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In late January, Colorado’s bipartisan tax commission took an informal poll among its 19 members to gauge support for the dozen or so ideas they’d been discussing to deliver tax relief to homeowners.
One emerged as a clear loser: a cap on property tax revenue growth.
The concept – backed by influential conservative and business groups outside the Capitol – ranked among the lowest of any proposal among the committee’s members, garnering strong opposition from Republicans and Democrats alike.
“Hard caps are a terrible idea,” Sen. Chris Hansen, a Denver Democrat and chair of the commission, told The Colorado Sun in an interview.
With just weeks remaining before its final report due in March, the commission is coalescing around a handful of ideas that would reject sweeping tax cuts in favor of modest tax code changes and targeted relief for lower-income homeowners and small businesses.
The commission’s approach has been to try to mitigate sticker shock for homeowners without going so far that the state harms public services like schools and emergency responders that rely on property taxes to function.
“I look at this commission and what we’re trying to do is balancing a teeter-totter on a water balloon,” commission member Bob Olme, the assistant chief of West Metro Fire Rescue, said at one meeting. “It’s very delicate. You go too far one way, you either damage the taxpayer or the people trying to provide services.”
Early signs suggest the commission won’t go far enough for tax cut advocates outside the state Capitol who are pushing for a 4% annual cap on revenue growth.
Colorado Concern, a nonprofit alliance of state business leaders, and Advance Colorado, a conservative political nonprofit, have introduced sweeping ballot measures that would cut assessed property values back to 2022 levels and could limit future property tax growth by billions of dollars – leaving the state on the hook to reimburse schools and local governments for much of the financial fallout.
And while Dave Davia, the president of Colorado Concern, says he wants to work with the tax commission on a solution, he told The Sun he wouldn’t support a plan that doesn’t include some sort of cap.
“It’s fair. It’s balanced. It’s a simple and explainable proposition for our voters,” Davia said. “It helps give relief.”
Colorado Concern and Advance Colorado in February began pursuing three statutory measures for the November ballot that would cut tax rates for homeowners and businesses alike starting in 2025, and enact a 4% limit on property tax revenue growth thereafter. That’s in addition to another ballot proposal brought independently by Advance Colorado, Initiative 50, that seeks to put a similar 4% cap into the state constitution.
The groups, which were previously on opposite ends of the property tax debate, would have to collect around 125,000 voter signatures to make the November ballot, an effort that would likely cost millions of dollars.
The proposed limits would apply to the statewide total of property taxes collected at the local level by cities, counties, schools and other local agencies – a little over $12 billion in 2022. Voters could override the limit in any given year through a statewide referendum.
“It’s already pretty unaffordable here,” Davia said. “Just adding 25% or 40% to that number doesn’t help, and it moves us in the wrong direction.”
On the surface, a 4% limit may not sound like a big deal. But statewide property tax revenue has grown by less than 4% just 15 times in the past 60 years, a Colorado Sun analysis of Department of Local Affairs data found.
That means a proposed statewide limit wouldn’t just cut taxes in times of historic home price growth. It could trigger tax cuts more years than not.
And the experience of other states suggests a cap could have wide-ranging consequences for public services in Colorado.
A Massachusetts property tax limit adopted in the 1980s slashed the state’s property tax rates from among the highest in the country to close to the national average. When New York adopted a property tax limit, state support for schools increased to compensate for a $25 billion drop in local funding, according to a study from the Rockefeller Institute of Government.
Colorado’s property taxes are already among the lowest in the country, studies show. And the state is falling short of its constitutional obligations to fund K-12 schools as it is. Next school year is expected to be the first time since before the Great Recession that Colorado will meet its minimum funding obligations under Amendment 23, which requires annual increases in K-12 spending to keep up with inflation.
“The only reason we’re paying down the (school funding deficit) this year is because property tax revenues are up,” said Scott Wasserman, executive director of the Bell Policy Center, a liberal think tank.
Wasserman’s group has offered a ballot measure of its own to counteract potential tax cuts, but faces an uphill financial climb to collect the signatures necessary to make the November ballot.
