DENVER -- How would you like money from the state to pay for improvements to your home and another check to help pay the taxes on those improvements?

That’s what some folks in Black Hawk are getting, all in the name of historic preservation.

But the CALL7 Investigators reviewed documents showing money going to things like granite countertops, cultured marble, skylights, redwood decks, new water heaters, an entertainment center and a dog door.

And it’s all legal.

That’s because Colorado voters and state legislators cleared the way in the early 90's, when gambling was legalized in three cities, Black Hawk, Central City and Cripple Creek.

Since that time, Black Hawk has become the crown jewel of gambling in Colorado, receiving nearly $40 million in historic preservation funds.

That money comes from the tax on gaming and all three cities get a share based on the tax revenue generated by casinos in each municipality.

As Black Hawk is the state’s most popular gaming spot, generating the most revenue, it has received the lion’s share of the historic preservation money among the casino towns.

The idea is to use the money to preserve the look of the cities prior to World War I, but CALL7 Investigator Tony Kovaleski discovered Black Hawk city leaders apparently have a loose interpretation of historic preservation.

He found homes modernized with state money.

Erv Fahrni lives in a relative’s home in Black Hawk which received historic preservation money.

Kovaleski asked Fahrni, “Does this look like it use to look before World War I?”

Fahrni responded, “No. Please.”

Kovaleski then asked, “What historic preservation took place here?”

“Well none,” said Fahrni. “They needed a livable house. You go inside it looks like a house you'd build today.”

City leaders approved $300,000 in historic preservation funds to renovate and modernize the home and according to Fahrni part of the home stands where a historic red barn was located.

Today, there is no evidence of a barn.

But the house does include a dog door which documents show was part of the approved scope of work.

"The dog door on this house, is it preserving history?” Kovaleski asked Fahrni who said, “No, but it keeps the house clean.”

"If you get to granite countertops and doggie doors that doesn't make the building more historic, that actually detracts from that," said former State Senator Sally Hopper.

She supported legalizing gambling in Colorado but said she expected the gaming tax would help restore significant historic structures throughout the state, like the State Capitol, the Governor’s Mansion or the old Elitch Theatre.

All are open to the public.

She never expected millions in state dollars paying to modernize private homes.

“Some say it's a slush fund for home repairs. Do you see it that way?” asked Kovaleski.

Hopper responded, “I'd hate to say it exactly that way except that you're absolutely right."

Four years ago, state Rep. Al White sponsored a new law removing the $100,000 limit on each city could give to one property.

White told 7NEWS, “I wouldn't have approved of any of this legislation for them to take taxpayer dollars and simply improve their home."

“Should the leadership in Black Hawk be embarrassed by this kind of spending?” asked Kovaleski.

“I think they should be. I think they know full well that these dollars weren't intended to be spent in this fashion," said White.

He continued, “I think the Legislature needs to look at it again. What the Legislature giveth, the Legislature can taketh away and I think you've presented me with some disturbing evidence of advantage is being taken of public dollars for private gain, private use, private benefit."

Another example is the property on which the home of city alderman Kathleen Doles and her husband sits. The property recently received approval for $492,000 in work.

CALL7 Investigators discovered several of the items that will be repaired in the 2008 grant were also repaired with state money in the 1990s.

Documents obtained by 7NEWS show an estimate of $116,250, in 2008, for work to retaining walls surrounding some of the property, however, records from 1994 show similar work. On that grant application, which was approved and the work presumably completed, Doles' husband said “the work will greatly extend the life of the retaining walls and the foundation.”

Another example involves work to the kitchen. A 2008 estimate shows $13,000 for cabinets and countertop work. Similar work, according to city records, was completed as part of a 1999 grant worth $25,000.

When asked for on-camera interviews to clarify, explain or justify Black Hawk’s use of historic preservation money, city leaders refused saying instead that everything must be done in writing.

"Why not talk and explain your position for people who have looked at the way you're managing these dollars and have asked some serious questions. They say it's politically corrupt," Kovaleski asked Black Hawk City Manager Richard Lessner

"And people always do,” Lessner answered. “We're willing to answer the questions but you have to follow the process.”

"I know the people who looked at this, legislators, ethicists said this system is ethically corrupt,” Kovaleski said.

"Well maybe they should contact us also," Lessner answered.

As mentioned, taxes on the grants received are also paid through the historic fund.

One resident received a check for $211,000 after receiving more than $400,000 to repair and renovate his private home.

The grants are considered taxable income so the Legislature has allowed for homeowners to be reimbursed for their tax obligations.

Black Hawk city leaders said dog doors will no longer be approved.