So far, so good with Colorado's pioneering tax and spending limitation, Amendment 1.

Thanks to a steadily growing economy, the dreaded "ratcheting-down effect" so feared by the measure's opponents still has not happened a year after Colorado voters passed the so-called Bruce amendment, named after the author, irascible Colorado Springs landlord and former prosecutor Doug Bruce.

County budget officers aren't jumping out of their third-floor windows, or having themselves dragged by a rope tied to their Hondas. And a widely predicted legal storm has been slow in materializing. The few suits filed so far have involved merely the scheduling of elections mandated by the amendment.

No county has been reduced to asking the people to vote to renew a three-year janitorial contract. No county has been whipsawed by a good revenue year followed by a bad -- an event after which, under Amendment 1, a county may not raise property taxes to make up for the bad year.

The historic amendment, the first state law to limit both taxes and spending, seems simple enough to the untrained eye. Increases in spending are pegged to a simple arithmetic formula. Take the Denver-Boulder consumer price index for the previous year. Add to that the growth in a county's construction permits, then add the growth in the county's population. The sum becomes the legally allowable rate of spending increase for the current year.

County spending caps have not really chafed this year because in 1992, the Denver-Boulder CPI was up 3.7%, and most of Colorado experienced population and construction growth.

If a government wants to increase spending beyond the Amendment 1 formula, it must rely on a vote of the people, which is allowable only twice a year.

Further, governments can't enter into debt agreements of longer than one year without asking the voters for permission. The amendment is worded to cover anything that could be construed as debt, including leases and certificates of participation.

Amendment 1 is so frightening to Moody's Investors Service that it views all Colorado local debt as limited obligations and has begun a long process of downgrading many issues. So far, the debt of about one-third of the state governments Moody's has reviewed has been downgraded because of Amendment 1.

School districts have been targeted by rating agencies as the most vulnerable to Amendment 1 because they depend on property taxes for revenues. Property values in Colorado have historically whipsawed, depending on the fortunes of the oil industry or the frequency with which Californians decide to move to the state in droves. Counties are not far behind the school districts in their vulnerability to Amendment 1. Many counties impose sales taxes and fees, but property taxes remain their biggest source of revenue.

In gauging the response to Amendment 1, The Bond Buyer here takes a look at three counties: Mesa, El Paso, and Boulder.

Mesa County

Judging by this Western Slope county, which is six hours west of Denver on the other side of the Continental Divide, small counties may feel the effects of Amendment 1 more than counties with a larger tax base.

Grand Junction, the county seat, is home to most of the county's 99,000 residents. It was a sleepy agricultural, health services, and government center for the sparsely populated and semi-arid Western Slope until the early 1980s, when for a brief time oil shale was going to be the next alternative fuel.

The big oil companies left in 1982, however, and the county's population has only recently returned to the record high set in 1982. Today, government and service industries remain the main employers, with the retirement industry now taking up a lot of the slack left by the oil shale people.

Had Amendment 1 been around in the early 1980s, Mesa County officials would have been hysterical, finance officer Bill Voss says. He notes that his own home, purchased in 1981 for $84,000, dropped in value to $50,000 and stayed there for most of a decade. If Amendment 1 had been around, the drop in assessed valuation throughout the area would have meant that the county would have had to ask its already strapped citizens for permission to raise their taxes. Voss has no illusions about what the result would have been.

"We had a major bust in 1982," Voss remarked. "But our social services [costs] have just gone steadily up through that bust, from food stamps to jail population. When things go bad, it doesn't mean the demand for our services goes down. We have 1,500 miles of roads to maintain whether there's 100,000 people or 75,000."

Mesa County has a 1993 budget of $57 million.

The county sneaked in a new jail just before Amendment 1 passed, financed by $19 million of certificates of participation.

