Colorado’s residential property taxes are already among the nation’s lowest, but a measure on the 2021 statewide ballot would drop them ever lower – for some.
Proposition 120 would, if approved by voters, reduce the property tax assessment rates for multifamily housing to 6.5% from 7.15% starting in 2022. If you owned affected property valued at $300,000, you would pay $1,950 per 100 mills (a mill is a $1 payment on every $1,000 of assessed value) versus $2,145.
The rate would also be reduced under Proposition 120 for lodging properties from 29% to 26.4%. If you owned affected property valued at $300,000, you would pay $7,920 versus $8,700.
Here’s a deeper look at Proposition 120:
Proponents of the measure say a property tax reduction for multifamily housing could reduce rents and encourage investment to ease the state’s housing shortage. Lower property taxes for lodging property may allow businesses to expand and hire more employees.
“Property values are skyrocketing right now,” said Michael Fields, who leads Colorado Rising Action, the conservative fiscal policy nonprofit behind the ballot measure. “People don’t have the money in their pocket to pay higher property taxes.”
Fields called Proposition 120 “a first step to ensure that people can stay in their homes.”
Conversely, opponents argue that slashing property taxes may result in local government cuts, including for schools and fire departments that rely on property tax revenue to operate.
Scott Wasserman, who leads the liberal-leaning fiscal policy nonprofit Bell Policy Center, said he’s concerned about the permanent nature of the cuts and how they don’t take into consideration the financial needs of local governments.
“We’re continuing to set statewide assessment rates regardless of how it impacts different counties,” he said.
In the final days of Colorado’s 2021 legislative session, a bipartisan measure passed that blunted the effects of Proposition 120.
Senate Bill 293 created new subcategories of residential and commercial property in an effort to limit the effects of the ballot measure. It then drove down the assessment rates for those new categories, though by not as much as Proposition 120 would have.
Here’s the breakdown:
- Single-family properties are taxed on 6.9% percent of assessed value, down from from 7.15%
- Multifamily properties are taxed on 6.8%, down from 7.15%
- Agricultural property’s rate dropped to 26.4%, from 29%
- Property used to produce renewable energy is taxed on of 26.4% of assessed value, down from 29%
There’s a big catch, however.
The rate decreases under Senate Bill 293 apply only in the 2022 and 2023 tax years. After that, state lawmakers will have to decide whether to continue with the lower assessment rates or raise them to their previous levels.
Because Senate Bill 293 was passed after the Colorado Secretary of State’s Office approved Proposition 120 for the signature-gathering process, the language on your ballot will ask if all property tax and commercial tax assessment rates should be dropped. Don’t be confused. That’s not the case.
Nonpartisan legislative staff estimate that the assessment rate reductions would decrease property tax revenue for local governments across Colorado by $46 million in 2022 and $50.2 million in 2023.
The revenue decrease is expected to be even larger in later years due to a scheduled increase in the assessment rate for multifamily housing in 2024.
Because property taxes fund schools, there may be a hit to Colorado’s education system. The impact will vary by district since different districts impose different mill levy rates. The state Legislature may backfill some of the losses.
Again, don’t be confused by the language on your ballot, which warns of a $1 billion hit to government coffers. That estimate was created before Senate Bill 293 passed and Proposition 120 was effectively scaled back.
To calculate your savings, you first must find out your property’s assessed value. Multiply that by the assessment rate, which is currently 7.15% for residential property and 29% for commercial property.
Take that number and multiply it by 0.001 per mill levied where you live. If your mill levy rate is 50, then you would multiply the number by 0.05. If the rate is 100, then you multiply the number by 0.1.
You can then calculate what your new payment would be by multiplying your property’s assessed value by 6.5% if you own multi-residential property – like a duplex or triplex – or by 26.4% if you own a lodging property, like a hotel, motel or bed and breakfast. Then multiply that number by whatever your local mill levy rate is.
(Condominiums are not included in the definition of multifamily housing properties, according to nonpartisan legislative staff.)
Proposition 120 would also allow the Legislature to keep $25 million over the state’s Taxpayer’s Bill of Rights cap to be used to fund existing reimbursements to local governments for the homestead property tax exemption.
Seniors and veterans with a service-related disability are eligible for the exemption, which allows those who qualify to exempt 50% of the first $2,000 of residential value from property taxes. In 2020, the average exemption was $584.
Here’s more helpful information from nonpartisan staff at the legislature: “In years the exemption is available, the state reimburses local governments for the revenue reduction resulting from the property tax exemption. The state spent $157.9 million on local government reimbursements in state budget year 2020-21. In some years, the state legislature has made the exemption temporarily unavailable as a budget balancing decision. The last year the exemption was not available was 2011.”
There’s one more thing voters may want to know.
Fields has vowed to file a lawsuit seeking to invalidate Senate Bill 293 should Proposition 120 pass.
“They can’t kneecap or adjust our ballot initiative when it’s already through the process,” Fields said in explaining his legal argument against Senate Bill 293.
If the lawsuit is successful, it’s not clear if Proposition 120 would then reduce the assessment rates for all property and residential taxes in Colorado. However, that’s what the Common Sense Institute believes would happen.
“It is a serious concern,” said Wasserman, from the Bell Policy Center.
Wasserman worries that the lawsuit could serve as a slippery slope affecting future legislatures and future ballot issues.
“Just because you take out a ballot title doesn’t mean you get to have the exclusive conversation about an issue in Colorado,” he said.
