Colorado Legislature working on relief for rising property valuations, potential tax hikes
Senate Bill 108 intended to head off big hikes in tax bills
Looking up the road at potentially massive property tax increases, the Colorado Senate recently passed a law intended to rein in those hikes.
Dylan Roberts, an Avon Democrat who represents Eagle County, and much of the northwest corner of the state, along with Clear Creek and Gilpin counties, was a co-sponsor of Senate Bill 108. That bill would allow local governments and special districts to provide property tax relief if those elected boards choose to do so.
The problem with the big increase is the Taxpayer Bill of Rights, or TABOR, amendment to the state constitution. That measure was passed in 1992. The main feature of the complicated amendment is revenue and spending limits on state and local governments. Those revenue and spending limits can be exceeded with voter approval.
Sales and income taxes collected in excess of the TABOR limits at the state level have been refunded to taxpayers. Legislators this session are debating what those refunds may look like.
While sales tax is the lifebIood of cities and towns, school districts and other special districts depend in large part on property tax collections. When property values increase, those districts generally either cut back their property tax rates — known as the mill levy — or issue refunds.
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Special districts are generally reluctant to cut their mill levies, since TABOR requires voters to approve any subsequent increase.
The Denver-based Independence Institute is a Libertarian-leaning think tank that focuses in large part on tax policy. Institute Fiscal Policy Director Ben Murrey said the 2020 voter repeal of another amendment — the 1982 Gallagher Amendment — could have kept residential property tax rates down.
That amendment required the cuts to property tax rates in order to maintain a balance between taxes paid by commercial and residential property. The amendment mandated that residential property make up no more than 45% of a local government’s tax collections.
With the rapid growth of residential property in the state, the assessment rate had dropped from roughly 30% in 1982 to 7.15% in 2020. It was set to drop even more before the amendment’s repeal.
Gallagher could have kept tax collections in check, Murrey said, adding his belief that the measure was essentially misrepresented to voters.
Murrey also has questions about Senate Bill 108. The main question is whether legislation can override a state constitutional amendment.
Roberts acknowledged that the bill’s provisions may have to be “worked out in court.”
But, he added, the intent of the bill is to provide temporary relief. Under the bill’s provision, local governments and district boards can provide property tax relief by lowering mill levies. If property values fall, those governments can then raise their mill levies without voter approval, but only to the level before the rates were cut.
“A lot of special districts want to do right by their citizens,” Roberts said.
Roberts noted that the bill has passed the Senate with a bipartisan majority. He expects the same in the Colorado House of Representatives.
“I expect this to land on the governor’s desk,” he said.
If the bill passes and is signed into law, Murrey said he expects to see a court challenge to the measure. Once there, he doesn’t hold out much hope for resolution in favor of TABOR advocates.
“The courts don’t care what the (state) constitution says when it comes to TABOR,” Murrey said.