Colorado property taxes would be cut by $700 million under deal

Colorado property owners would get a $700 million break on their rising tax bills over the next two years under a plan unveiled Monday by Gov. Jared Polis and state lawmakers that’s aimed at preventing a business group from pursuing an even larger reduction in November. 

The legislature, in a deal reached in the final days of Colorado’s 2022 legislative session, would also spend $400 million from the general fund to blunt the financial effect of the reduction in expected taxes on schools and local governments, which are primarily funded by property tax revenue.

“We know every part of the state is seeing higher home values and costs,” said House Majority Leader Daneya Esgar, a Pueblo Democrat. “We’re doing this legislation to make sure that our economy can continue to grow without significant increases in property taxes and we’re making sure that we can continue to put more money in classrooms.”

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The agreement, which is set to be introduced in the form of a bill, is the culmination of months of discussions between the governor’s office, Democratic leadership at the Colorado Capitol and Colorado Concern, a nonprofit representing the state’s business executives that was pursuing a measure on the November ballot that would have capped property valuation increases at roughly 3% for taxation purposes. 

The Colorado Concern initiative was forecast to reduce expected property tax revenue by $1.3 billion in its first year, a hit that opponents warned could be catastrophic for schools and local governments. Colorado Concern pitched the measure as necessary to blunt the economic effects of inflation and the general rising cost of living in Colorado.

Colorado Concern has agreed to stop pursuing its ballot initiative as long as the proposal unveiled Monday doesn’t change and passes the legislature. 

“Colorado Concern is focused on tax relief for property taxpayers and improving our current property tax system to make it simpler and more predictable for both residential and business owners,” said Mike Kopp, who leads Colorado Concern. “The governor and many in the legislature are focused on similar objectives and, with a little luck, our objectives will overlap and we will not need to proceed with a ballot measure. “

Polis, in an interview with The Colorado Sun, said that “by providing this relief valve and immediate property tax relief for every Coloradan, we’ll address some of the concerns from several entities that have filed property tax-related initiatives.”

Gov. Jared Polis during a media event regarding new federal funding slated for Interstate 70’s Floyd Hill in Clear Creek County on Wednesday, Feb. 23, 2022. (Andy Colwell, Special to The Colorado Sun)

The governor said he intends to begin negotiating a longer-term property tax relief mechanism.

“We’re confident that … we’ll be able to work with the business community, with school districts (and) with many others to figure out what a long-term solution looks like,” Polis said. “This is a two-year property relief, property tax cut package. The thought is that during those two years, we will work on what a more permanent solution looks like.”

Here’s how the relief, offered through Senate Bill 238, would work:

  • For the 2023 tax year, the residential assessment rate used to calculate how much a residential homeowner owes in property taxes would be reduced to 6.765% from 7.15%. Additionally, the first $15,000 in taxable value of a residential property would be waived.
  • For commercial properties, the assessment rate in 2023 would be reduced to 27.9% from 29%. Additionally, the first roughly $30,000 in taxable value of a commercial property would be waived.

Assessment rates are used to calculate how much someone owes in taxes by multiplying the rate by a home’s assessed value, which is determined by a county assessor. What a property owner pays is then determined by the mill levy rate. A mill is a $1 payment on every $1,000 of assessed value. 

The reduction would mean that a residential property owner who owns a home with an assessed value of $300,000 in an area with a mill levy rate 100 would pay $1,963 versus $2,145.

The median sale price of a single-family house in Colorado hit $575,000 in March, up nearly $100,000 over the year before.

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Polis said the average residential property owner in Colorado would save about $260 a year on their property taxes under the change. 

In 2024, the rates would go up slightly to match a reduction already approved for the 2021 and 2022 tax years thanks to a measure passed by the legislature in 2021. For single-family residential property owners, the assessment rate would be approximately 6.95%, down from 7.15%. For multifamily residential property, the rate would be 6.8%. 

For those who own commercial property used for agriculture and to produce renewable energy, the assessment rate would be 26.4%, down from 29%.

Finally, the legislature is proposing to continue a change allowing senior citizens to defer all of the increases in their property taxes until they sell their homes while allowing everyone else to defer any increases over 4%. 

A housing development sits under construction off Reese Street, located on the southern end of the town of Silverton on Oct. 1, 2021. (William Woody, Special to The Colorado Sun)

Rep. Mike Weissman, an Aurora Democrat working on the bill, said the property tax changes in 2023 aim to help lower and middle income Coloradans through the section waiving some assessed value. Without that provision, he argues, well-to-do people would benefit more from the changes.

But Amie Baca-Oehlert, president of the Colorado Education Association, the state’s largest teachers union, and Carmen Medrana, who leads United for a New Economy, a progressive group, blasted the proposal and complained that they were left out of its formation.

“We’re disappointed Gov. Polis and legislators are working behind closed doors to cut a deal that would give some of the richest and most powerful special interests fiscally irresponsible, inequitable property tax cuts,” the pair said in a written statement. “… While we’re disappointed in the process so far, we look forward to working with legislators, the governor and other organizations representing working Coloradans as this bill moves forward — and as a permanent solution is debated and designed.”

The bill making the changes is expected to be bipartisan thanks to the sponsorship of Sen. Bob Rankin, a Carbondale Republican.

“This represents a big step forward, I think, on the property tax debate,” said Sen. Chris Hansen, D-Denver. “We think we’ve got something that is really balanced and will provide immediate relief but not cut into K-12 or the other important local services.”

One hiccup in the deal could be how proponents of the proposal plan to spend $400 million to help schools and local governments weather the reduction in property tax revenue.

According to Hansen, half of that money will be spent by the legislature this year through the general fund. The second half will also come from the general fund but will count toward the $1.3 billion to $1.6 billion that is projected to be owed to Coloradans from next fiscal year because of the Taxpayer’s Bill of Rights cap on government growth and spending.

In other words, the legislature plans to use $200 million that would have been refunded to taxpayers toward covering the cost of their property tax reduction bill.

State Rep. Colin Larson, a Ken Caryl Republican who was working on the Colorado Concern ballot measure, said that was a surprise that threatens the delicate deal, which was negotiated in good faith. Larson argues that by using TABOR refund money to blunt the effects of the property tax cut the tax relief plan really totals $500 million, not $700 million.

Polis said the legislation is part of his “saving-people-money agenda” this year that comes as Republicans are hammering him and other Democrats heading into the November election over the rising cost of living. Last week, Polis and Democrats in the legislature introduced a plan to advance refund checks owed to Coloradans under the Taxpayer’s Bill of Rights, which limits government growth and spending. Instead of receiving the checks — which would be $400 for individuals and $800 for joint files — in April 2023, they are now slated to be sent out in late August or early September. 

Asked, however, whether the property tax relief would have been brought without the threat of Colorado Concern’s further-reaching ballot measure, the governor didn’t directly answer.

“There’s a lot of thought that’s gone into a comprehensive agenda to save people money,” he said.

UPDATE: This story was updated at 11:56 a.m. on Tuesday, May 3, 2022, with more details about Senate Bill 238, which would offer property tax relief.

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