After months of dire warnings, assessment protests, political wrangling and nervous waiting, homeowners across the state are receiving their property tax bills. The print on those notices may be tiny, but for most people, the increases are huge.
Two conservative groups, Advance Colorado and Colorado Concern, plan to harness grassroots outrage over average increases of 25% to win approval for a ballot initiative that caps how much property taxes can rise going forward.
“Just because the housing market went up 40% (in value) doesn’t mean people have more money to pay the property taxes,” said Michael Fields, president of Advance Colorado.
“Most people want to stay in their homes. This initiative creates long-term predictability that is now lacking for businesses, individuals, families and governments,” he said, adding that wage gains have not come anywhere close to covering the added revenues local governments and school districts are requesting.
The two groups, which have faced off against each other on previous tax initiatives, are teaming up to reset property taxes back to 2022 levels and limit future property tax increases to 4% a year in an effort they believe will resonate with and provide relief to taxpayers stung by the added costs they are facing.
“We believe it is fair and balanced and it polls well. We think voters will respond accordingly,” said Dave Davia, the new president of Colorado Concern, an organization of Colorado CEOs formed back in 1986.
Here are how the mechanics of the proposed measure work.
- The residential assessment rate, or the share of a home’s market value subject to taxation, will be cut from 6.7% to 5.7%, while the assessment rate for commercial properties will drop from 29% to 25.5%. The two changes would restore property taxes close to 2022 levels, unwinding the latest cycle of tax hikes.
- The first $55,000 of a home’s value would be exempt from taxation. The exemption would favor lower and middle-income property owners and restore a discount that the Gallagher amendment, which voters repealed, would have otherwise provided.
- Revenue growth on existing residential and commercial properties would be limited to 4% a year, or 8% in a two-year assessment cycle. The cap could be raised by a statewide vote and could also lift local mill levies if asked.
Still to be determined is how to address shortfalls the growth cap might create in local government funding, which voters also want to see protected, Davia said.
Voters may want relief on taxes, but they also value the role local governments and districts play, he said. There is no point in easing property tax burdens if more houses burn down because there aren’t enough firefighters on duty.
The two groups have filed three “statutory” initiatives with different “backfill” language with the state’s Title Board and will move forward with one of the three after additional discussions and pending approval.
Initiative 198 would use money from the state General Fund to backfill shortfalls with no cap. Initiative 199 would divert General Fund dollars “up to the maximum amount practicable.” Initiative 200 would provide up to $750 million to cover shortfalls. All three alternatives prohibit tapping surpluses generated under the Taxpayer Bill of Rights or TABOR.
The two groups opposed each other on the repeal of the Gallagher amendment, which shielded homeowners from rising property values by shifting more of the tax burden onto commercial properties. And they faced off on Proposition HH, a failed ballot measure that tried to soften the blow of property tax hikes by diverting TABOR surpluses.
After HH was soundly defeated, Colorado Concern, on the losing side, pursued Initiative 97, which capped future property tax increases at 2.5% or the rate of inflation, whichever was higher. That measure resets property taxes to 2020 levels.
At the same time, Advance Colorado, a leader in the campaign to defeat HH, received ballot language approval for a constitutional measure, Initiative 50, to limit future property tax increases to 4% a year and filed several statutory initiatives to flesh that out.
Rather than crowding the ballot with conflicting measures, the two groups decided to work together, Davia said.
A joint campaign would bring Advance Colorado’s funding resources and expertise in gathering signatures, while Colorado Concern brings its connections to the state’s business establishment and Democratic politicians, who wield the levers of power.
Beyond the latest measure, Fields said Advance Colorado plans to go forward with its earlier Initiative 50, which puts the 4% cap into the state constitution but also requires a higher 55% vote in favor. The two won’t conflict, he said.
Why has Colorado Concern, known for partnering with the political establishment in the past, switched sides? Davia said Colorado has relied on drawing outside workers to keep its economy going. And those workers won’t keep coming here if they can’t find housing they can afford. Property taxes are part of that equation.
Colorado in recent years has become an “exporter” of people to other states. Employers will take their jobs to where people, especially young adults, are choosing to locate.
“We are going to fix this because it needs to be fixed for our state, for our employees, and for our employers,” he said.
And there could be more measures coming from the legislature, depending on what a task force studying property taxes recommends. During a special session called after the failure of Proposition HH, the Commission on Property Tax was set up. It faces a March 15 deadline to report its findings and potential fixes to the General Assembly, which could then pass a referendum for the ballot with a majority vote.
