By Lea Grady
Property taxes have been on the rise since 2020, when Colorado voters decided to repeal the Gallagher Amendment, named after Dennis Gallagher, who authored it in 1982. Gallagher, a former state representative and senator and overall political activist, died in April 2022.
The Gallagher Amendment ensured that as home values went up in the state, the rates used to calculate how much homeowners owed in property taxes would be lowered, moderating growth in residential property taxes. The Gallagher Amendment resulted in the residential assessment rates going from 21% in 1982 to 7.15% by 2020. The 2020 repeal of it froze residential assessment rates at 7.15% for homeowners and 29% for most non-residential properties, and led the Colorado Legislature to pass several temporary bills to thwart the drastically increasing property taxes for Colorado residents, according to a May KOAA report.
Recent survey results from county assessors indicate that home values across Colorado increased 40% on average over the past two years, and the 2023 tax bill for the median priced home in many front range counties is expected to increase by more than $1,000, according to “Proposition HH: The Taxpayer Dilemma,” a report by the Common Sense Institute (available at https://commonsenseinstituteco.org).
The latest bill, SB23-303, passed by the Colorado General Assembly on the last day of the legislative session, is again trying to address property tax spikes looming on the horizon. However, before this bill can be fully enacted into law, portions of it must go to the voters because of the Taxpayers’ Bill of Rights, or TABOR.
TABOR requires the state to refer the portion in question, Proposition HH, to the Nov. 7 election. TABOR was approved by voters in 1992; it adds several limitations to the ability of Colorado government to raise taxes and increase spending. It requires a vote of the people for new tax increases and limits the amount of money the state can collect and spend each year, according to the Common Sense Institute report. The cap is determined by population and inflation.
The report states that Proposition HH offers taxpayers a choice to trade property tax relief for a long-term increase in state taxes. On the property tax side, if approved by voters, the residential assessment rate would be 6.7%, with a $50,000 valuation reduction. For 2024, the rate would stay the same at 6.7%, with a $40,000 valuation reduction.
From 2025 to 2032, Proposition HH would create new subclasses of real property with different tax rates: primary residence, qualified-senior primary residence and non-primary residence. Primary residence rates would remain at 6.7% and a $40,000 reduction, the qualified-senior primary residence would be 6.7% minus the lower amount of $140,000 or the amount that reduces the assessed value to $1,000. The non-primary residence rate would remain at 6.7% with no reduction. Taxpayers would have to complete an application with the county assessor to designate their home as a primary residence. Taxpayers with multiple properties will only be able to claim one residence as primary. The law stipulates graduated rates for lodging, agricultural, commercial and other non-residential properties as well.
Under current law, SB22-238, the state is required to reimburse local government entities for tax revenue lost as a result of reductions in valuations. SB23-303 would generate additional funds and dedicate a portion of state TABOR surplus to the backfill and extend the backfill relief from 2024 to 2032, with some exceptions.
If Proposition HH fails, the state’s current property tax law under SB22-238 would remain in effect.
Opponents of Proposition HH warn that if it passes, the state of Colorado will be able to collect and spend an additional $9 billion, funded by the significant increases in taxes that Proposition HH allows. While there is a tradeoff to property owners, renters come out the biggest losers and are estimated to lose $5,119 in TABOR refunds over the next decade. Overall, both property owners and renters are expected to pay more over the next 10 years if Proposition HH passes.
Proponents of Proposition HH claim that it will maintain support for critical local services, particularly K-12 education. They stress that households will pay $600 less in property taxes. They say that the last property tax assessment was taken in June 2022, the peak of the housing market when the property values were at an all-time high. Proponents point out that retained revenue from the TABOR surplus would initially backfill local districts for property tax reductions, after this, up to $20 million would be appropriated for rental assistance and over the next few years as much as $2.2 billion would be expected to flow to the State Education Fund.
Colorado residents interested in detailed analysis of Proposition HH can visit https://commonsenseinstituteco.org/prop-hh/ for an in depth detailed report or https://www.bellpolicy.org/wp-content/uploads/PropHHFactsheet.pdf.