DALLAS -- The Colorado Supreme Court has rejected efforts to get a fast-track interpretation of how the state's new tax and spending limits affect bond issuance, meaning it could be years before some legal questions are resolved.

Justices last Thursday declined to hear five issues raised by Gov. Roy Romer, making it likely that issuers will have to risk costly test cases in order to clear up market concerns about their bonds.

Bond dealers said clarifications of how to operate under Amendment 1, the constitutional amendment approved Nov. 3, may now take two to three years rather than the 30 days many wanted.

"I though it was a long shot to ask the court, but one worth pursuing," said Dee Wisor, a bond lawyer at Sherman & Howard in Denver. "For the court it was going to be a difficult place to be. I think they might well want to have some facts developed on these issues."

As a result of the court's decision issuers will have to consider seeking local court decisions that could take up to three years to be appealed to the state Supreme Court, he said.

"This means continued confusion about Amendment 1," said Wayne Nielsen, first vice president and manager of public finance at Kirkpatrick, Pettis, Smith, Polian Inc.

Others say bond volume, which has reached $4.7 billion, will likely remain sparse into next year as issuers avoid the market until they have judicial rulings on issues such as whether the amendment affects popular certificates of participation.

"It's definitely going to mean more delays," said Larry Malohn, vice president and manager for A.G. Edwards & Sons Inc. in Denver. "If we don't have some clarifications, then the volume is going to be way down."

Underwriters, bond lawyers, and government officials had hoped the court would hear arguments over five broad issues and make rulings on how to interpret the amendment.

In a statement, the governor said he was sorry the justices declined to hear the case, but added, "I accept the court's decision and will continue to work closely with state and local officials and with the Colorado legislature to correctly interpret and implement this amendment."

However, the amendment's author, Colorado Springs landlord Douglas Bruce, said the court's decision was a victory. "I told the governor he shouldn't file this, but the state is trying to get from the judiciary what they couldn't get at the ballot box," Bruce said.

On Nov. 3, voters authorized a constitutional amendment that limits growth in revenues and spending to a complex formula unless additional spending and taxes are approved by voters. Also, all types of multiyear debt is now subject to referendum.

Observers said Friday that groups such as the Colorado Municipal League would seek legislative clarifications on some issues when the General Assembly opens its spring session in January. Others said that issuers are considering bond deals as possible test cases that would ultimately be heard by the state Supreme Court.

For instance, market sources said one county is rumored to be preparing a certificates of participation issue as a test case to clarify whether such annual appropriation-backed debt is subject to the limits.

Bruce has argued that they are, but bond lawyers note that the Colorado Supreme Court has twice previously ruled that such obligations are not debt as defined by the Colorado Constitution. However, because of market concerns, underwriters believe a judicial ruling would be necessary before a COP can be sold.

But Bruce said it may be difficult to push a test case on COPs because an issue has to be sold before it can be subject to litigation.

"Who's going to want to buy a COP under a cloud?" he said in a

telephone interview. "They won't be able to sell it, and they won't be able to get a test case until they sell it."

Wisor said an actual sale may not be necessary. Instead, he said the issue could be prepared and then a local official would simply refuse to sign documents, which would give the issuer cause to file a test case.

Also, Nielsen and others said that as long as a reputable bond counsel certifies the issue, a COPs deal could be sold to an institutional buyer. "It's hard to imagine that there's not a market for those at some price," he said.

The governor had filed interrogatories, or written questions, with the court asking that they rule on how Amendment 1 affects local governments. For instance, Romer sought clarification on what a district or a government enterprise was as defined by the amendment.

Meanwhile, underwriters said local government officials face their major deadline under the new amendment tomorrow when they must legally set their property tax levies and budgets for 1993.

Some city officials are reportedly still uncertain whether Amendment 1 will force them, for instance, to lower operating taxes if previously pledged ad valorem taxes for debt service rise.

As a result, local officials risk being sued over the budgets. Also, the amendment contains a so-called bounty hunter provision that could force cities to pay a plaintiffs legal fees if the city loses.

"I'm on the wrong side of the business," said Wisor, the bond lawyer. "With this I should probably be a plaintiff's lawyer."

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