Things are no longer so easy. A case in point: Mesa County needs a new courthouse and had planned to build a $12 million structure next to the new jail on the city's outskirts. County commissioner John Crouch, a big supporter of Amendment 1, killed the project. For now, the county will make do by spending $400,000 to renovate the old court complex downtown.

Like their counterparts in many counties, Mesa's attorneys are taking a conservative view of Amendment 1. They are not willing to battle the ever- present Doug Bruce, who bestrides Colorado threatening to sue anyone who tests the limits of Amendment 1.

Last year, for example, the county bought 18 new photocopiers instead of entering a lease agreement because leases and contracts could be construed as long-term debt. The county commissioners no longer are given multiyear contracts, for the same reason.

Amendment 1 says a government can enter into a lease, but must set aside the full amount payable.

A local refinery closed last year and it will cause some belt tightening, but it is the long term that Voss is most worried about.

"Our area has historically been a boom-and-bust cycle, whether it's uranium or oil shale. If we hit a time when a couple of our bigger taxpayers shut down and pull out, the mill levy will be the same [because of Amendment 1], with the demand for our social services still rising.

El Paso County

No bounty has taken a more conservative approach to Amendment 1 than El Paso County, says accounting director Clarence Kissler. El Paso County is home to Colorado Springs, where Doug Bruce lives.

"Not really," Kissler responds when asked if Bruce's proximity is intimidating. "We're trying to be conservative and take the attitude we're going to comply with the amendment."

But grinning, he adds, "I'm sure he watches us."

Certainly, Colorado Springs is used to Amendment 1. The year before the fall of 1992, when Amendment 1 was passed statewide, Bruce led an identical and equally successful drive to amend the city's charter.

"The [Amendment 1 provision] that gives us consternation is the indirect debt provision," Kissler said. "In reality, it's probably not improper to go into a lease agreement. Our advisers have told us it's probably all right to do an equipment lease as long as it is subject to an annual escape clause. But we haven't done that."

As a result, all of the county's contracts are subject to annual appropriations.

El Paso County has 400,000 residents and an annual budget of about $100 million. Growth has been static for the last three years. In 1992, assessed property valuation plummeted 15%. but an increase in revenues from the 1% county sales tax made up for some of the $8 million in lost tax revenues.

Austerity measures also were taken, including a pay freeze for county workers in 1992 (followed by a 5% raise in 1993) and the layoff of 10 social workers.

El Paso County's 1993 budget is based on what occurred in 1992. The Denver-Boulder consumer price index was 3.7%; and local population and construction growth was up 1.9%, which left the county able to raise spending by 5.6% without going to the voters.

El Paso County's spending limit this year is $101.2 million. Estimated revenues are $97.2 million.

"We're able to maintain budgets under our spending limit. The more difficult area is generating revenues to meet that spending limit. As I analyze it more and more, [Amendment 1] becomes a revenue limitation more than a spending limit," Kissler said.

Boulder County

If you're a government official, living is pretty easy in Boulder. Years of responsible -- some say over-restrictive -- planning have created a stable real estate market and therefore a stable property tax base. Combine that with a desirable lifestyle and a growing biomedical and technological private sector, and few governmental needs go unmet in this county of 225,000.

The county's budget has been stable at around $89 million for the past few years, and there are no unfunded major building projects.

"As far as actual revenues, Boulder County is in the fortunate position of being in a fairly high growth mode. We haven't seen services suffer," said finance manager Virginia Aragon.

"The assessed valuation for 1994 will be up 3% That means with the same mill levy, we are at least getting some increase in property tax valuation. All available revenues are considerably less than what the expenditure limit is. We're allowed a 5.75% increase, and the [increase in] revenue will probably be more like 3%."

Aragon says that Boulder schools will probably go to voters with at least one big bond issue this fall. She says voters might pass one or two, but if five or six issues are on the ballot, none may pass. Boulder County voted Amendment 1 down and the more affluent residents can afford higher taxes, but there is a limit, she warns.

"It's too early to tell about Amendment 1," Aragon said.

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