Colorado legislature property tax relief bill still faces initiatives

Ping-ponging property tax rates could reach long-term stability if a proposal introduced in the Colorado legislature on Monday beats the clock for when the body must finish its work this week.

But the proposal, while rallying support inside the State Capitol, did not appear likely to stop ballot initiatives backed by powerful, deep-pocketed interests on the outside that are looking for steeper cuts. The truce sought by lawmakers, so far, has proved elusive.

Ahead of the formal unveiling of the new bipartisan property tax package Monday morning, Gov. Jared Polis joked about “white smoke” emerging over the Capitol — a sign that an impasse that hung over the building for weeks had finally ended. By mid-afternoon, however, old battle lines had deepened, again throwing uncertainty over the future of state property tax policy.

The new legislation, in the form Senate Bill 233, was long-awaited but never guaranteed. It was introduced on the last possible day that would allow it to pass through the General Assembly before lawmakers must adjourn on Wednesday.

“This solves the problem that Colorado voters are concerned about,” Polis said. “It puts very reasonable caps on the increase in property taxes. The reason that many people are out there with ballot issues on the left and the right is that they are very dissatisfied with the status quo.”

If successful, the bill would, beginning in the 2025 tax year, exempt the first 10% of a residential property’s actual value, up to $70,000, for the purposes of tax calculations. It also would tax less of that home’s actual value by lowering the assessment rate, or a percentage taken of the actual value. The reduced value is then multiplied by the local mill levies, or tax rates, to determine the tax bill owed to local governments and special districts. The proposal also includes limits on the growth of property tax revenue.

In the meantime, SB-233 would extend temporary property tax reductions enacted by lawmakers late last year into the current property tax year.

The governor’s office estimated that the longer-term savings would equal about $300 to $400 per year for a home valued at $700,000, though the more precise amount depends on local taxes.

Mill levies vary from county to county and even neighborhood to neighborhood. They raise money to pay for things including schools, parks, libraries, fire and emergency services, and water and sanitation.

Beginning in the 2025 tax year, which is generally paid by property owners the following year, the proposal would reduce property taxes by 7-10% compared to current law for homes valued at $700,000 or less, according to the governor’s office.

A caveat: While property owners would pay less than they would under current law, that doesn’t necessarily mean they will see a smaller tax bill, since rates are tied to property values that are generally increasing.

The bill would also cut the assessment rates used for commercial properties from about 28% to 25%, in stages.

If it passes, the legislation would cap annual property tax revenue growth for local districts at 5.5%, regardless of whether or not those districts previously voted to remove caps on revenue collections, known as “de-Brucing.” But they would have the option of asking voters to override this new cap.

$1.2 billion cut in collections

All told, statewide property tax collections would decline by about $1.2 billion per year, some of which would be reflected as slower growth for local governments’ revenue. The state would dip into its funds — which exact pool of money is still being negotiated — to make sure no local governments faced actual cuts, while it would use the state’s education fund to ensure school districts stayed fully funded.

Sen. Barbara Kirkmeyer, a Brighton Republican and sponsor of the bill, celebrated it as “the largest property tax reduction in 20 years.”

Senate President Steve Fenberg, a Boulder Democrat, noted that property taxes had been a nonstop conversation for years, with temporary changes and failed ballot proposals leading up to the new legislation. Coloradans could now “take a deep breath and understand what the rules of the road are and what the future holds,” he said.

The long-term proposal comes after years of wrangling over the state’s role in property taxes, which is primarily a local revenue stream, after voters overturned the Gallagher Amendment in 2020. That state constitutional provision tied residential property tax rates to commercial rates and limited homeowners to no more than 45% of total property tax collections — functionally tamping down residential tax rates, but at the cost of a declining tax base for some local governments and special districts.

After the repeal, residential property values went from soaring to rocketing in Colorado — and as values went up, so did property taxes, leading to sticker shock across the state and the Front Range in particular.

After passing short-term changes in 2022, state leaders introduced Proposition HH in the waning days of the 2023 legislative session. And when that failed dramatically at the ballot box, Polis called a special session in November so lawmakers could continue temporary reductions in property tax rates. They also established a commission to look at long-term remedies to property tax policy.

Questions about outside support

Proponents of the new bill said Colorado Concern, a powerful nonprofit alliance of business executives, had agreed to back down from its threats to run ballot Initiative 108, which would lower assessment rates across the state — and cost state government an estimated $2.25 billion to make schools and local governments whole. The group also is supporting Initiative 50, a measure backed by conservative policy institute Advance Colorado that would create a hard cap on the growth of property tax collections.

Colorado Concern, however, denied ever reaching an agreement to back down.

That was despite negotiating through the weekend; the group’s president and CEO, Dave Davia, was seen leaving the building Saturday in a tux and on his way to a “Mission: Impossible”-themed gala.

“Colorado Concern and its leadership have worked in good faith with the legislature for months toward meaningful and long-term property tax relief,” Davia said in a statement Monday. “Unfortunately, SB 24-233 does not represent material tax relief for Colorado homeowners and small business owners. A deal has not been reached at this time.

“We are committed to continuing to work toward a legislative solution in the final days of the session but have not removed our support for Initiatives 50 and 108.”

Michael Fields, president of the Advance Colorado Insitute, said Monday afternoon that the new bill is “not real property tax relief.” The proposal doesn’t change his intent to run the ballot measures, he said. The group is beginning to gather signatures for Initiative 108 this week.

“There are still two days left in session,” Fields said. “Maybe legislators amend this bill enough to provide real property tax relief and a real cap that doesn’t have so many holes and exemptions in it.”