Volume No. 16 Issue No. 3 March 2019  

  Understanding property taxes
  By Lindsey Harrison

     This is the second article in a series on growth and development in Falcon and nearby areas.
   That development in Falcon and the immediate adjacent areas has been steady for several years, showing no signs of slowing down, is inarguable. But property tax calculations are not as black and white.
   Steve Schleiker, El Paso County assessor, said his office often fields questions from residents about how their property taxes are determined and who makes that determination.
   Colorado is a “value in use” state, Schleiker said. “If, on Jan. 1, the property is being used as a single family residential property, we value it as such,” he said.
   Property taxes are determined based on the square footage of the property, once its use has been determined, Schleiker said. Residential property in Colorado is assessed or taxed at 7.2 percent, while vacant land, commercial property and business personal property are all assessed at 29 percent, in accordance with state law, he said.
   However, land that might appear vacant could be used for another purpose, changing its valuation and its assessment rate, Schleiker said.
   A vacant lot can also be taxed at a different rate if it has been slated as a subdivision, he said. Based on Colorado law, tax discounts are offered to developers who are planning to subdivide a large piece of property that is vacant. But it is not categorized as vacant so it is not taxed as such, Schleiker said.
   "Discounting of vacant land established the present worth of (the) vacant land that will likely be sold within one year," he said. "After new subdivisions are created (but not actually under construction), it is necessary to examine each subdivision to determine if it is subject to discounting."
   The need to assess agricultural property at a different rate than vacant, commercial or residential properties stems from the fact that farmers and ranchers can have hundreds of acres of property, Schleiker said. Using the typical assessment formula, which uses price per square foot, many of those ranchers and farmers would not be able to sustain their business because of taxes, he said.
   According to the assessor’s website, “Colorado has an Agricultural Land Classification designed to help legitimate farmers and ranchers continue agricultural operations on their land.” Therefore, properties used as legitimate farming and ranching operations can be classified as agricultural and will be taxed based on that classification, Schleiker said.
   Agricultural classification could be an attractive option if someone was looking to pay fewer taxes on their property, but it comes with some strings attached.
   “Property owners can be leasing their property for agricultural use, for grazing or (to grow) meadow grass,” he said. “If they have met the requirements to get that agricultural status, they get taxed that way. They have to prove that use through a lease or something similar that shows its use as an agricultural property, and then we go out and do a physical inspection.”
   Those physical inspections occur yearly to determine if a property still meets the requirements for which it has been categorized, he said. If, for instance, there is no sign of cattle grazing, no fencing, no cattle hay, no sign of agricultural use; the property loses its Agricultural Land Classification status, Schleiker said.
   Frequently, developers will enter into multi-year leases for grazing, which allows them to keep their property’s agricultural status and assessment rate, he said. “Cows will come out and chew everything on the land and the rancher will move the cows to another parcel to allow the other one (parcel) to regrow,” Schleiker said. “It is possible that cows have not been seen on that property for that reason.”
   According to a document prepared by the Colorado Assessors Association, Colorado Association of Tax Appraisers and Colorado Division of Property Taxation, Department of Local Affairs, the value of agricultural land is based on the earning or productive capacity of the land; and taxed according to that value.
   It is feasible for developers to purchase property categorized as agricultural and have it taxed as such until they are ready to begin development based on their initial plans, but they must maintain the Agricultural Land Classification requirements, Schleiker said.
   “About 50 to 60 percent of the time, when a property is transferred to a developer’s hands, we take it out of agricultural status,” Schleiker said. “Once the developer starts scraping (grading and preparing) the land, they lose that agricultural status.”
   Since the valuation of a property is not based on how it is zoned, there are a number of properties zoned for agricultural that are being assessed at the commercial rate of 29 percent because they are not being used for agricultural purposes, he said. Similarly, a vacant property may be zoned residential, but if it is not being used as such, it is taxed at the 29 percent vacant land rate, Schleiker said.
   Valuation of property is determined on Jan. 1 of each year, so if someone wants their property taxed at a different rate, they must prove the property meets the requirements for that categorization and then wait until the first day of the following year to realize that valuation change, Schleiker said.
   Notice of valuations must be mailed out by the assessor’s office by May 1, according to state statute, he said. For the current valuation, Schleiker said his office uses sales from a 24 month period, from July 1, 2016, to June 30, 2018. “Those sales determine property values for the 2019 year, which affect the 2019 and 2020 property taxes,” he said.
   Countywide, Schleiker said single family residential home valuations have increased between 15 to 25 percent; vacant land valuations are up 15 to 20 percent; commercial land valuations are up 10 to 15 percent; and agricultural land valuation is going down because of an increase in the cost of agricultural products.
   The increases in valuations are due to the rise in property sales during the 24-month valuations study period. ”We (El Paso County) are the No. 1 market in the whole entire nation," Schleiker said.
   In the coming months, Schleiker said he plans to hold town hall meetings to help people better understand valuations. He also said the assessor’s office is willing to answer questions related to property valuation and property taxes, or residents can visit the county’s website at http://elpasoco.com.
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