Colorado can now allocate more money from sports gambling to state water projects

DENVER — Whether you’re a parlay prognosticator, or your hunch on hitting the over has put you deep in the under, some of those sports betting dollars may now help support water projects seeking funding across Colorado.

Proposition JJ, or the “Retain Sports Betting Tax Revenue for Water Projects Measure,” passed with a resounding 71.5% of the vote in November, one of the largest margins in the 2024 Colorado state election. 

This measure effectively removes the $29 million cap on taxable revenue earned through sports betting in Colorado, meaning that the state government will be able to retain and allocate more money towards various state water projects.

Chris Woodka, a senior policy and issues manager with Southeastern Colorado Water Conservation, said that Prop JJ won’t solve all of Colorado’s water needs overnight, but he believes it will help “fill gaps.”

“We have lots of aging infrastructure, leaking water lines, meters and storage tanks that need fixing,” Woodka said. “So with this passage of [Proposition JJ], it opens the spigot a little bit more to get the funding that we need.”

Colorado first got in on the sports betting action in November 2019 when voters narrowly passed Proposition DD and officially legalized sports betting in the state (making it the 18th state to do so). 

Along with authorizing sports betting, Proposition DD placed a 10% tax on sports betting operators, with all tax revenue reserved to fund state water projects.

However, a $29 million cap was placed on the taxable revenue in each fiscal year (FY), meaning all tax revenue earned in excess of $29 million would return to the sports betting operators.

Officials expected Proposition DD to generate around $10 million in its first fiscal year and grow by anywhere between $13.5 to $15.2 million in FY 2021 – 2022. 

But sports betting tax revenue has far exceeded expectations. A 2023 report from the Colorado Department of Revenue found that nearly $44 million in taxes were raised on retail and online sports betting from May 2020 to April 2023. 

Basketball, professional football and baseball — in that order — were the top three sports by total wagers across those three years, followed by NCAA Basketball, tennis and ice hockey.

January 2024 broke records, generating more than $4 million in one month. The same happened in September. 

According to monthly reports from the Department of Revenue, sports betting tax revenue exceeded $24 million from January 2024 to September 2024. 

Proposition JJ removes the $29 million revenue cap put in place by Proposition DD, meaning all money raised from sports betting taxes will go to the Colorado state government and subsequently water projects around the state.

In other words, Prop. JJ exempts sports gambling revenue from TABOR limits, meaning Colorado will keep all of the money earned through the 10% tax. 

Tax revenue is believed to have exceeded the $29 million by about $1 million last year, and government forecasts expect revenue to reach more than $30 million in FY 2024–2025 and $31.5 million in FY 2025–2026.

Nationally, sports betting has surged in the past few years, and Colorado is no exception. Sports betting was illegal in the state less than five years ago. Today, it boasts having more legal sportsbooks than any other state.

Experts say that the relatively low 10% tax rate matched with the wide availability of betting sources makes the state a welcome place for sportsbooks.

Only a few months ago, UK-based global online sports betting company bet365 announced plans to open its new U.S. headquarters in Denver.

While there was limited organized opposition to Prop. JJ, Democratic State Senator Kevin Priola voted against the ballot question in the state legislature, according to reporting from Colorado Public Radio, arguing that the proposition does not go far enough to address gambling addiction present in the state.

Some types of water projects that may receive funding include environmental and recreation projects, water storage and supply projects, agricultural (technical assistance and water efficiency) improvements and engagement and educational efforts. 

Allocations flow through the Water Plan Grant Program, a multi-million dollar funding stream managed by the Colorado Water Conservation Board (CWCB). 

The CWCB considers proposals from across the state, measuring them against the Colorado Water Plan, a detailed funding framework that aims to support projects aligning with five key categories: water storage and supply, conservation and land use, engagement and innovation, agricultural projects and watershed health and recreation.

Funds are released twice in a fiscal year, once in September and once in March, and help finance a broad spectrum of projects based in regions across Colorado.

“[The goal] is to really help projects in local communities and address the needs in those areas,” said Cole Bedford, the Chief Operating Officer of the CWCB. 

Bedford noted that while the additional revenue coming in from the taxes won’t be near enough to satisfy all of the projects that come to the Board for funding, he believes that the year-over-year increases will still significantly support local projects across the state.