Paul Rondeau: Your taxes are going up: here’s why
Vail CO, Colorado
Your property taxes are going up ” a lot. How can this be with the 1992 Colorado Taxpayers Bill Of Rights (TABOR) constitutional amendment in place? It’s complicated. You need to understand three concepts: (a) individual tax components make up the total tax, (b) formulas, and (c) tax rates and TABOR. Further, you need to pay attention to certain key words and phrases.
The tutorial is broken into two parts: Secton I, All the details, published Monday, and Section II, summary and action plan, which will be published Tuesday. This is probably the most complete, current explanation of property taxes ” so the reader may want to save both sections for further reference, study or notation of any reporting errors.
1) Components: Your total property tax bill equals the sum of taxes from various taxing entities. These include: (a) Eagle County school district, (b) Eagle County general, (c) municipalities and (d) special districts ” generally metro and recreation.
2) Formulas: Your taxes are calculated by simple arithmetic of A X B = C for each taxing entity. The factors “A” and “B”, coupled with the result “C” are defined below:
A = The tax rate or a mill levy (1.0 mill = $1 for every $1,000 of assessed value). The tax rate is unique to each taxing entity and initially set by vote when the entity originated.
B = Assessed value. This is not equal to your property’s value, but a percent of the value as set by county assessor. Uses 1982 “Gallagher” constitutional amendment “assessment ratios.”
Multiply property value (“actual value”) by 7.96 percent for residential and 29 percent for commercial and vacant land. Seem complicated? Just remember, as your property value goes up/down, so does your assessed value in a direct proportion.
C = Tax for your property is the result of “A” (tax rate) X “B” (assessed value)
Hence, your taxes can go up, down or stay the same based on the tax rate, which is changed or at least discussed annually, coupled with your assessed value revalued every two years.
(3) Tax rates and TABOR: Here you have to think about taxes at the level of each taxing entity, but using the same tax formula. The assessed value is the sum of all assessed values,including residential, commercial and vacant land. The tax is the total of all property tax collected. Colorado’s TABOR amendment was designed to keep property taxes in line with the inflation rate, typically in the 3-4 percent range. This is accomplished by adjusting the tax rate. The tax rate turns out to be key driver for deliberations by elected leaders and misunderstandings by the public.
For example, a recent newspaper headline read “Tax Freeze In Place”. What it really described was a tax rate “freeze” (i.e. keeping it fixed), leading to a tax entity’s increase of taxes collected in a rising property value market.
For even more detail of all this, consider the next three bullets:
– Keeping taxes collected level. If the total of all assessed values goes up, the tax rate must go down accordingly. The formula for this would be tax rate (adjusted-down) X assessed value (went-up) = Tax (equal to last year). Call this the “Level-Tax Tax Rate” as a starting point.
– Keeping taxes within TABOR. The Level-Tax Tax Rate is allowed to go up by the TABOR-mandated inflation percent, plus a derived percentage for hat’s called local growth (allowing taxes to be collected as the tax base is expanded because of new construction, etc.) to become a “TABOR-capped tax rate.” This is further complicated by yet another cap, the 5.5-percent limit, which was -put in place before TABOR.
– Allowing taxes to go beyond TABOR. Some taxing entities ” by a taxpayer vote ” are allowed to collect taxes beyond the TABOR and the 5.5-percent caps. This is known as “de-Brucing”, as Mr. Bruce was the author of the TABOR constitutional amendment. Largely, this was done when the property values were not skyrocketing. It is accomplished by fixing ” don’t call it “freezing” ” the tax rate at a point in time and therefore the taxes go up as the assessed valued go up in direct proportion.
( Note: some of the above rules are different for schools, e.g. “local growth” (see second bullet above) equals percent change in student enrollment.)
Each taxing entity crafted TABOR-exempt ordinances in their own way. For example, Aspen fixed its tax rate for five years, while Vail is open-ended. A key point to consider: The difference between the taxes collected without a TABOR-Cap and the taxes that would have been collected with TABOR in place is an easy calculation for the first year of fixing the tax rate. However, in subsequent years it becomes more complicated and few taxing entities have this information available. It would be interesting to show the effect of de-Brucing over time.
Going further, the question comes up ” can fixed tax rates be lowered to provide tax relief, especially with skyrocketing property values? Doing so requires a complicated legal maneuver. Aspen is in the process of doing this, partly based on public pressure. On the opposite side of the coin, can tax rates be fixed (“de-Bruced”) without a taxpayer vote? Apparently so, as the governor signed a bill to fix a portion of the school district’s tax rate.
It’s a really confusing situation. This move effectively ignores TABOR and is going to be challenged in the courts.
Paul Rondeau is a Vail resident. E-mail comments about this column to email@example.com