorado Counties Inc., said she thinks some counties are exploring taking their own legal action. But she said CCI is suggesting that they can't recover underpayments any more cheaply than by joining the class-action suit.
"I think the administrative costs of doing it on your own don't make it worthwhile" given the amount of underpayments involved, she said.
Garfield County officials have participated in a webinar on the matter that included an attorney involved in the class-action suit. County Manager Kevin Batchelder said he was assured that there was unlikely to be a political backlash in terms of future PILT legislation or relationships with members of Congress as a result of participation in the suit. Batchelder said he was told the suit "is really pretty much flying under the radar" of members of Congress.
Said Garfield Commissioner Tom Jankovsky, "That would be my concern, is that senators or congressmen who are against PILT would use this against us next year."
But in later calling for further exploring the matter, he said, "$121,000 less attorney fees, we don't want to let that pass us by."
Garfield Commissioner John Martin noted that the issue arose because of an act of Congress.
"So there shouldn't be any political fallout. It's an accounting issue," he said.
So far, the governments that have opted in to the suit in Colorado are Chaffee, Crowley, Dolores, Douglas, Gilpin, Jackson, Las Animas, Rio Grande and Weld counties.
Although many class-action suits include qualifying parties in them unless they opt out, the rules of the Court of Federal Claims expressly require opting in to be included.