We provide a direct test of the extent to which the stringency of a Tax and Expenditure Limit (TEL) influences the creation of special district governments by examining one of the strictest TELs in U.S. history, the Colorado Taxpayer's Bill of Rights(TABOR). Through analysis of panel data from 1993 to 2004 of general purpose and special district governments, we test the relationship between TABOR and the creation of special districts. The novelty of our research involves the use of successful and failed attempts to override TABOR to measure variation in TEL restrictiveness at the county and municipal geography. Our results indicate that counties and municipalities unable to override TABOR's restrictions and therefore bound by the TEL have no greater use of special district governments than local jurisdictions experiencing similar demand for services but not bound by TABOR. These results are robust to failed override attempts specific to tax revenue as well as debt proceeds. Furthermore, results are unaffected by the use of multiyear lagged measures of override attempts and the inclusion of county debrucing initiatives that passed or failed by a small margin—i.e., less than 60 percent of votes. Contrary to anecdotal evidence, our results find norelationship between tax and expenditure limits and the formation of special districts.
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