Property Tax Legislation and Ballot Measures

Colorado School Finance Project�May 10, 2024

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Greg Sobetski�Chief Economist�Legislative Council Staff

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Property Tax Basics

• Assessor determines valuations
• Most property assessed biennially in odd years
• Based on market as of June 30 of even years (June 2020, June 2022, June 2024)
• “Assessed Value” = actual value × assessment rate
• Tax = assessed value × sum of mill levies
• Assessment rates set by the state
• Mill levies set by local governments

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• Ex.: $550,000 home × 7.15% assess. rate × 90 mills = $3,540 tax due

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Property Tax Landscape Before Session

• Permanent rates post-Gallagher
• 7.15% residential; 29% nonresidential; 87.5% oil and gas
• 2023: significant temporary cuts
• residential: 6.7% with $55,000 subtraction
• nonresidential: 27.9% with $30,000 subtraction
• AV growth of +25%, even with cuts
• 2024: modest outstanding cuts
• residential: 6.8% multifamily, 7.06% otherwise, no subtractions
• no cut to nonresidential
• AV growth of +7%
• 2025: no cuts, revert to permanent rate; AV growth of +2%

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Taxpayer Example

• Ex.: single-family residence valued at $400k (2021), $550k (2023), 90 mills
• 2021: $400,000 × 7.15% × 90 mills = $2,574
• 2022: $400,000 × 6.95% × 90 mills = $2,502
• 2023: ($550,000 - $55,000) × 6.7% × 90 mills = $2,984
• 2024 (before session): $550,000 × 7.06% × 90 mills = $3,494
• 2025 (before session): $550,000 × 7.15% × 90 mills = $3,539

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Local Share Expectations (before SB 24-233)

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Ballot Measures

• 1 Measure On the Ballot (Initiative #50)
• 1 Measure Approved for Circulation (Initiative #108)
• 8 Measures Titled
• Of which, 3 Appealed to Supreme Court

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Six Measures to Cut or Limit Property Taxes

• 2 from Michael Fields and Suzanne Taheri (#50, #108)
• 1 from Tom Kim and Anneliese Steel (#97)
• 3 from David Davia and Michael Fields (#296, #298, #300)

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• 4 cut assessment rates (res and nonres) and/or apply subtractions
• 1 limits growth in statewide tax revenue, unless voters permit revenue to be retained
• 1 limits growth in assessments

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Assessment Rates (4 measures)

• All measures cut rates beginning in PTY 2025. Different permutations:
• 5.7% res; 24% nonres (#108): ~$800M LS impact; $1.45B backfill to others
• 5.7% res, with $55,000 subtraction; 25.5% nonres (#298): ~$870M LS impact
• 5.3% res; 25.5% nonres (#300): ~$860M LS impact
• One measure includes incremental reductions in assessment rates
• Annual stepdown of 0.37 pp in res rate, 1.00 pp in nonres rate,�to reach 5.3% res and 24% nonres in 2029 (#296)
• ~$190M LS impact, but grows quickly (~$390M in FY 2026-27, etc.)

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Limit on Statewide Property Tax Revenue Growth (#50)

• Constitutional measure
• When property tax revenue is projected to grow by at least 4 percent, statewide voter approval is required for local governments to retain and spend the excess
• Fiscal impact depends on revenue growth rates, voter authorizations

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Limit on Growth in Assessments (#97)

• Constitutional limit
• For 2025 and later assessments:
• Properties sold since June 2020 are valued at the level of their most recent sale
• Properties not sold are valued at the level of their PTY 2021 assessment
• Annual increases are limited to the lesser of inflation or 2.5%, unless the property undergoes substantial improvement
• Estimated to reduce property taxes by $2.3 billion for PTY 2025, larger amounts in later years
• LS impact: ~$740M

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Four Measures to Limit the Impact of Property Tax Limits

• All four from Scott Wasserman and Ed Ramey

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• 1 conditionally imposes tax on “luxury” residential property
• 1 conditionally increases the nonres rate for most nonresidential property
• 1 conditionally allows the state to retain and spend revenue for reimbursements
• 1 requires local voter approval in order for a statewide limit on property tax to apply locally

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“Luxury” Residential Property Tax (#96)

• Constitutional measure
• If a statewide limit on the amount of or growth in property tax revenue is imposed, a supplemental tax is imposed beginning in 2027 to offset revenue loss that would otherwise occur:
• Applies to single family residential worth at least $2 million
• Fiscal impact uncertain, would depend on what limit, if any, is imposed

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Nonresidential Assessment Rate (#269)

• Begins in PTY 2026
• If local share of total program funding for school finance is less than 50%, increases nonres rate to 32%
• Increased rate does not apply to property being used by businesses that meet SBA definition of “small business”
• Expected to trigger under current law
• Estimated to increase property tax revenue by $300 million in PTY 2026 and decrease the state share school finance obligation by $100 million

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Retain Revenue for Reimbursement (#261)

• Begins in 2025
• If a statewide limit on the amount of or growth in property tax revenue is imposed, authorizes state to retain revenue over the Referendum C cap to reimburse local governments for their lost revenue.
• Fiscal impact uncertain, would depend on what limit, if any, is imposed

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Local Voter Approval for Application of Limit (#95)

• Constitutional measure
• If a statewide limit on the amount of or growth in property tax revenue is imposed, requires local voter authorization for limit to apply locally.
• Fiscal impact uncertain, would depend on what limit, if any, is imposed

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Senate Bill 24-233

• Bipartisan sponsorship (Sens. Hansen, Kirkmeyer; Reps. deGruy Kennedy, Frizell)
• Cuts property taxes in 2024 and all future years
• 2024: extends 2023 cuts
• Residential: 6.7% with $55,000 subtraction
• Nonresidential: 27.9% with $30,000 subtraction
• LS impact: $379 million, appropriated from SEF

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Senate Bill 24-233

• 2025 and later years:
• Applies nonresidential cuts universally
• Applies residential cuts only to non-school districts
• Improved commercial and agricultural property:
• 2024: 27.9%
• 2025: 27.0% (LS impact ~$75M)
• 2026: 25.0% (LS impact ~$150M)
• No changes to other nonresidential property

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Senate Bill 24-233

• Residential property (non-schools):
• 2024: 6.7% with $55,000 subtraction
• 2025: 6.4%
• 2026 and ongoing: 6.95% with a 10% subtraction, up to $70,000
• Residential property (school districts):
• 2024: 6.7% with $55,000 subtraction
• 2025 and ongoing: 7.15%
• Trigger: if LS ≥ 60%, then residential rate subsequently adjusted annually to target LS = 60%

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Senate Bill 24-233 – other provisions

• Property tax revenue limit:
• Does not apply to school districts
• Property tax growth limited to 5.5% annually, lots of exceptions
• Expands property tax deferral program
• Bill does not take effect if property tax reductions or limits pass at the November election

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Interaction with HB 24-1448 phase-in

• HB 24-1448 pauses implementation if:
• Assessment (odd-numbered) year: LS growth < (inflation – 2%)
• Non-assessment (even-numbered) year: LS growth < -2%
• SEF transfer growth < -5%
• Not expected to trigger under SB 24-233
• If anything, makes pause less likely in FY 2025-26
• Would trigger under any of the ballot measures that cut assessment rates

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Questions?

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Greg Sobetski

Chief Economist | Legislative Council Staff

Greg.Sobetski@coleg.gov | 303-866-4105

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