DALLAS - After nearly two decades of rejecting the idea, Colorado voters this week adopted tax and spending limitations on government that bond experts predict will send local finances into a slow spiral downward.

"It's a dark day for Colorado," said Dee Wisor, a bond lawyer at Sherman & Howard in Denver and a local school board member. "The combination of what voters have really approved is a disaster."

While market watchers and rating agencies have warned that such a decision could mean weakened credit quality and local governments' hampered ability to respond to needs, few expect an immediate fallout. Because scores of Colorado issuers sold $4.3 billion in deals in the 10 months leading up to the election, little volume is expected in the coming weeks.

However, cities and counties must soon finalize their fiscal 1993 budgets for the year that begins Jan. I and comply with the tax and spending standards imposed by what is commonly known as the Bruce Amendment.

"I think local officials are grappling with what to do right now," said Ditmar Kopf, assistant vice president and lead analyst on Colorado for Moody's Investors Service. "I don't think in the short term there is a problem, but our concerns are more long term. "

Wayne Nielsen, first vice president and manager of public finance for Omaha-based bond dealer Kirkpatrick, Pettis, Smith, Polian Inc., said many local officials are not sure of how the Bruce Amendment will affect their budgets.

"I'm not so sure those answers are readily discernible," said Nielsen, president of the Colorado Municipal Bond Dealers Association.

Because of uncertainty over how the constitutional amendment would be implemented, bond counsel and governmental lawyers expect to ask Gov. Roy Romer to seek rulings from the Colorado Supreme Court in the coming weeks on issues they see as ambiguous.

Wisor said lawyers plan to meet this morning to continue developing a list of legal issues that the governor would be asked to submit to the high court justices.

Colorado Springs landlord Douglas Bruce, the author of the amendment named after him, yesterday said a ruling is unnecessary because he is willing to work with government officials to interpret the law.

"I'm willing to bury the hatchet they wanted to bury in my head," he said.

However, bond lawyers say the rulings will be necessary before many Colorado issuers can return to the credit markets. Wisor said the intent is not to get the amendment overturned, but to clarify parts of it.

So far, lawyers have identified several broad topics they may seek rulings on from the supreme court..

For instance. bond lawyers are uncertain of what is defined as an enterprise fund. They wonder whether such self-supporting agencies must have governing bodies separate from the city councils that create them in order to be exempted from the amendment.

Another major question will be whether annual appropriation lease debt is affected by the amendment, which requires voter approval for all types of multiyear debt.

However, Wisor said, the Colorado Supreme Court has previously ruled that financings such as certificates of participation and lease-backed bonds are not legally debt under the state's constitution.

Many other issues are lesser points of law, such as whether governments with authorized but unused tax or bonding authority must seek a reauthorization of what voters granted before the Bruce Amendment was adopted.

In a related issue, bond lawyers question whether existing general obligation bonds that are refunded would continue to be secured by an unlimited tax pledge or whether they would become limited tax bonds that generally have lesser credit quality for investors.

Wisor said another issue involves how the tax and spending limits would affect transfers of revenues between two government entities. For instance, the state now transfers millions of dollars to local government from lottery proceeds. He said it is unclear if such transfers would be subject to limits imposed on one, both, or neither of the governments.

Market watchers are waiting for such questions to be resolved.

"There's going to be a definition of the terms of the amendment," said Sheila Amoroso, portfolio manager of the Franklin Colorado Tax-Free Income Fund, a long-term bond fund with $135 million in assets. "For now, it's kind of a nonevent. "

Noting that much of the recent paper sold out of the state was insured, she said the market reaction yesterday was indifferent about the amendments passing.

While the Bruce Amendment affects all layers of government by limiting taxes and spending not approved by taxpayers, officials say voters on Tuesday gave Colorado schools a double whammy by rejecting a separate amendment that would have raised $330 million in new state sales taxes to fund education.

Backed by the governor, the measure would have raised the sales tax 1% to provide permanent funding for the state's schools. Now those schools face not only a shortage because the tax increase failed, but the squeeze officials expect from the limits.

Romer yesterday said he was surprised and disappointed by the vote, saying, "We now have to go to plan B."

While admitting there is no specific alternative plan, aides hinted that legislative action might be considered because of apparent shifts in the partisan makeup of the Colorado General Assembly.

While Republicans remain in control of both houses, the margins are now nearly evenly split with the governor's own Democratic party. "We think the Democrats might be more willing to work on education," one official said. "We'll have to wait to count some heads."

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