Gov. Jared Polis on Monday unveiled a much-anticipated proposal to offer tax relief to Coloradans, a key provision of which is to ask voters to fix the problem via the ballot box this November.
The proposal seeks to do three things: Provide immediate property tax relief, address the problems that arose from the voter-approved repeal of the Gallagher Amendment in 2020, and provide a mechanism to prevent property tax rates from increasing faster than income, tied to the Denver-Boulder Consumer Price Index.
The move comes as the Colorado lawmakers stare down the barrel of looming crisis, one in which property taxes are expected to increase this year by as much as 50% for many homeowners.
Flanked by Democratic lawmakers, business owners, homeowners and other supporters, Polis said the proposal will reduce residential property tax increases by 50% on average.
Critics immediately called the proposal insufficient – akin to bringing a “squirt gun” to a burning building. Proponents said the multipronged approach offers tangible relief.
The proposal allows seniors covered under the state's homestead property tax exemption to keep that exemption when they downsize into another residence, the governor said.
It will hold harmless the things property taxes pay for — police, fire, local hospitals and K-12 education — by tapping the state's TABOR surplus.
Under the proposal, the state would "de-Bruce" state revenue up to a new limit that adds 15% annually to the calculation. To “de-Bruce” means to eliminate the spending limit, and to spend all tax revenues collected. That would allow the state to keep an additional $167 million in 2024, which in turn would reduce the state's TABOR surplus from $2 billion to $1.8 billion, and reduce taxpayer refunds by $46 in 2024.
Under the proposal, the state would use the $167 million as property tax relief.
The measure also will differentiate between property taxes assessed on primary homes versus property taxes assessed on second and third homes, with subsequent homes getting less of a break. It will not affect second homes that are used as rental property, a concern for resort communities that rely on short-term rentals during tourist seasons.
The proposal has a 10-year sunset.
A companion bill, according to Sen. Chris Hansen, D-Denver, will enact changes on the assessment side. That measure is expected to receive bipartisan support.
The supporters at Monday's press conference included Scott Wasserman from the Bell Policy Center, who has filed two ballot measures to reduce property tax increases. Also in attendance Monday were J.J. Ament, CEO of the Denver Metro Chamber of Commerce, and former state Sen. Mike Kopp, president and CEO of of Colorado Concern, which sounded the alarm on property tax increases more than a year ago.
Property values are reassessed every two years, and 2023 is an assessment year.
Voters' decision to repeal the Gallagher Amendment in 2020, paired with skyrocketing home values and the biennial assessment, is expected to result in an increase in property taxes by as much as 50% in some metro area counties.
The Gallagher Amendment, approved by voters in 1982 and meant to drive down homeowners’ tax burden, pegged the contribution of residential property taxes to 45% of the total, resulting in the residential assessment rate decreasing over time from 21% in 1986 to 7.15% by 2020.
In 2023, the residential assessment rate across Colorado is 6.765% - meaning only 6.765% of the property value is taxed. The non-residential assessment rate stands at 27.9%. Non-residential property includes commercial property, land for agricultural purposes, land for mineral extraction and energy production, and vacant land.
In the latest valuations, all nine Denver metro area counties show double-digit increases in median value that followed the red-hot real estate market of 2021 and early 2022.
Assessments, for example, are up 33% on the median home in the city of Denver, and a whopping 47% on the median home in Douglas County.
Wasserman said the proposal will lean on reducing taxable value, and for lower-valued homes, this will really have an impact.
One concept expected to be included is the assessment rate for second homes. While supporters are expected to cite high values of such second homes, it could also affect resort communities that rely on short-term rentals.
While the idea of charging different property tax assessment rates on second homes has been around for a while, it's never come to fruition because county assessors have maintained they have no data on just which homes are considered second homes. The bill is expected to provide a one-year delay to allow assessors to figure that out, along with the resources to do it.
"This has been a big issue for a number of years," Wasserman said.
The bill is expected to differentiate between homes that are rented out for substantial portions of the year versus those that are only occasionally rented out or not at all.
The bill to be introduced Monday is not the only solution being proposed on property taxes.
Senate Bill 108 would allow local governments to offer temporary property tax credits or mill levy reductions and later eliminate the credits or restore the mill levy without going to voters for permission. The bipartisan bill cleared the state Senate and is now ready for debate before the House.
In a statement Monday, Advance Colorado said voters deserve a real long-term solution to the property tax crisis and not the measure proposed by the governor and legislature.
“We’ve got a five-alarm fire in Colorado and our governor showed up with a squirt gun," the statement said. "We have heard reports of seniors already walking into their county treasurer’s office with tears in their eyes at the prospect of losing their home."
Fields added that the governor and legislature are "paying for part of this relief" with money taxpayers are already owed, creating a "fake cap on property tax increases, and going after even more of our TABOR refunds."
Advance Colorado's Michael Fields was one of the proponents behind Proposition 120 in the 2021 election, a property tax reduction measure that voters rejected by more than 14 percentage points.
Weighing on the proposal, House Republicans criticized Polis and the Democratic majority for waiting until the 11th hour to fix a problem they knew was coming all along.
“While we at the Capitol were making too many new laws that were way too expensive, real Coloradans across the state have been opening up their mail and finding tax bills they cannot pay," said House Minority Leader Mike Lynch, R-Wellington.
As to the proposal's plan to use TABOR surplus dollars, Lynch said Democrats are treating TABOR like an ATM.
"The people of Colorado should be skeptical of the governor’s hastily introduced plan with only one week left in the session," he said. "He seems to want to convince us this plan will solve all financial shortfalls, such as school funding, teacher pay, fire and police, and resolve Colorado’s property tax issues for homeowners and businesses. Given this sugar-coated plan must be approved by voters, it's concerning the governor has no Plan B if it fails.”
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