Legislature approves property tax cuts for 2023 and 2024, sending bill to governor
Under compromise, business group Colorado Concern withdraws ballot measure
Sen. Bob Rankin, R-Carbondale, listens as Sen. Chris Hansen, D-Denver, speaks on the Senate floor April 6, 2022. (Faith Miller/Colorado Newsline)
Colorado state representatives approved legislation to temporarily cut property taxes, voting unanimously Friday to send the bill to the governor’s desk.
Senate Bill 22-238 would temporarily reduce residential and commercial property tax assessment rates, providing $700 million in savings over two years for Colorado homeowners and businesses. Lawmakers and Gov. Jared Polis, who first announced the property tax relief package last week, said the cuts were needed at a time when soaring home values and the recent repeal of the Gallagher Amendment, which had constrained growth in residential property taxes, are driving up tax bills across the state.
SB-238 was led by two members of the influential Joint Budget Committee — Sens. Chris Hansen, a Denver Democrat, and Bob Rankin, a Carbondale Republican — along with Rep. Mike Weissman, an Aurora Democrat, and Patrick Neville, a Republican from Castle Rock. It increases and expands the property tax cuts lawmakers passed last year through Senate Bill 21-293, which temporarily reduced assessment rates for most types of property.
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This year’s bill represents a compromise between Polis, a Democrat, and Colorado Concern, a group representing business executives that had been working to place an across-the-board property tax cut on the 2022 ballot. That measure would have capped annual growth in property valuations used for taxes at 3%, potentially costing cities, counties and school districts $1.3 billion. Colorado Concern has formally withdrawn its proposed ballot measure following the passage of SB-238, Anneliese Steel, the group’s corporate affairs director, told Newsline.
Other organizations backing the bill included the Denver Metro Chamber of Commerce, the Colorado Hotel and Lodging Association, Douglas County, and the Rocky Mountain Mechanical Contractors Association.
2022 assessment rate reductions in Senate Bill 21-293
Multi-family residential: 7.15% to 6.8%
Single-family residential: 7.15% to 6.95%
Most commercial: Maintained at 29%
Agricultural and renewable energy production: 29% to 26.4%
2023 proposed assessment rates
Multi-family residential: 6.77%
Single-family residential: 6.77%
Most commercial: 27.9%
Agricultural and renewable energy production: 26.4%
2024 proposed assessment rates
Multi-family residential: 6.8%
Single-family residential: To be determined
Most commercial: 29%
Agricultural and renewable energy production: 26.4%
Supporters of SB-238 argued that property tax cuts are needed to blunt the effects of rising property values across the state. Assessment rates are no longer constrained by the Gallagher Amendment, which voters repealed in 2020 — getting rid of a decades-old formula that combined with other constitutional provisions to keep residential property tax revenue low in some areas of the state.
“We think it’s a mistake to try to do these things formulaically in the Constitution, because there’s no way to react and adjust based on the latest economic data,” Hansen told Newsline. “Now we can take the very latest information and craft a package around that, and that’s what Bob Rankin and I — my bipartisan co-sponsorship here — that’s what we’ve done for the last two years.”
In its December economic forecast, nonpartisan Legislative Council Staff wrote that residential assessed, or taxable, property values rose 11.3% from 2020 to 2021 in Colorado. Residential assessed values are expected to grow another 18.3% by 2023. The jump in home values results from a limited housing supply, the increasing costs of construction materials and labor, low interest rates and elevated household savings, the forecast said.
“We’re just trying to create a mechanism that will really blunt this spike that we’re seeing right now,” Hansen said.
Besides cutting assessment rates, SB-238 would also reduce the taxable value of a home by $15,000 and the taxable value of some commercial properties by $30,000. Property tax is calculated by multiplying a home’s taxable value by the assessment rate and by the local mill levy. One mill is equal to $1 for every $1,000 of a home’s value.
Under the proposal, someone owning a $500,000 house would save an average of approximately $274 on their tax bill in 2023 with additional savings projected the following year, Polis said at a Monday news conference. Someone who owned a storefront or office worth $500,000 would save $1,200 the first year.
The amount of savings a typical homeowner could expect in 2024 is still unclear. Under SB-238, the reduced assessment rates for single-family residential property in 2024 would be determined next year. They would be set at a level that would make the total amount of property tax savings included in the bill equal to $700 million over the two years.
SB-238 would direct the state to backfill $400 million of the lost property tax revenue for local governments, with about half of that coming from refunds that the state was expected to have to issue to taxpayers in 2024. The refunds are required under the constitutional amendment known as the Taxpayer’s Bill of Rights, which limits the amount of revenue the state can collect.
The reimbursements that SB-238 would make to local governments would be tiered, with only some counties receiving the full amount of local property tax revenue they would have collected without the legislation. Counties with 300,000 or fewer people that saw property values grow less than 10% from 2022 to 2023 would receive full reimbursement. Those with 300,000 or fewer people that saw property values grow 10% or more would be reimbursed for 90% of lost revenue. Finally, all other counties would receive 65% reimbursement from the state.
A ballot measure capping property tax increases at 3% could have resulted in varying outcomes for different Colorado communities, especially those that rely heavily on property tax revenue to provide government services. During a May 2 news conference, Rankin lauded the tiered system in SB-238, noting that it avoided applying the same formula across the state.
“I represent a good part of rural Colorado, and my concern with any statewide assessment that has been considered or in fact has been enacted, going back to the days of Gallagher, is that every one of our counties and special districts are a little different,” Rankin said. “They depend on property taxes, and their budgets depend very much on revenue, which can be disparately impacted.”
The bill would also make permanent a program that lawmakers established last year through SB-293 allowing homeowners to delay paying up to 4% in property tax increases.
“People can defer their property taxes for 10 years,” Hansen said. “That means that if you’re on fixed income or you need more time, that you basically don’t have to pay those increased property taxes, and you can handle it when you sell the property.”
After Polis, Hansen, Rankin and Esgar first unveiled the property tax relief package at the May 2 news conference, a group of progressive advocacy organizations accused them of “working behind closed doors” to devise “irresponsible, inequitable property tax cuts.”
The group — called the Together We Thrive coalition and consisting of United for A New Economy, the Colorado Education Association, the Colorado Fiscal Institute and others — followed up after the bill’s Senate passage with a more optimistic statement.
“The Together We Thrive coalition, which includes groups representing working Coloradans and communities of color, hopes this temporary fix allows for a more productive, inclusive process to find a permanent solution that addresses the real issues behind skyrocketing home prices,” Carmen Medrano, executive director of United For A New Economy, said in an emailed statement on behalf of the coalition. “Coloradans are tired of the wealthy few not paying what they owe in taxes and being disproportionately bailed out, and demand solutions that give property tax relief to those who truly need it without giving millionaires a tax break on their mansions. We look forward to being a part of that deliberate process to craft a real solution that actually addresses housing costs while ensuring we have high levels of the public services that allow our communities to thrive.”
Hansen, meanwhile, characterized SB-238 as progressive, saying it would benefit low-income homeowners by ensuring the first $15,000 in a home’s value was not taxed. Renters could see indirect relief too, he argued.
“When you lower taxes on multifamily apartment buildings and condos, that means that they don’t get passed through to the renter,” Hansen said, “and so we are taking a huge amount of pressure off of rents as a result of this relief package.”
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