Colorado lawmakers seeking to use additional taxes from sports betting on water projects

Colorado's entry into legalized sports betting four years ago has yielded unexpectedly high results, surpassing revenue projections. The success of the vertical has now prompted discussions on the allocation of the surplus funds, with lawmakers seeking to ask voters to let Colorado use more taxes on water projects, instead of giving them back to the casinos.

With Governor Jared Polis signing House Bill 1436 into law, the stage is set for voters to decide how to distribute the extra funds in the upcoming November ballot. The bill aims to address the unanticipated surplus of funds generated by the 10% tax on sports betting revenue, which helps fund water projects in the state.

The legislation governing sports betting, Proposition DD, implemented a $29 million cap on tax collections to secure bipartisan support. However, the actual revenue has far outstripped this limit, catching lawmakers by surprise. Brian Jackson with the Environmental Defense Fund, which helped craft House Bill 1436, said: “Frankly, we never thought we would reach that.”

Initial projections were conservative due to limited data availability, but the actual revenue has outpaced expectations. This year, sports betting revenue is anticipated to surpass the cap by approximately $2.8 million, with projections suggesting a further increase to $7 million by 2025-2026.

Rep. Marc Catlin, a key sponsor of both House Bill 1436 and the original Proposition DD, expressed optimism about the revenue's potential. “I’m hoping it will continue to be a growing, steady revenue stream for water,” he stated.

The Colorado Gaming Association, supportive of the ballot measure, emphasized their intention to fulfill their tax obligations. Peggi O’Keefe, the association’s executive director, affirmed: “We certainly always intended to pay that 10% tax with sports betting. The fact we exceeded expectations I don’t think changes that.”

The urgent need for water project funding in Colorado has heightened awareness of the importance of these funds. House Speaker Julie McCluskie, D-Dillon, a prime sponsor of House Bill 1436, said: “I believe our public has grown to understand how critical water resources are to Colorado."

Should voters approve the measure, the surplus funds will be allocated by the Colorado Water Conservation Board, supporting various projects aimed at water storage, agricultural initiatives, watershed health, recreation, and land use planning. Additionally, a portion of the tax revenue will be allocated to the state’s Division of Gaming and programs addressing gambling addictions.