Colorado homeowners in sought-after locations with the finest in recreation and decent jobs reveled in the soaring value of their properties during 2021 and early 2022. Formerly urban dwellers and remote workers discovered they could live in the state’s dream locales, too.
More second-home buyers and retirees arrived, upping the prices of homes alongside long-term residents who weren’t interested in selling. But they did appreciate how their largest investment grew.
Now, it’s nearing the time to pay for that dramatic increase in value.
In January, homeowners will discover how significant values have increased their property taxes. And if legislators don’t take productive action, Colorado residents will see sticker shock.
Every two years, county assessors using prices gathered through June forward property values to county treasurers. Six months later, and for the next annual bill, those amounts times the assessment percentage and the differing mill levies become the tax bills. Brace yourselves, as June 2022 numbers soared.
And, painfully, at the time the bill is due, 2024 home prices will likely have slipped somewhat. In some cases, they have already. Higher interest rates have slowed – and partially reversed – rising prices.
The question is, what should the state do to blunt the higher amounts, and how?
A flush state budget last year resulted in $700 million toward two years of backfilling the increase. Another $200 million has been proposed for this year.
While that’s welcome, it’s not nearly enough.
The Legislature is considering allowing county commissions, city councils and district leaderships to temporarily reduce mill levies to a level that will cover taxing districts’ needed salary increases and higher equipment prices with inflation. To some degree, this would spare taxpayers. That would be local decision-making for sure, which we like, but could be politically fraught: One taxing district could potentially reduce bills more than a neighboring one.
And what’s a reasonable amount of time for this reduction in mill levies? Two years? Three?
Another idea is to cap tax increases short- or long-term and use what would be Taxpayer’s Bill of Rights refunds to fill the gap. Interest groups are taking action on their own.
Advance Colorado, the conservative fiscal nonprofit, is offering Initiative 21 for the November statewide ballot. It would amend the state Constitution to cap property tax increases at 3% per property and set aside up to $100 million in TABOR surplus each year for fire districts.
The Bell Policy Center, the liberal-leaning fiscal nonprofit, filed eight proposed 2023 ballot measures for review. The bills would reduce or cap property tax increases and/or use TABOR surplus to replace the revenue lost by school, fire district and local water project budgets.
Beyond keeping our property taxes at reasonable levels, residents are also confronted with what we want property taxes to fund. And by how much.
If the post-pandemic property value increases are only short-lived, we have to be careful in making a decision that would ultimately be a mistake. At the time, the Gallagher Amendment was a needed protection against the taxation of rising residential home values. But its formula weighed severely against commercial property and was difficult to undo.
Best not to change the Constitution.
The Legislature will only be in session until May 6. While housing and guns are uppermost on legislators’ minds, temporary property tax relief should be, too. Let’s not put property tax bills choices made by interest groups on the November ballot. We want legislators to do this.
We need the General Assembly’s give-and-take toward middle ground, thorough vetting and focused attention on this property tax predicament.
