Colorado voters will likely side with two ballot measures promising greater property tax relief than what a bipartisan legislative compromise rushed through in the session’s final hours is offering, the head of the Denver Metro Chamber of Commerce warned Monday.
Senate Bill 24-233 will save property owners an estimated $950 million in taxes compared to the legislature taking no action. It also caps future annual increases at 5.5% a year, avoiding a repeat of the 40% gain some jurisdictions faced, but carves out an exemption for school districts, which collect more than half of property tax revenues.
“It misses the mark” in actual tax relief, J.J. Ament, president and CEO of the Metro Denver Chamber of Commerce, told members gathered at the group’s annual State of the State in the Seawell Ballroom in Denver on Monday.
Backers of two ballot measures promising even more relief plan to move forward with their proposals despite the bipartisan compromise, which has the backing of Gov. Jared Polis. One measure would cut the statewide assessment rate to generate $2 billion in savings for property owners from recent increases, while another one would impose a hard 4% cap on the amount property taxes could rise in any given year.
A surge in home prices during the pandemic and the repeal of the Gallagher Amendment, which had protected homeowners by shifting a larger share of property tax burden to commercial property owners, combined to generate an unprecedented surge in property tax bills.
Ament said Gallagher needed to be repealed to relieve the crushing burden commercial property owners were facing. But despite promises to homeowners they wouldn’t be left vulnerable, the legislature sat on promised reforms for three-and-a-half years until a run-up in home values and a record surge in property tax bills forced the issue.
An earlier legislative fix, Proposition HH, was soundly defeated by Colorado voters last November, which resulted in the legislature convening a committee to study reforms. But a bill didn’t come forward until the final 72 hours of the session, bypassing the more robust public review process such an important bill should have received, Ament said.
He urged the governor, who spoke earlier at the same event, to “give this issue the time and attention it deserves,” although he stopped short of directly calling for a special session. But a special session is the only way a ballot showdown could be avoided this fall.
If SB 24-233 represents the best and final offer from the side of tax collectors, the ballot measures represent the final and best offer from the side of taxpayers, Ament said. And it is the voters who will get the final say come November.
“The bottom line, under SB24-233, Coloradans will still see an increase in property taxes from what is being paid today,” Kelly Caufield, executive director of the Common Sense Institute, a pro-business think tank that the chamber supports, said in a press release.
CSI, in an analysis released last week, predicts that Colorado homeowners will pay similar amounts in property taxes next year and could face higher property tax rates in 2025 under the new bill even if home values don’t rise.
CSI looked at a hypothetical home valued at $400,000 in 2022 that had a 40% increase in value in the last assessment cycle. Its property taxes would have gone from $2,364 last year to $2,877 this year and next. Under the legislative fix, the tax on that home in 2025 will be $3,229, assuming no increases in home values.
That represents a “savings” from the $3,405 that would have been due without any legislative action. But it is an increase from the current tax bill and a huge increase from the $2,364 paid in 2022.
If interest rates drop in the coming months, releasing pent-up demand and causing home prices to surge another 20% in the next two-year cycle, then the owner of that house would be looking at paying $3,875 in property taxes come 2025, CSI estimates.
“This is not a long-term fix. True property tax reform should provide more predictability to homeowners,” CSI argued in its study.