Residential property owners are expected to get a tax break that will spell more trouble in 2018 for the La Plata County budget.
Colorado properties will be reappraised this year, which happens every two years and means each property receives an updated marked valuation based on recent sales of similar property in each county. Some values are expected to increase.
La Plata County Assessor Craig Larson said that based on preliminary analyses, the county could lose $800,000 in revenue because of a 35-year-old state Constitutional amendment intended to keep residential property taxes in check.
The $800,000 projection does not encompass other revenue shortfalls, including declining property tax from natural gas production. When county commissioners approved the 2017 budget late last year, they painted a bleak picture with a 26 percent decline in available expenditures compared to 2016, which is not expected to improve much next year.
Colorado voters passed the Gallagher Amendment in 1982 to counteract swelling property taxes. The state reduces the residential assessment rate - the percentage of taxable property value - whenever statewide residential property values are increasing faster than commercial property values.
As a result, assessment rates on Colorado homes have dropped from 21 percent when the amendment passed, to 7.96 percent today because of rising real estate values and population growth.
The rate has been stagnant since 2003, but because of increasing value in urban areas combined with dropping oil and gas prices, the ratio is expected to drop to 6.85 percent, Larson said.
The nonresidential assessment ratio is fixed at 29 percent, but the residential rate is evaluated and adjusted, which critics say places an unfair tax burden on businesses.
And it’s bad news for the state, which anticipates a $500 million gap between available funds and the proposed budget for 2017-2018.
Counties across Colorado are in the midst of the reappraisal process, and preliminary estimates indicate some Front Range homes could see as much as a 30 percent valuation increase. Changes won’t be as drastic in La Plata County, but the county won’t have a clearer picture until the reappraisal process is complete and the legislature sets the rate this spring.
“It’s going to be ugly for the next few years,” Larson said. “The difficult thing is we haven’t raised the mill levy in forever.”
Property tax is typically the county’s No. 1 revenue source, as it is for many local governments. But because of the oil and gas bust, which is not expected to bounce back until 2019, property tax is coming in third for La Plata County this year, behind intergovernmental revenue and sales tax.
The Taxpayer Bill of Rights further complicates the budgetary equation; while the assessment ratio can go down at the legislature’s discretion, TABOR prevents property taxes from going up without a vote by the people.
La Plata County citizens have voted against mill levy increases for 25 years, most recently in November when the county proposed property tax hikes to fund road and bridge maintenance and structural improvements to the airport.
“I think we all realize there are significant problems,” County Commissioner Brad Blake said. “That’s why we (the commission) are going to be looking at a use tax and an excise tax for pot this year. We live in painful times.”
jpace@durangoherald.com
Calculating new property tax
If the residential assessment ratio decreases from 7.96 percent to 6.85 percent as projected, a county home owner with a house with an appraised value of $400,000 would pay about $38 less on this particular tax under the current county mill levy of 8.5 mills.
Multiply the appraised value ($400,000) by the assessment ratio (.0796). Then multiply the product by the county mill levy (.0085) to get the estimated property tax.
This calculation is an example and does not reflect the anticipated property tax change for all taxing districts, including special districts and school districts.
