Once the echoes of opening day speeches fade and Colorado lawmakers settle in to solve some of Colorado’s biggest fiscal challenges, the daunting trade-offs required to deliver promised property tax relief will come into focus.

The unavoidable reality is Colorado lawmakers cannot afford to backfill in any meaningful way a big, across-the-board property tax cut or even fully understand how such tax cuts would upend the carefully calibrated financial plans of thousands of special districts, counties, municipalities and school districts that count on that revenue to deliver basic services.

There are a lot of ways to describe this situation. Complex, multidimensional and interlocking are three that come to mind. Simple it is not, and anyone who tells you that is trying to cover a structural problem with some cheap siding and a coat of paint.

“Legislators need to realize that as they peel back the onion, there are more and more layers to this story, and they really need to avoid the surface-level answer,” said Chris Romer, President and CEO of Vail Valley Partnership, a regional community development association. “What does it mean to be ‘made whole?'”

Romer suggests the realities in individual special districts are very different and complex. A one-size-fits-all solution is going to create unintended consequences.

As lawmakers are lobbied on various ways of addressing the affordability problem in Colorado – and we absolutely think they should – we would ask them to keep these four values top of mind:

Targeting relief

With limited resources, lawmakers ought to think carefully about how to devise solutions that focus on those who needs the help the most. Lower- and middle-income Coloradans have the least flexibility in their personal budgets and are taking the biggest hit with inflation and property tax increases.

In fact, based on a housing market forecast by Veros, we know homes that sit below the 75th percentile in value are seeing the steepest increases. Relief should focus there. The owner of an $18 million home does not need another $6,000 shaved off their property taxes, as we did last session.

On the non-residential side, the challenges are different. After 30 years of fixed ratios thanks to the recently repealed Gallagher Amendment, the non-residential rate is very high. As wonderful as it would be to lower these rates overnight, every local budget in Colorado is balanced upon them. Here, targeting takes a different form. Should barbershops pay the same assessment rate as the headquarters of a major company like Google? Should a family-owned farm pay rates as high as those for an industrial feedlot? Should private child care providers pay the same rates as a bank? We can make sure the right non-residential property users get relief now, but only if we can find a way to pay for it.

Adequacy and effect

As the public debate unfolds, it’s important to not lose sight of the fact these taxes pay for basic government functions administered by thousands of special districts and school districts. Diminishing their revenue streams could have cascading effects that are so individualized we have no way of broadly predicting outcomes. For instance, we recently saw a story out of Castle Rock that said its 37 special districts in 2021 carried nearly $1 billion in debt, money spent on roads, sewers and water systems. A primary revenue source for them is property taxes. Do we really have enough resources to backfill their losses?

Don Lombardi, chief of West Metro Fire Protection District, can talk for hours about the costs he’s had to cover in years when property tax revenues were lean and how financial challenges remain: diesel fuel is still over $5 a gallon; paying people wages that keep them from leaving for better salaries; fire trucks that you have to order and pay a deposit on four years in advance; inadequate insurance and Medicaid reimbursement rates – and that just scratches the surface.

His thoughts on a property tax rate assessment cut? “What they tell us is you’re still going to get an increase, you should be OK with that. And I’m saying, ‘What do you mean? We’re not going to be OK.'”

Our schools are also at the center of this debate. Local property taxes make up a significant share of our K-12 funding, and the state is on the hook for what local governments are unable to contribute. Cutting local revenues and backfilling them with state dollars could very well lead to our state running in place and simply shifting the proverbial deck chairs on the Titanic.

Including renters

We must have a mechanism to ensure any property tax breaks reach renters’ pockets. Last session, multi-family residential property owners saw both property tax exemptions as well as a reduction in their assessment rates. There’s little evidence to suggest that was passed along to renters. In fact, the summer and fall were full of headlines of rising rents. It’s not good enough to give a break to property owners and just assume that renters, who have seen sizable rent increases and often are lower-income families, get some of that relief.  This can be done in a variety of ways – whether through refundable tax credits that go directly to renters or through renter signoffs on property tax relief. No matter how we get there, any property tax relief project must include a lowering of the costs renters pay.

Supplemental revenue

Yes, our TABOR “surpluses” are big, at least for now. But we also are more pressed up against the arbitrary TABOR ceiling than we ever have been. There are a growing number of demands on the dollars above that cap, such as tax credits for energy saving purchases, more equitable tax rebates and greater funding for our schools. These all compete over what is likely to be a shrinking fund over the next few years.

It’s imperative lawmakers think about the big picture when it comes to Colorado revenues and consider whether it’s time to find new ways to pay for the relief that is necessary. A luxury tax, for instance, which would increase property taxes on homes worth more than $2 million, or treating excessively used short-term rentals property tax like a business, could be some of those alternatives.

It’s time to think outside the box

No matter what legislators choose to do this session, we hope they look outside the box for answers. There are simply not enough tools in the box we’ve been operating in. Oversimplified assessment categories, generalizations about local funding levels, and crude caps on value growth will not get the job done. Our state constitution’s uniformity clause and ban on a statewide property tax bars us from looking at solutions that often are raised as reasonable approaches to adequately, fairly and sustainably fund public services at the state and local levels. In looking for solutions to address these complex issues, that might be a good place to start.

Scott Wasserman is president of the Bell Policy Center, and Graham Thurston Hallett is a policy analyst at the center specializing in economic data analysis.