The ballot proposals would require varying levels of state funding to compensate local governments for lost tax revenue, leaving less money for other state programs like higher education and Medicaid. And while the measure directs state lawmakers to protect K-12 funding, it’s no guarantee they will – as the aftermath of the Great Recession showed.
Davia, however, pushed back when The Sun noted that property tax reductions have historically led to funding cuts for K-12 and higher education, two workforce development priorities for the business community.
“If that’s what the legislature decides to do, then that’s what the legislature decides to do,” Davia said. “That’s something we’re very aware of and focused on trying to find a solution for. There’s nothing in our measure that calls upon the legislature to cut higher education or cut K-12.”
Another issue cited by critics: The Massachusetts and New York caps apply to individual local governments and still led to disparities in public services between wealthier districts that voted to override their tax limit and poorer ones that have tended not to.
In Colorado, those disparities could be even larger. The limit applies to total property tax revenue statewide. As a result, property value growth in wealthy mountain communities and Denver could trigger cuts in rural areas where property values are growing more slowly.
There are two caveats worth noting. Unlike Initiative 50’s blanket 4% cap, the growth limits contained in the Colorado Concern proposals would have exceptions for properties whose taxes go up due to a “substantial change of use” from one year to the next. The limits also exempt local mill levy increases approved by voters in the future.
Nonetheless, in public discussions, commission members have held the 4% growth cap up as a boogeyman that awaits them if they fail to come up with a plan that can appeal to the public.
“Whatever solution we come up with has to sound simple and understandable or we’re gonna end up with a 4% cap,” Republican Brenda Dones, Weld County’s tax assessor, said at a meeting in January.
For decades, Colorado lawmakers have relied heavily on across-the-board tax cuts to provide relief to homeowners. The most recent example came in the November special session, when the legislature reduced property taxes by $434 million through a mix of rate cuts and exemptions.
“We’ve made some significant progress,” said Hansen, the commission chair. “And the question for this commission is what can we afford on top of that?”
In discussions so far, the commission has shied away from the blanket tax cuts of years past. Instead, policymakers are exploring ways to target tax relief toward those who need it most.
One idea gaining traction among progressives is a so-called “circuit breaker” that would provide tax relief when payments exceed a certain percentage of a homeowner’s income. The challenge is how to administer it. Property tax collectors don’t have access to state income tax data, so homeowners would likely have to apply for help and provide proof – meaning more paperwork for taxpayers and local governments alike.
Another tax commission idea that may prove easier to implement: providing a new homestead exemption to everyone’s primary residence – and possibly a special exemption for small businesses as well. Such exemptions effectively reduce the taxable value of a home by a certain amount. Today, only seniors qualify for such a tax break in Colorado, but many other states provide homestead exemptions more broadly.
Expect across-the-board relief to remain part of the discussion. In a previous interview, Democratic Gov. Jared Polis told The Sun he would insist on rate cuts for all homeowners on top of whatever targeted relief lawmakers in his party want to see.
Hansen says lawmakers plan to go beyond merely cutting taxes this time around. The commission is looking at a handful of systemic changes that policymakers hope can limit large spikes in people’s tax bills in the future.
One that has broad support among the commission’s members is smoothing out increases over a period of time so that wild swings in the housing market – which can be exacerbated by Colorado’s two-year assessment cycle – don’t hit homeowners’ wallets all at once.
For instance, if last year’s 40% spike in home values had been spread out over four to six years, homeowners could have seen their tax bills go up by 10% a year or less. The committee also wants to allow all homeowners to pay their property taxes monthly, as people with mortgages do, rather than in one large annual payment.
Another idea has been repurposed from Proposition HH, the failed Democratic ballot measure from last year. Commission members want to implement something similar to the proposal’s “truth in taxation” provision, which would require local governments to notify residents and hold public hearings if tax revenue grows beyond a certain threshold.
“This is the idea that we’ve heard loud and clear across all the community meetings that we’ve held,” said Democrat Tamara Pogue, a Summit County commissioner who serves on the tax task force. “The public is looking for ways to understand our taxation system and to engage in that conversation.”
