Proposition HH debate features property taxes, TABOR refunds, future predictions

Backers of Proposition HH are keeping their message simple in ads, portraying it as the best chance Colorado has to reduce the size of historic property tax hikes that are due to hit next year because of mounting surges in property valuations across the state.

But the measure is anything but simple. The complex ballot question also would tinker with state tax refunds, attempt to make local governments whole for lost property tax revenue and significantly boost education funding, which long has been shortchanged by lawmakers.

The many tentacles of the most prominent and wide-impact measure on the Nov. 7 ballot give opponents plenty to attack. If voters approve Proposition HH, they argue, property taxes still will go up next year — though not by as much as they would’ve otherwise — but now the state will hold back more from refund checks mandated by the Taxpayer’s Bill of Rights. It amounts to an unnecessary grab at taxpayers’ wallets, they say.

The party in control of state government, led by Gov. Jared Polis and other top Democrats, has put all its chips on Proposition HH, which was referred to the ballot by lawmakers. If it fails, the Democrats have no politically easy options left to tamp down rising property taxes. There’s no Plan B, at least none that’s been discussed publicly.

The state constitution’s voter-passed TABOR Amendment requires voter approval for any increases in tax collections, even without an outright tax increase. So a last-ditch effort by the legislature would have different stakes. Lawmakers likely would have to work within the confines of the existing state budget to provide any relief.

Amid the recent deluge of campaign ads and dueling messages, Proposition HH pits Colorado’s leading Democrats against a conservative-led opposition in an arena — the statewide ballot — that’s given conservatives some of their only big wins in recent election cycles.

The measure comes three years after voters repealed the Gallagher Amendment, removing some safeguards that had shifted more of the burden for property taxes onto commercial property owners — but at the cost of leaving school districts underfunded. While a broader overhaul of the tax system was promised then, it hasn’t happened.

Left to decide on Prop HH are voters, many of whom are homeowners worried about the hit they’re facing when property taxes come due in the spring.

Property valuations have risen by roughly 40% at the median across the state, with larger swings in some places, including parts of metro Denver — and taxes largely will follow suit.

The mechanisms set in motion if Proposition HH passes would, in most cases, halve those increases. Supporters say that despite all the noise raised by opponents, that’s the most important potential impact.

“When you’re in charge, you have to solve problems, right? You have to govern,” said Senate President Steve Fenberg, a Boulder Democrat and key advocate for the ballot measure. “You have to look at things from all the perspectives and do what you think … is the most responsible decision and path forward.

“When you’re not in charge, you can just throw grenades and say no and poke holes — and, frankly, spread mistruths about some things in order to get your way.”

Opponents also point to ways supporters’ ads oversimplify or distort things.

The battle has taken on a partisan tinge, though the lines aren’t always neatly divided by party. While the opposition spending has largely been led by the conservative group Advance Colorado, business groups and local government associations have lined up against it, too. Many local government officials are worried they won’t see enough promised supplemental money from the state to offset the hit they’d take if property tax increases are blunted.

“It’s more the people who are supporting it who want to pitch it as a partisan fight, because they think that benefits them,” said Kristi Burton Brown, the former chair of the Colorado Republican Party and now a policy analyst for Advance Colorado. “… (There’s) quite a bit of bipartisan opposition. You can see that from a lot of local elected Democrats who don’t like it because they think it’s the state coming in and controlling what happens in local property taxes.”

She highlighted opposition that includes the National Federal of Independent Business, the Colorado Association of Realtors and Democratic Sen. Joann Ginal of Fort Collins.

Proposition HH has won support from groups that include the National Education Association, Education Reform Now’s advocacy arm, the nonprofit Gary Community Ventures, the Colorado AFL-CIO union, the AARP and the Colorado Alliance for Retired Americans. The latter groups’ support is in large part due to HH’s proposed property tax relief for older people, including making the senior homestead exemption portable when changing addresses.

