With ballot threat looming, lawmakers agree to slash property taxes again

Colorado Gov. Jared Polis speaks during a news conference about a bipartisan property tax reduction bill on May 6, 2024, at the Colorado Capitol. At left is House Speaker Julie McCluskie and at right is state Sen. Barbara Kirkmeyer (Quentin Young/Colorado Newsline).

Under the threat of a multimillion-dollar ballot measure campaign backed by Colorado businesses and anonymous conservative donors, state leaders on Monday announced they had agreed to pass the second cut in as many years to the nation’s third-lowest property tax rates.

“The biggest winner, of course, will be homeowners across our entire state (and) businesses across our entire state,” said Gov. Jared Polis, flanked by lawmakers from both sides of the aisle, said Monday at a press conference at the state Capitol.

Senate Bill 24-233, introduced with less than 72 hours remaining in the 2024 legislative session, would reduce by roughly $1.3 billion annually the amount of taxes paid by Colorado property owners to city and county governments, schools and other local taxing districts, lawmakers said. The resulting budget shortfalls would be partially offset using money from the state education fund and the general fund. A typical homeowner would receive a few hundred dollars in tax relief.

Beginning next year, the bill would make several fundamental changes in the way property taxes are calculated, establishing two different statewide assessment rates — one for school districts and another for all other taxing districts. For the latter, growth in property tax revenues would be capped at 5.5% annually, unless voters decide otherwise.

State Sen. Barbara Kirkmeyer, a Weld County Republican and a sponsor of the bill, said the agreement would deliver the state’s “largest property tax reduction in 20 years” in the short term and ensure stability going forward.

“Unlike deals in the past several years, this will provide a long-term, permanent solution, and will be simple and easy to understand for every Colorado property owner: Your taxes are going down,” Kirkmeyer said.

The deal marks the third time in a week that public brinkmanship over high-stakes initiatives bound for Colorado’s 2024 ballot has produced major policy outcomes by way of negotiations behind closed doors at the Capitol. Similar agreements have been announced by Polis and top lawmakers on issues relating to oil and gas pollution and medical malpractice litigation.

On property taxes, two conservative groups, Advance Colorado and Colorado Concern, have backed a more aggressive series of anti-tax measures that may still appear on the November ballot. Colorado Concern is an influential business group governed by a board of Colorado-based corporate executives, while Advance Colorado is a so-called “dark money” nonprofit that has spent millions in recent years to influence state elections but is not required to disclose its donors.

Colorado Concern, viewed as a more moderate group after backing Democrats’ failed 2023 property tax reform measure, Proposition HH, was “involved” in the talks that led to SB-233, lawmakers said Monday — but Advance Colorado was not.

“I did talk to Advance Colorado on two separate occasions directly,” said state Sen. Chris Hansen, a Denver Democrat. “They made it clear that they wanted to move forward with (their ballot initiative). I guess they’ll still need to make that decision.”

Kirkmeyer did not answer directly when asked if she and other Republican backers of SB-233 would commit to opposing Advance Colorado’s ballot measures.

“I think Advance Colorado is working to do what they feel that they’re hearing from the people of Colorado,” she said.

Property tax battles

Colorado’s effective property tax rate of 0.55% is among the lowest rates of any U.S. state, according to data from the conservative-leaning Tax Foundation.

But the issue has been top of mind for state policymakers since last spring, when soaring property values were reflected in the state’s latest two-year valuation assessment cycle, causing tax hikes that averaged 30% to 40% in many of Colorado’s most populous counties. The sticker shock was also partly the product of the repeal by voters in 2020 of the Gallagher Amendment, a 1982 constitutional measure that kept residential assessment rates low while raising rates accordingly for non-residential property.

Proposition HH, referred to the 2023 ballot by the Legislature, proposed property tax relief that would have been paid for using excess revenue that would otherwise be refunded to Coloradans under the Taxpayer’s Bill of Rights. After voters rejected that plan, Polis called a special legislative session in December, during which lawmakers passed a scaled-down package of roughly $430 million in property tax relief for 2023 and convened a task force to recommend long-term reforms.

“Today is a culmination of that effort, and we bring forward a package that is sustainable and balanced,” Hansen said.

A new property tax structure established by SB-233 would prioritize revenues for school districts, which would benefit from higher assessment rates and fewer restrictions and exemptions than all other local government entities, which include city and county governments, fire districts, water districts and more.

The residential assessment rate for school districts would be set at 7.15% beginning in 2025. For all other taxing districts, the residential assessment rates would be set at 6.95%, and revenues would be subject to the annual 5.5% growth cap. Additionally, for the latter category, the bill aims to maximize relief for lower- and middle-class homeowners by exempting 10% of the value of any homes under $700,000 from taxation, gradually reducing that percentage for higher-value homes.

SB-233 would also gradually reduce the assessment rate for commercial property from 27.9% this year to 25% by 2027, which Kirkmeyer said was a priority for Colorado Concern.

The bill would hit local tax revenues hardest in the current property tax year, before its structural reforms take effect, a nonpartisan state fiscal analysis found. As required by law, state aid will backfill school districts to the tune of $351.7 million in fiscal year 2024-25, offsetting most of the lost revenue for schools.

But local governments would lose out on nearly $400 million in revenue this year. A backfill mechanism created by the bill would reimburse only a handful of small rural districts where total assessed values decreased between 2022 and 2024, to the tune of about $10 million.

Kirkmeyer, a member of the Legislature’s powerful Joint Budget Committee, said that she and other officials will be “checking the couch cushions throughout the state and every department” to make up for the hit to the state’s $15 billion general fund, the vast majority of which funds education and health care.

“We will make this happen,” Kirkmeyer said. “It will work for Colorado, and we won’t put the state in a critical situation.”

To become law, SB-233 will need to race through the Legislature in the final days of the 2024 session, beginning with a Senate committee hearing that began just after 3 p.m. Monday. The Legislature adjourns for the year on May 8.

Editor’s note: Newsline’s Quentin Young contributed to this report, which first appeared on Colorado Newsline. Newsline is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Colorado Newsline maintains editorial independence. Contact Editor Quentin Young for questions: info@coloradonewsline.com. Follow Colorado Newsline on Facebook and Twitter.