Local governments in Colorado are set to cash in next year.
With property values skyrocketing, counties, cities, schools and others could collect millions of dollars more in property taxes.
But some local elected officials are asking: Should they really accept all that new money?
“There's not a single taxing authority out there that planned on or needs a 45% increase in one year. And that's what we're facing here,” said Teller County Commissioner Erik Stone, a Republican.
Teller, Douglas and Garfield counties are among a number of local governments moving to partially lower property tax bills. Other local governments, including Denver and dozens of other cities and counties, have automatic tax limits that will be kicking in soon.
However, countless other taxing districts have no apparent plans to offer a tax break, and instead may see sizable leaps in their tax revenues. Looming over all this is Proposition HH, a ballot measure that would lower property tax rates statewide. (Prop. HH would also result in smaller TABOR refunds to taxpayers.)
It’s all feeding into a bigger question of whether property tax cuts should come from the state or local level. Stone argues it’s time for cities, counties and others to step up.
The answer for residents, he believes, “is frankly not to look to the legislature for solutions, but instead look to their local elected boards of all these taxing authorities to give them tax relief.”
Meanwhile, state Sen. Chris Hansen, a Democrat on the Joint Budget Committee, argued that state intervention is necessary because local governments simply aren’t using the powers they have to take on property taxes in large numbers.
“We needed state-level action because the locals were not doing anything,” Hansen said. “If they wanted to do something proactive, they could have done it.”
But there’s still time before next year’s bills go out. Here’s how local districts are – or aren’t – taking on the property tax surge.
A few local governments are exploring their options
When property values rise, homeowners and others pay higher property taxes. Those property taxes go to a variety of local districts – including county governments, city governments, and schools, but also special districts that fund parks, water infrastructure, fire protection, arts groups and more.
So, rising property values usually means a bigger budget for those entities. But the question of how much bigger depends on the district and what they do in the next couple months.
Let’s take Garfield County, home to Glenwood Springs. Currently, the county government takes in about $40 million annually in property taxes, a significant portion of its overall budget.
That number could grow a lot next year. The average single-family home in the county has gained a whopping 45% in assessed value in the latest revaluation, according to calculations by CPR News. (That’s not to mention taxable gains for commercial and oil-and-gas properties, too.)
With that huge valuation spike, Garfield County expects its property tax revenues will grow by $15 million next year – unless something changes.
And, in fact, something is changing. County leaders have announced a plan to lower property tax rates for the first time in decades.
County commissioners hope “to temporarily lower the mill levy so that revenues generated back to Garfield County will track with inflation. In this way, it will reduce the current tax burden on property owners,” wrote county manager Fred Jarman in an email.
Instead of rising by 45%, in other words, tax payments for the county government could go up by a single-digit percentage.
This kind of tax discount is possible because of a recent law, SB23-108, which ensures that local governments can temporarily drop their rates – and raise them back up again later – without fear of getting stuck permanently at the lower rate.
Stone, of Teller County, was instrumental in getting that new power for taxing districts. Now, he’s working on lowering the Teller County government's property tax rate from about 14 mills to about 11 mills, a decrease of more than a fifth in its property tax revenues.
“You don't need [Proposition] HH to get property tax relief. You just need to come talk to us,” Stone said of local governments. It’s not just counties, either: Colorado Mountain College is lowering its property tax rate, rather than accepting a multimillion dollar windfall.
But this tax-cutting comes with some limits. Individual entities like counties and colleges each represent just a portion of property tax bills. There may be a dozen different entities levying taxes on a single property, with the leaders of each making their own financial decisions. Across the state, there are thousands.
A new approach?
Meanwhile, one county is embracing a strategy that will ensure across-the-board property tax cuts for residences, but has drawn mixed reactions from state lawmakers.
Instead of just lowering tax rates for the county government, Douglas County commissioners have moved to instead reduce the assessed value of all single-family residential properties by 4%.
The across-the-board reduction means that every district in the county, from schools to fire and sewer districts, will automatically get 4% less property tax revenue from those properties. That’s a total savings of about $28 million across all residents’ tax bills, compared to the status quo. (Their bills will still be significantly higher than last year, though.)
The county is basically revising the values that the assessor had initially assigned to thousands of properties, which officials now argue were too high. And correcting that valuation, they say, is also a form of tax relief.
Douglas County Assessor Toby Damisch said the need for the change became obvious as property owners made a record-breaking 36,000 appeals; in total, a quarter of all single-family owners contested the assessor’s valuation. (The county actively educated and encouraged taxpayers to make those appeals.)
“As we all guessed, they were mad and sad and worried and upset and disappointed in their governments,” Damisch said of the taxpayers; the median Douglas County home saw 47% appreciation with the reassessment, he said.
Nearly half those residential appeals resulted in the assessor’s office agreeing to make adjustments. It showed that the county’s appraisal model could be made more accurate, Damisch said.
DougCo’s residential value jumps were the highest in the Front Range, Damisch said – a fact confirmed by CPR News’ analysis, which found DougCo outpaced other counties by several percentage points. (Of course, DougCo has become one of the most desirable, and fastest-growing, counties in the state.)