What Proposition HH would do

At its core, the ballot measure aims to soften the blow property owners are set to face early next year when tax bills come due. Tax bills are still expected to rise if HH passes, but not as sharply as they would without it.

To pay for the impact of scaling back those increases — and to raise significant money for education — Proposition HH would increase the TABOR amendment’s cap on state tax collections by 1 percentage point each year. That’s on top of increases normally allowed by inflation and population growth.

The state would be able to retain an estimated $170 million extra in the current fiscal year that it otherwise would have to refund to taxpayers. By the 2031-32 fiscal year, that annual amount is projected to grow to as much as $2.2 billion.

State government would send up to 20% of that money to local governments to offset their lost property tax revenue, and it would set aside up to $20 million for rental assistance programs to help residents who aren’t homeowners. But the rest — the vast majority — would go to education funding, rising to a projected $2.1 billion a year within a decade.

As for how would Prop HH would affect homeowners, their properties’ total assessed value would be reduced by $50,000 in the first tax year and by $40,000 in the next, with that adjustment lasting through 2032. It also would tick down the assessment rate, or percentage used to determine how much is owed. The measure also includes the extra provisions for older homeowners as well as reformulations for how non-residential properties are assessed.

The nonpartisan analysis in the state-produced Blue Book found Coloradans would save hundreds on property taxes in the next two years compared to the full property tax increases that would take effect without HH. The savings include about $167 for a residential property valued at $100,000, up to $400 for a $1 million property.

The Colorado Fiscal Institute, a left-leaning think tank that has backed the measure, found the biggest benefits go to lower-value homes. A home whose valuation increased from $300,000 in 2022 to $405,000 in 2023, for example, would see a property tax increase of about $100 under Proposition HH. But if HH fails, the homeowner’s tax bill would be about $415 more.

As for the impact on state TABOR sales tax refunds — the state’s main mode of returning excess revenue — low-income taxpayers, or those making less than $50,000 a year, would receive an extra $270 in their checks. That comes from a one-year flattening of refunds that would provide an estimated $898 to all taxpayers, regardless of income, rather than doling the money out based on six income tiers. Tax filers in the $50,000 to $99,000 range would see $60 more in their TABOR checks because of that change.

But some higher earners would receive less in their refunds, with people who report incomes of more than $278,000 seeing a decrease of more than $1,000 in their checks or credits.

Beyond next year, TABOR refunds likely would decline for all taxpayers under Proposition HH, depending on how the state handles them. Refunds also potentially could be eliminated in some years due to HH, depending on the performance of the economy — a dynamic state officials caution is hard to predict very far out.

“Worried about the confusing nature of HH”

Proposition HH has made some local government officials nervous, in part because there are eventual limits on how much assistance they’ll receive to offset reductions in property tax revenue.

The state’s three biggest advocacy organizations for local governments have come out against it — the Colorado Municipal League, Colorado Counties Inc. and the Special District Association of Colorado.

Colorado Counties Inc. voted most recently on its position. It wasn’t a unanimous vote, and critics point out that every county, regardless of size, had the same pull. But CCI President and Adams County Commissioner Steve O’Dorisio, a Democrat, said a supermajority voted to oppose it.

“A lot of folks said they’re worried about the confusing nature of HH, the unpredictability of the finances and the impacts to revenues,” he said. “Specifically, counties feel like they’re being asked to do more with less. Whether that’s the area of public safety — that includes jail standards and body cams and recruiting and retaining — to homelessness and housing. There’s a broad spectrum of challenges that we’re facing.”

The feeling isn’t shared by all county commissioners.

“This is the last, best shot for local governments to be kept as whole as possible,” said Clear Creek County Commissioner George Marlin, also a Democrat. He invoked the likelihood that voters will weigh in on a hard cap on property tax growth next year with Initiative 50, spearheaded by Advance Colorado.

“It’s very clear that voters want to see something be done on property taxes,” he said, characterizing Proposition HH as an imperfect measure that’ll still help Coloradans. “A lot of people who want to see something done on property taxes need (that relief).”