DENVER - A ruling by a judge in the Littleton School District case "represents an important victory for the school district and its bondholders," Standard & Poor's Corp. said earlier this month.

In conjunction with the ruling, Standard & Pooes affirmed the general obligation ratings of four AA-rated school districts: Cherry Creek, Littleton, Cheyenne Mountain, and Jefferson County.

On one side in the Littleton case was Amendment 1 and its requirement of a popular vote for mill levy increases; on the other was the unlimited tax security pledge on bonds issued before Amendment 1 passed in 1992. Littleton increased the mill levy to offset revenues that did not materialize as projections called for. Amendment I supporters sued the district for raising the mill levy without a vote.

Arapahoe County District Judge Kenneth Stuart ruled that Amendment I could not impair an obligation already incurred by an issuer.

Standard & Poor's said that when appeals are exhausted in the Littleton case, "One of the main points of contention since passage of Amendment I will be settled - namely, that spending down all operating resources is not necessary before the unlimited tax pledge can be tapped."

Moody'g Investor Service already considers general obligation debt in Colorado to be limited because of Amendment 1. Standard & Poor's has held off.

"Had the court held in favor of the plaintiffs, security for the bonds would have been changed to resemble a limited tax pledge, with voter approval required to increase the debt service millage rate if debt service payments exceeded the revenue generated by the prior year's debt service millage rate," Standard & Poor's analysts wrote.

The ability to raise mill levies to cover revenue losses is important in Colorado because of the state's Gallagher Amendment, passed more than a decade ago by voters, and its stipulation of a 45%-to-55% ratio Of residential to commercial property tax assessments.

In other words, the residential tax burden must stay below that of commercial, regardless of changes in market value. In the past two years in Colorado, residential property values have jumped while commercial values have risen much more slowly.

Arapahoe County's Cherry Creek School District has $202 million of general obligation bonds outstanding, Littleton has $29 million, Cheyenne Mountain has $2 million, and Jefferson County schools have $110 million.

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