Like all other counties, Douglas County uses a statistical model to assign values to individual properties based on sales and other data from the area, similar to what sites like Zillow do.
The new valuations were supposed to be based on the value of homes on June 30, 2022 – drawing from the previous two years of sales data. But the DougCo market was on a downward trend as that June 30 date passed.
Over the summer, “we still had all these prices coming in where people were paying way above this price, but we also saw the floor of that range of pricing really expand downward,” he said.
So Damisch’s team did a new analysis, this time looking at sales that had been pending on the June 30 date. It showed the market had indeed been weakening on the valuation date, Damisch said, proving that a 4% across-the-board decrease in residential valuation was justified.
However, the move has drawn skepticism from Sen. Hansen, who sits on the state board of equalization, which reviews property tax values. He argued that it seems as if DougCo was trying to cut taxes by changing values.
“If counties want to reduce their mill levies, then they should reduce their mill levies. … Making up values that don't match the market, that's not tax relief. And that's what we have to double-check. So did the assessor in Douglas County mess up or not?” he asked
Damisch counters that he was simply following the data: “We have an obligation to our citizens to study it, an absolute obligation.” Separately, he added, the county also is looking to lower its actual tax rate.
Democratic Gov. Jared Polis praised the approach, according to county commissioner Lora Thomas. A spokesman for Polis confirmed that he is “supportive of cutting property taxes and was conveying that to the commissioner in appreciation of her work.”
DougCo’s plan is set to be reviewed by the state equalization board on Dec. 18.
Automatic limits (and their limits)
In some cases, property tax rates will go down whether or not local leaders want them to. A handful of automatic constraints will slow property tax increases for various counties, cities and other districts.
For example, dozens of county governments are subject to a state law that only allows their property tax revenues to grow by 5.5% each year. Several more counties, not to mention many cities and others, are subject to TABOR, which says overall revenues can’t grow faster than inflation and population growth.
Jefferson County has already hit that limit recently. The county is refunding $39.4 million dollars to its property owners this year, with the median check being $110.
The city and county of Denver even has its own custom tax cap, which says that your tax payments to the county government won’t grow by more than 6% annually.
“It’s always capped. You'd never have the spikes, the big double-digit spikes we might see if we did not have that measure in place,” said Margaret Danuser, Denver’s CFO.
Districts that hit their limits will have to either lower their tax rates or, like Jefferson County, refund money to taxpayers. And certain other property taxes might also go down automatically – for example, if it’s a dedicated fund that only needs a certain amount of money to pay off debt.
But, again, the actions of one local government only affect a portion of your tax bill. Even if the Denver government caps its own revenues, there are still all the other districts within the county – including, more than anything, schools.
What about schools?
The largest recipients of property taxes are school districts, taking in more than half all property tax dollars, and they’re a special case.
The state sets a minimum level for school property tax rates, which districts are not allowed to go below. That leaves them little flexibility to offer tax relief, according to Tracey Rainey, a school finance expert with the Colorado School Finance Project.
“The state sets the mills and districts have no control over what the state sets,” she wrote in an email.
In other words, schools are the force behind the largest part of the property tax increase next year, and yet they have little power to refuse that money.
However, that doesn’t mean school districts will be rolling in money next year. When local tax revenues rise, schools receive less financial support from the state, so they won’t get the full benefit of those rising property tax bills, according to Rainey and Hansen.
Now, some school districts do collect extra property mills, known as override mills, that go above and beyond the state funding requirements. There may be some tax savings to be found there – those bonus mills are usually “floating,” meaning they’ll automatically be lowered to balance out the rise in values, or the district may choose to manually lower them.
For example, Jefferson County schools collect a 27-mill base and, for this year, an additional 19.1 mills of “override.” The base will stay the same next year, but the override will drop by 1 to 1.5 mills, according to Jeffco Public Schools CFO Brenna Copeland.
“We will not receive any new revenue due to valuation increases. In fact, most of our mill levy override revenue (the portion of the mills that go directly to the district) do not even adjust with core inflation, so we are collecting less money each year on an inflation-adjusted basis,” Copeland said in a statement to CPR News.
Residents are getting organized
Natalie Menten, a tax and transparency activist, wants residents to put pressure on their local leaders to lower taxes. She said she’s training ordinary people to navigate the process.
“I think local pressure has way more impact than people realize,” she said. “Why should government profit off double-digit increases with pain to taxpayers? … And I think that has a lot of impact when city counselors sit there and think about it.”
There are only a couple of months left for local governments to take action. But some argue that they can’t do anything until after the November election – because Prop. HH, if it passes, will have its own effect on their revenues.
Prop. HH would lower assessed property values statewide – which would compound the effect of any local property rate cuts, potentially affecting revenue more significantly than districts had planned.
“It takes away the ability of local governments, municipalities, counties, and special districts to make those decisions locally, which probably will be more impactful to citizens than Proposition HH,” argued Kevin Bommer, executive director of the Colorado Municipal League. The group is opposing HH.
No matter what happens with Prop. HH, it’s likely to mean a hectic end of the year as local governments try to decide how much property tax money they need and how they’ll spend it.
Local governments usually must decide on mill levies by Dec. 15 at the latest, but if Prop. HH passes, that deadline will be extended to Jan. 5.
