History of Railroad Regulation and Taxation in Colorado Scope and Content of Collection with Series Descriptions Railroad Maps and Plats Moffat Tunnel Commission Photograph Collection Moffat Tunnel Commission Records Denver & Rio Grande Photograph Collection Governor John Evans Collection Links to On-Line Information

Railroad Advertisement, c. 1904

Railroads: Regulation and Taxation in Colorado
by Erin McDanal and Rosemary Graham

Settling the arid and sparsely populated Great Plains region and the Far West was a daunting challenge in the nineteenth century.  The railroads eased settlement throughout the West as they became vital lines for travel and trade. A transcontinental road through the mountains was needed to connect the East with the West. In an effort to find a practical and economic railroad route from the Mississippi River to the Pacific Ocean, the Federal Government sent out five surveying parties between 1852 and 1854. One of these parties, directed by Captain J.W. Gunnison in 1853, explored the Rocky Mountains along the present route, in part, of the Denver and Rio Grande Western Railroad.

Actual railroad construction in Colorado, however, did not begin until some fifteen years later. In an effort to link Denver with Cheyenne and the Union Pacific, the Denver Pacific Railroad Company was formed and the laying of track began in 1869. It was financed locally in large part through the vigorous efforts of its organizers who also obtained a land grant of 900,000 acres from Congress. To exploit these lands, the carriers utilized the services of the organized railroad and operated the National Land Company which conveyed large tracts of lands to individual settlers, speculators and colony organizations.

Construction efforts of the Denver Pacific were exceedingly energetic. By December of 1869 the road extended from Cheyenne, Wyoming, south to the new town of Evans, named in honor of ex-governor John Evans who was the leader of the enterprise. By June 24, 1870 the road had been completed to Denver.

Concurrently with these efforts, the Kansas Pacific Railroad Company, with whom an agreement had been reached, resumed construction work on a line to Denver. This road opened on August 15, 1870 less than two months after the branch line from Cheyenne was completed.

Other construction soon followed. In September, the Colorado Central opened a line from Golden to Denver to connect with the first two lines, and then in 1872 finished a line up Clear Creek Canyon to Black Hawk. By 1873 the Denver and Boulder Valley Railroad Company was in operation and shortly thereafter the Denver and South Park was started.

One of the best known roads, which has also been closely identified with the development of Colorado, was the Denver and Rio Grande. It was originally planned to extend south to El Paso, Texas and ultimately to reach Mexico City. Other railroad expansion in Colorado continued throughout the 1870's stimulated by the gold and silver discoveries in places such as Leadville, Aspen, Silverton, Creede, Cripple Creek and many other camps.

Colorado carriers were dependent for their continued success on the national economy and the overall economic health of the railroad industry. The general plight of America's railroads in the 1880's, brought on by enormous expansion of fictitious capital and apparent inability to pay dividends on outstanding stock, was reflected in the Colorado roads. In 1882 railroad construction with the state reached its lowest point since 1870. The recovery in the 1890's, with intermittent slack periods, caused railroad construction to climb to its peak year in 1914 when 5,814 miles of track were in operation within the state.

The regulation of such an industrial giant as the railroad industry became necessary at both a state and local level. As early as 1862 the Colorado Territorial Legislature passed an act relating to corporations which laid the foundation for later legislation that was designed to secure the proper maintenance of road beds and the rendering of good service to the public.

The State Constitution in 1876 expanded control over the railroads by giving the legislature the power to alter, revoke or annul any charter of incorporation which in their opinion was injurious to the citizens. The constitution also disallowed railroad monopolies within the state and pronounced that all railroads were to be defined as common carriers. All individuals would have rights to have people and property transported on these common carriers and  no undue or unreasonable discrimination could be made in charges or in facilities for transportation of freight or passengers.

Railroad Commission and Public Utilities Commission

Florence and Cripple Creek Railroad

In 1881 an act was passed that required every railroad company to keep an agent in the principal town or city along its line in the State who would adjust and settle claims for overcharges and for all loss or damage. In 1883 another act passed regarding rate overcharges. Two years later the Legislature established a Railroad Commission consisting of one member. The act required him to make a report annually to the Governor, but in the eight years prior to the repeal of the act in 1893, only two reports were rendered

The Railroad Commissioner published a short report in 1892 which stated that although there was an earnest desire on the part of the people of Colorado for general railroad legislation, there had been a determined opposition by the railroad corporations of the state to the enactment of any railroad legislation whatsoever. The legislature failed to appropriate sufficient funds to carry on the business of the commissioner thus making it impossible for him to publish the numerous statistics which he had gathered. In 1893 the office of Railroad Commissioner was abolished. During this period, the most substantial authority over the carriers may have been derived from  the office of the Secretary of State which could compel corporations doing business within the state of Colorado to file applications for charters and requisite statutory reports and statistics. 

