taxes

A bill proposed in the waning days of the General Assembly would rewrite how property taxes are classified, but more directly could work around a question about lowering property taxes on the November ballot.

Colorado Politics obtained a draft of the bill to be introduced late Wednesday by Sen. Chris Hansen, a Denver Democrat, and Sen. Bob Rankin, a Carbondale Republican, to turn the two property tax classifications, commercial and residential, into five or perhaps six divisions. 

In the House, the bill's prime sponsor is Majority Leader Daneya Esgar of Pueblo.

The timing of the bill and what it changes matter — the title is set and petition signatures are already being gathered on a petition to reduce residential and non-residential classifications cumulatively by $1.03 billion in 2023 and comparable amounts thereafter.

If lawmakers bust up the classifications — a powder keg of intentions and politics that might benefit Republicans in next year's general election — the savings to taxpayers falls to about $200 million in two years, a loss of about $900 million a year.

Supporters have until Aug. 2 to collect 124,632 signatures from registered Colorado voters to qualify for the ballot. Rewriting the ballot measure to adjust for potential 11th-hour changes from the legislature at this juncture isn't possible, they told Colorado Politics.

Proponents of the tax cut, however, have vowed to take it to court if the legislature can pass the pre-emptive changes to limit the tax savings. 

The new bill fits a pattern of recent efforts by the Democratic-controlled legislature to put workarounds in place on measures passed by voters. 

After voters passed Proposition 117, which mandates that voters must be consulted if a proposed fee brings in more than $100 million in its first five years, the legislature is considering a transportation bill that breaks up new fees into four categories, which would remain under the $100 million threshold.

Similarly in 2019, after voters rejected new setbacks from homes and businesses for oil and gas operations, the Democratic-led General Assembly passed legislation to allow state regulators and local governments to enact setbacks.

The ballot measure was filed in April by the conservative advocacy group Colorado Rising State Action, which led last year's campaign on Proposition 117.

Michael Fields, the executive director of Colorado Rising State Action, described the maneuver on property taxes as similar but preemptive. 

"It doesn't surprise me," Fields said. "I've had the feeling this whole session that they think they have a permanent majority in the legislature, and when you think that you'll do whatever you want."

Democrats hold a 41-24 majority in the House and a 19-16 edge in the Senate.

He doubts such a cynical Hail Mary to avert voters' intent could pass legal muster.

If the measure passes in November, Colorado will have two opposing laws, and the courts have consistently sided with voters over policymakers, he said.

"I think they want to have that battle and see," Fields said. "There's a legal challenge and a political hit they could take by doing this — the people pass a billion-dollar tax cut and they're not going to get it, because the Democrats passed a bill to stop it.

"I think that's really bad politics."

He noted that after redistricting draws new boundaries this year, lawmakers might have to run in more moderate, less safe districts next year.

Fields said the aim of the ballot measure is to offset rising values and tax bills in Colorado that are breaking the financial backs of those who want to hang on to the property but face rising tax bills they can't control.

On the flip side, the initiative would allow the state to keep an additional $25 million a year under the TABOR cap before hitting the spending cap, which triggers refunds to taxpayers. The offset helps reimburse local governments for homestead exemptions for qualifying older homeowners and disabled veteran.

The ballot measure aims to reduce Colorado's residential property tax assessment rate from 7.15% to 6.5% and cut the assessment rate for other property, excluding producing mines and property producing oil or gas, from 29% to 26.4%.

The goal, backers say, is to give taxpayers relief from rising property values while the government still collects more than it has previously, not counting the nearly $4 billion in federal stimulus money Colorado is expected to receive this year.

"This isn't an end run," Hansen insisted. This is the legislature working to fulfill its promise in the wake of the Gallagher repeal last November. "We always knew we would have to come back and look carefully at property tax reform, especially in a situation with rising home values. Lots of people, especially in multi-family dwelling units, need targeted tax relief. We're trying to create those targets in statute and immediately deliver property tax relief to those categories."

If the voters want to do something beyond what's in the bill, that's fine, Hansen said, "but we will have guaranteed property tax relief in statute through the bill." 

"It's our responsibility to manage the budget long-term and leave room for a ballot measure, which this does," Rankin said. 

Hansen and Rankin have been watching and waiting to see how home values changed post-Gallagher, and the sudden spike in home values prompted action sooner than they anticipated. The bill they're proposing is only for two years, and would set a different assessment rate for multi-family dwellings than single-family homes, and different rates for commercial properties.

Agriculture and renewable energy properties are also in a different category, although Hansen said that could change and they could be split off into their own categories. 

"We're proposing to lower for some categories those assessment rates, which is the lever the state controls," Hansen said. That would reduce the increase in property taxes, not lower property taxes entirely, he explained. School districts, for example, will still see increased revenue, just not as much. 

The ballot measure, however, specifies a $1.03 billion tax cut, no matter how the pie is sliced.

Multi-family residential property (apartments, condos, townhomes, duplexes), represent about 10% of the total property value of the state. But that's where low-income families are renting and owning, and it's statewide, whether in rural Colorado or the Front Range.

These are the affordable housing options for many Coloradans, Hansen said. And he's hoping those property tax savings will be passed along by those who own apartment buildings, for example, to their tenants.

"It's urgent that we provide targeted relief to that category" and to take pressure off of rent increases, Hansen said.

The bill would have an impact on school district revenues.

"We're making a move toward mill levy equalization," Hansen said, through a bill passed earlier in the session. The bill could reduce the inflationary increase by about $50 million. Hansen explained the increase is projected at about 8% without the changes from bill, and with the bill would drop by about 3%, and it would affect only those districts that are working on mill levy equalization, about 127 out of 178 school districts. 

This goes back to the reason that the legislature asked voters to repeal Gallagher last year, Rankin said. A statewide calculation for changing assessment rates, which is what Gallagher did, affects different parts of the state differently, he explained. As an example, a fire department with a tax base that is almost 100% residential will see different revenues than an urban district that has a larger percentage of its values in commercial property.

"We have to be very careful when we adjust these rates to not do too much at once," which he said would disproportionately affect rural Colorado.

"We are really trying to do this in a bipartisan way," Hansen said, thanking Rankin for the work of the last week. "I think we found a concept that will do what's needed for this moment." 

While the bill is just two years, property taxes will continue to be an ongoing conversation at the state legislature.

"Colorado is a dynamic property market and we need dynamic management of property taxation," Hansen said. 

For rural Colorado, "we got everything that we think is prudent," Rankin added. 

Another ballot issue proposed for November would reduce the state income tax rate from 4.55% to 4.40%.

The ballot initiative was filed by Jon Caldara, president of the Independence Institute, and state Sen. Jerry Sonnenberg, R-Sterling, on April 9.

Odd-year elections in Colorado are limited to taxes or fiscal issues that fall under the state constitution's Taxpayer's Bill of Rights, which caps government spending and requires refunds when tax revenue exceeds it.

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