Colorado Governor Sues the Legislature To Certify 6 Vetoes, Resolve Legal Snag

DALLAS - Gov. Roy Romer sued the Colorado General Assembly last week in a move to resolve whether his veto of six bills, including one that would regulate special-district debt, are legal.

Lawmakers have ordered the bills published as law, saying the veto was not valid because of a bureaucratic glitch. Cindy Parmenter, the governor's press secretary, said the dispute arose after lawmakers claimed Gov. Romer failed to properly deliver a constitutionally required veto and message to the Secretary of State before a June deadline.

But the governor contends in his lawsuit that he met that requirement when he filed his signature with the phrase "I disapprove." The governor traditionally has filed a formal letter explaining his action, but an aide failed to do that on these bills.

"We are arguing that when he wrote ~I disapprove' that was all the explanation that is required," Ms. Parmenter said.

No court date has been set for the suit. The case will be closely watched by the state's bond dealers, special-district officials, and members of a new bondholders group that are on different sides of the debate over whether Senate Bill 159, which would regulate special-district bonds, is now law.

While they disagree on the legislation, the groups all say they will not join the legal fight at this time.

"We'd just be in the way," said Dick Kitchen, co-founder of the Colorado Municipal Bondholders Association, a 300-member group of investors in now-defaulted special-district bonds. "I don't think the veto will be sustained."

The Colorado Special District Association, which held its annual meeting last week in Vail, will only enter the legal dispute if it is appealed to the state Supreme Court.

"It's a constitutional question," said Dodie Gale, executive director of the group. "They are going to decide it based on the constitution, not on the merits of the law."

On the issue of whether the law is needed, both sides sharply disagree.

"We feel like it is overkill at this point," Ms. Gale said. "It sets up a whole regulatory structure that is not necessary."

But Mr. Kitchen said the governor "was off base" to veto the legislation. He believes precedent is on his group's side in the court fight. He noted that the former governor, Richard Lamm, lost a court case in the late 1970s when he argued that he had legally vetoed legislation.

In that case, however, nothing had been filed with the Secretary of State. Ms. Parmenter said Gov. Romer believes his signature with the "I disapprove" phrasing meets the constitutional requirement that the governor disclose why he vetoed a bill.

No matter what the outcome of the lawsuit, both sides expect special-district oversight to be an issue again next spring when the legislature meets. At this point, however, it is only a question of whether investors will be arguing for oversight or whether others will be fighting to have S.B. 159 repealed.

Investors backed the bill as a way to protect future bondholders from the $500 million in defaults by Colorado issuers since 1987. It would require special districts to register with a new state oversight board run by Colorado's securities commissioner and financed with fees from issuers.

But investment bankers blame the defaults on the state's land bust and contend that the strict limits on debt issuance set by S.B. 14 - which was signed by the governor - are enough to prevent future problems.

Lawmakers also passed House Bill 1282 last spring. That makes Colorado the first state in the nation to mandate secondary-market disclosure by special districts. The law is not affected by the controversy over the disputed veto.

"We don't feel the process [in S.B. 159] is constructive," said Alex Brown, president of the Colorado Bond Dealers Association, which lobbied against the legislation. "We believe that S.B. 14 is enough."

If it is necessary to return to the General Assembly next spring to try to repeal S.B. 159, Mr. Brown said, it will be more difficult than trying to defeat a first-time proposal.

"We would probably have to demonstrate that it is not contributing in any way," said Mr. Brown, a senior vice president at George K. Baum & Co.

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