The second attempt at more direct regulation of the railroads occurred in 1907 with the establishment of the Railroad Commission, consisting of three members. The constitutionality of this act, however, was questioned by the carriers and while the litigation was still pending in the courts a new act was passed by the Legislature eliminating the contested features of the former act. The new act in 1910 entirely repealed the former act. While cases arose involving the constitutionality of this act, the Colorado Supreme Court held the act to be constitutional. 

As the economic activity rose within the state along with the commensurate increase in technical activity within the railroad industry itself, the Railroad Commission recommended a Public Utilities act which would confer on the Commission the supervision over all public utilities in the state and would strengthen the powers of the Commission. As a result, the Public Utilities Act was passed in 1913 which effectively ended the existence of the Railroad Commission as a separate entity and established the PUC as the agency that regulated the railroads. 

Board of Equalization and Tax Commission

Another area  in which the State became involved was taxation of the railroads. The Board of Equalization was created in 1876 by Article X Section 15 of the Colorado State constitution in an attempt to make a uniform system of property taxation. Under this law assessors determined the value of properties, while the State Board of Equalization adjusted these figures in order to evenly distribute the burden of taxation among the counties.

Early on the ambiguous definitions used in the law to describe property caused problems and criticism. This was especially true regarding the railroad companies who owned property in more than one state. Beginning in 1876, its year of creation, the board found inaccurate assessments, causing them to equalize the figures. This action raised questions about the constitutional power of the board. In 1877 the court ruled that the board could not raise the combined valuation of the state. As a consequence, the board felt that their powers were all but eliminated and made no further attempts to equalize for the next 20 years until 1899.

The inefficiencies and inconsistencies in the system caused many problems. The Board of Equalization, for instance, raised the values of all property taxes in 1901 in an attempt to increase revenue in Colorado. From 1900 to 1901 the railroad assessment increased by 275 percent, whereas the assessment of the entire state increased by only 118 percent. The railroads refused to pay this drastically increased amount on the grounds that their property had not been accurately valued.

These assessment inequalities, along with a board plea in 1899,  the depression in the 1890's and the increased role of government all lead to the Property Tax Law of 1902. The law clarified the definitions of various properties and gave the board the power to assess the properties of railroads and public utilities. The law also stated that the railroads must provide an annual report that included miles of track, miles of sidetracks, real estate, buildings, rolling stock, equipment, miles of telegraph and telephone wire, and the shares of stock. In addition, the report included the cash value of each of these categories. Although these changes temporarily improved the tax system in Colorado, by 1910 the county assessors joined a nationwide movement for tax reform.

In response, the State Legislature created the State Tax Commission in 1911 to be appointed by the governor and treasurer.  Because the duties of the commission included equalizing assessments between the counties and assessing the railroads, there was an attempt to eliminate the now redundant Board of Equalization in 1912. The equalization of assessments, however, was limited by the constitutional provision that the State Board of Equalization  should possess this function.  The legislature was thus forced to give the board the final decision on equalization. This highly criticized system of dual power remained only in Colorado and Missouri by 1913. From 1911 to 1946 there seemed to be a higher tendency of the board over the commission to be influenced by partisan politics. For 10 years the board did not equalize at all and then for 18 years they reduced values. From 1915 until 1930 the railroads benefited from these reductions.

In 1941 the Department of Taxation and Revenue was created. Separate from the Department of Revenue, the Department of Taxation was administered by the Colorado Tax Commission. A major organizational change occurred in 1968 with the establishment of the Department of Local Affairs which included a Division of Property Taxation. This division was also administered by the Colorado Tax Commission until 1970 when the Commission was abolished and the Office of Property Tax Administrator was created. The Colorado Tax Commission then became the Board of Assessment Appeals. 

Bibliography

Colorado State Archives. Colorado Governors, Board of Equalizations Collection.

Colorado State Archives. Colorado Department of Regulatory Agencies, Public Utilities Commission Collection.

Colorado State Archives. Colorado Railroad Commission Collection. 

Colorado State Archives. Colorado Department of Local Affairs, Tax Commission Collection.

Graham, Rosemary. "Agency History of the Colorado Board of Equalization". Unpublished report. Colorado State Archives: 2001. 

Saletore, G.N. and Alvin L. Smith, Jr.. "Records of the Railroad Commission of the State of Colorado". Unpublished report. Colorado State Archives and Records Service: 1961.