Colorado lawmakers scramble to block what they say could be “catastrophic” property tax cuts from November’s ballot

Colorado lawmakers are attending a special session this week to strike a deal over Property tax rates. The last-minute special session was called by Gov. Polis in response to two initiatives brought by Conservative policy groups Advance Colorado and Colorado Concerns. If passed, Democratic lawmakers say the initiatives would devastate funding for schools and local government.

Transcript:

Sarah Wilson: So, the reason the two ballot initiatives are—legislators have been using words like ‘catastrophic,’ and they would ‘decimate budgets,’ very apocalyptic language around these. But basically, combined, they would decrease property tax revenue by almost two and a half billion dollars in the state. And that is really bad news for school districts and other local taxing districts like fire districts that heavily rely on property tax revenue.

When you think of your local school district, where your kids go, where your nieces and nephews go, they get most of their revenue from property taxes. School districts are the largest recipients of property tax revenue. It also comes after some work that lawmakers did this past May during their regular session to finally fund schools at the level they should be at instead of basically writing them an IOU, which they’ve done for the past decade.

Alexis Kenyon: So, what is the other side of the story? We’ve been hearing a lot about property taxes in the past few years. But in reality, Colorado has the third-lowest property rate in the country. Can you tell us about what the groups who have proposed these massive cuts are arguing? This is an argument that I think a lot of homeowners understand well and would likely agree with. What are they arguing?

Sarah Wilson: Yeah, compared to the rest of the country, Colorado actually has a pretty low property tax rate and assessment rate. What’s happening, though, is that home values across the state are rising much faster than normal and faster than inflation. So the way property taxes are calculated is tied to home value.

If you have a spike in your home value, then you’re going to have a spike in your taxes, and homeowners might not be prepared for that or able to adjust their own personal budgets to accommodate for that. That’s pretty much the argument.

Alexis Kenyon: Okay. You used at the beginning of that answer a term I want to clarify for listeners because it’s something that might come up.

If the special session doesn’t go as planned and these initiatives end up on the ballot in Colorado, the way the government determines how much homeowners pay for property taxes is based on a percentage determined by another percentage.

So the first percentage is determined by the state, and that’s the assessment rate. That’s basically the state coming in and saying, “You know what, city governments, you can only charge property taxes on a little percentage of a person’s total value in their house.”

So if a person has a $500,000 house, the state of Colorado says you can charge property taxes, but it can only be– right now, our assessment rate is around 7%– “You can only charge taxes on 7% of $500,000,” which would come out to around $35,000. So that’s what the city of Boulder would be charging taxes against when it comes to property taxes.

Sarah Wilson: Right. So that’s what legislators are kind of debating right now—how much that assessed value should be. It builds off of a much larger bill that lawmakers passed in May. They cut it a little bit in May, and they’re trying to cut it a little bit more, so this is the “compromise.” When property tax assessment rates are cut, that results in less revenue for local government school districts, the entities that receive property taxes. So if someone is paying less in their property tax bill, that means that their school district is, in turn, also getting less.

Alexis Kenyon: So what’s the compromise? What is on the table?

Sarah Wilson: The overview is like the four main ingredients of this compromise bill: a residential assessment rate cut, some cuts for other non-residential property that were not included in other property tax bills from earlier this year, and growth caps on local government revenue. Those are the ingredients.

Alexis Kenyon: Okay. So we just heard about assessment rates and how those would affect our property taxes. Explain to us what a growth cap is and how it would apply in this bill.

Sarah Wilson: A growth cap is pretty much like, “Hello, city of Denver, you cannot increase your property tax revenue by more than 5%.”

Initiative 50 was a growth cap that would have been a 4% statewide growth cap. The growth caps in this compromise bill are larger than proposed in Initiative 50. It’s about 10.5% for local governments over two years and 12% for school districts over that same time period, compared to the very low number in Initiative 50.

Alexis Kenyon: So if Boulder’s housing prices go up by 40% in one year, which it did in 2022, the growth cap says, “City government, you’re not allowed to collect property tax on all of that that growth. You can only collect 10% more revenue from property taxes regardless.” So it limits that.

Sarah Wilson: Yeah.

Alexis Kenyon: Do you think that the conservative groups that put these very extreme initiatives on the ballot made them so extreme to force lawmakers to come back in August for a special session to make more compromises on something they already made compromises on in May? Was that the tactic?

Sarah Wilson: Yeah. A lot of people have been saying that. There is another proposal that Representative Mike Weisman, a Democrat from Aurora, brought forward that did make it through committee, and they’re all actually debating it on the floor right now. So by the time this airs, you’ll have to see where it is in the process.

But it is an effort to maybe disincentivize this kind of ballot initiative tactic in the future. The way that works is that if there is a ballot initiative that affects property tax revenue in any way, if it passes statewide, voters in Colorado Springs would also have to vote in favor of it in a separate election process for it to actually go into effect.

Essentially, an opt-out provision. That’s one way to disincentivize. Another part of this compromise deal is that they’ll pull the initiatives from the ballot, but these groups have committed to not attempting any ballot initiative for six years.

Alexis Kenyon: It’s possible that we’ll wrap up tomorrow. What do you think? Do you think we’re going to get a compromise out of the special session?

Sarah Wilson: There are a few different rumblings. I think it will be a very close vote.

Read more coverage from Newsline’s Sara Wilson, here.