Vail Valley Partnership CEO: When voting this year, consider Gallagher Amendment’s impacts (column)
October 25, 2018
Did you know Coloradans only pay one-fourth as much as they used to pay in property taxes on their homes due to the Gallagher Amendment to our state constitution?
The amendment, which was passed by voters in 1982, has forced continual decline in Colorado's residential property tax base, has reduced local funding for services such as kindergarten through 12th-grade schools, recreation districts, fire districts and other special districts.
What is the Gallagher Amendment? The Gallagher Amendment was part of a package of property tax changes in our state constitution which the Colorado legislature referred to voters as Amendment 1 on the 1982 ballot.
The Gallagher Amendment was the culmination of a property tax revolt that began in Colorado in the late 1970s as a result of growing frustration among Colorado voters about the increasing property tax which they were paying as extremely high inflation and high growth, especially along the Front Range, caused their property values to grow.
Additionally, prior to the passage of Amendment 1 in 1982 (a comprehensive property tax proposal which included the Gallagher Amendment), there was no statewide oversight to ensure that each county assessed property values in a consistent manner. Some counties chose not to reassess the value of some classes of property (such as residential) in order not to increase the tax burden for those property owners, and some counties chose not to reassess any of their property during some scheduled reassessment cycles. Consequently, there was a lot of inequity in property values across the state.
What have been the impacts of the Gallagher Amendment? While the Gallagher Amendment was intended to address specific challenges at a specific time when it was proposed and passed in 1982, changes in real estate market conditions over time and the voters' adoption of subsequent constitutional amendments which retroactively affect the Gallagher Amendment have created unforeseen and unintended consequences that are causing significant challenges for Colorado today.
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Today, residential property makes up about 80 percent of the actual market value of all property in the state. However, the Gallagher Amendment has frozen the ratio of non-residential and residential property values at their 1982 levels and limits the taxable value of all residential property to never constitute more than approximately 45 percent of the state's total property valuation.
Because the growth in value of residential property in the state has outpaced the growth in the value of non-residential property, the Gallagher Amendment has forced down the residential assessment rate in order to abide by the Gallagher Amendment's requirement that residential property make up no more than 45 percent of the total value of all property in the state. When we adopted the Gallagher Amendment in 1982, this assessment rate for residential property was 30 percent; today, it's been forced down to only 7.2 percent and is expected to continue its decline to 6.11 percent in 2019.
The last reduction from 7.96 percent in 2017 represented a 10 percent reduction in property tax revenue for special districts, and the next drop to 6.11 percent in 2019 will amount to another 15 percent reduction — a total of 25 percent reduction in revenue over a two-year period.
The declining residential assessment rate is resulting in lower property tax collections for every home in Colorado. Colorado's decreasing residential tax base is extremely challenging for local communities that rely on property taxes to provide local services.
Regardless of how you vote, please take the time to learn about how Gallagher impacts our special districts when casting your ballot this election cycle.
Chris Romer is president and CEO of the Vail Valley Partnership, the regional chamber of commerce. Learn more at http://www.vailvalleypartnership.com.