Davia said his group’s measure isn’t an attempt to front-run the commission or force its hand but reflects looming state deadlines to get ballot initiatives approved for the November election. If the property tax initiative isn’t set in motion now, backers will have to wait two more years to come forward again.
The commission may yet show the wisdom of Solomon in splitting the baby, protecting taxpayers from budget-crushing tax hikes while securing adequate local government and school revenues. But Fields said he wasn’t willing to bet on it, pointing to the broken promises made after the Gallagher amendment was repealed in 2020.
Protections for homeowners never emerged to replace those forfeited and that is contributing to the current financial squeeze residents in the state now face, he said.
“We aren’t hopeful that they will come up with a long-term solution,” he said. If they do, backers can stop collecting signatures.
The commission’s chairman, Sen. Chris Hansen, D-Denver, said his initial worry about any ballot measure with a hard cap is that it would set Colorado down the path of California and Proposition 13, which resulted in a “fiscal disaster.”
And while he favors backfill provisions to protect local governments, he estimates, roughly, that a robust one could divert $2 billion or more a year from the state budget.
“My question to the proposers is, where do you want us to find that money? There is no free lunch. We can’t just wish away our budget problems,” he said. “Where do you want us to find these multiple billions of dollars and where do you want us to cut? They’re essentially proposing cuts. So tell me what you want to cut if this is your proposal.”
Robbing Peter to pay Paul
One of the earliest and most vocal opponents to the proposed ballot measure has been the Denver-based Bell Policy Center, which likens the series of ballot measures lining up as setting the stage for a fiscal “train wreck.”
“I just feel like this measure is mugging the state and we have no money in our wallets. This is not serious public policy. It is deeply concerning,” said Scott Wasserman, president at the Bell Policy Center, a progressive think tank.
An estimate provided to the group expects the measure would blow a $2.8 billion hole in local government revenues, one that would only worsen over time. Wasserman has a sense of what gets cut first in the state budget — higher education — to the point that the state might be forced to shut down a college or university.
One of the biggest problems with the measure is that it rigidly caps from the top down a funding source that around 3,500 distinct local governments, school districts and special districts across the state, Wasserman said.
“Property taxes are local taxes and I object to the idea that the entire state gets a say on whether a local district can or can’t raise a local mill levy. We are going down an increasingly slippery slope,” he warned.
And the times when voters might be called on to go above the 4% cap or lift mill levies, say a period of high inflation, are also likely the times when they would be less willing and able to help out. To counteract any caps, the Bell Policy Center has filed a pair of initiatives of its own.
Initiative 95 would make any statewide cap on growth in property tax collections also subject to a local vote. Voters who want to retain revenue flexibility for their local governments and districts could essentially opt-out.
That’s different than the opt-in approach that the ballot measures from Colorado Concern and Advance Colorado take. They allow voters to give local governments the right to collect more than 4% on a case-by-case basis.
The other measure from Bell, Initiative 96, would implement a statewide property tax on luxury homes, defined as properties valued at $2 million or more, adjusted for inflation and excluding apartments and multi-family units. The revenues collected would be calibrated to the funding shortfalls that local jurisdictions face, with the state handling distributions.
Kelly Flenniken, executive director of Colorado Counties Inc., said her group, which represents 63 out of the state’s 64 counties, is still studying the ballot measures and acknowledges that the group’s members may hold diverse opinions. But as a general rule, local governments prefer not to see their revenues artificially lowered.
“Local governments are concerned about a decrease in revenue as we continue to see mandated and required services,” she said.
She said a common misperception is that local government spending requirements track with consumer inflation. That may be the case for some items, like wages. However, federal and state mandates can create additional spending requirements that are hard to escape.
Fixing and paving roads, for example, is a big budget item for counties. Since February 2020, the cost of asphalt is up 41% and the cost of concrete products is up nearly 36%, according to a price index maintained by the Associated Builders and Contractors.
“A cap would cause us great concern. We would need to look at it and do the analysis,” said Ann Terry, CEO of the Special District Association of Colorado.
Fields counters that the ballot measure seeks to protect local government revenues through the state backfill and emphasizes voters can approve a higher cap or boost mill levies if asked.
Taxpayers, already squeezed by high inflation the past two years, need more predictability, especially seniors and those who don’t have much money coming to begin with, he said. For them, even a $1,000 increase in taxes can be daunting.
“What elected officials don’t understand is how much of an impact having to pay this added money can have on people’s lives. This is an immediate problem. Let’s have other discussions later. Can we fix this problem?” he asked.
Denver Post reporter Nick Coltrain contributed to this report.
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