Legislators announce, advance bipartisan bill to reduce property taxes

On the last possible day to do so, a bipartisan group of legislators announced a deal Monday to reduce property taxes for homes and commercial buildings by $1.3 billion annually, using revenue caps, assessment-rate cuts and reductions in home values.

Senate Bill 233 — sponsored by Democratic Sen. Chris Hansen of Denver and GOP Sen. Barbara Kirkmeyer of Brighton, who often clash on tax policy — relies largely on the work of the Commission on Property Tax that was appointed to consider long-term changes. During a news conference, supporters positioned it as an alternative to proposed ballot initiatives from Advance Colorado and Colorado Concern that would set a hard 4% cap on property-tax revenue increases and lower assessment rates more significantly than SB 233.

Much like last year’s SB 23-303, which put onto the November ballot the failed Proposition HH property-tax reduction measure, SB 233 must cover a lot of legislative ground in the final three days of the session, leaving it vulnerable to filibustering attempts. But unlike that controversial measure, this one is coming with bipartisan support as well as the backing of Gov. Jared Polis and groups ranging ideologically from the Colorado Chamber of Commerce to the Bell Policy Center, and backers say it’s the result of nearly a year of stakeholding.

“This is the next step in a six-year arc on this work,” said Hansen, noting that his first discussions about repealing the Gallagher Amendment that had regulated property-tax rates began in 2018, leading eventually to his chairing the special property tax commission. “This is not a last-three-day bill. This is a conversation that has been going on for years.”

Bill gets legislative backing, outside criticism

And the Senate State, Veterans & Military Affairs Committee seemed to agree, passing SB 233 unanimously.

But the bill doesn’t do enough to get Advance Colorado and Colorado Concern to end their efforts to pass Initiative 50 and Initiative 108, their leaders said. Colorado Concern President/CEO Dave Davia said it doesn’t represent “material tax relief” for home or business owners, and Advance Colorado President Michael Fields said its carveouts mean residents would pay higher effective tax rates under SB 233 than they do now.

SB 233 would set a 5.5% cap on property-tax revenue increases beginning with the 2025 property tax year and allow local governments to exceed it only via a vote at the ballot. However, it would exempt from that cap home-rule cities and counties, revenue that has been pledged to bond and debt issues and school districts.

In fact, the bill would bifurcate tax assessments for school districts and all other kinds of governments permanently, ensuring that any cuts to property-tax rates that local governments make would not affect educational systems. After extending lower 2023 tax-assessment rates and value subtractions through this year, the bill would return residential property tax rates for school districts to 7.15% for 2025 property tax year, even as it keeps them at 6.7% for local government entities.

Explaining cuts to residential and commercial property taxes

Then, beginning in 2026, SB 233 would set local-government property-tax assessment rates at 6.95% but also would allow homeowners to subtract 10% of their value, up to $70,000, before calculating their taxable value. So, the owner of a home worth $700,000 or less could subtract a full 10%, while owners of more expensive homes could still subtract $70,000, though it would represent a lower portion of their value.

This would mean that, combined with the higher school-district assessment rate, Colorado residential properties would have an effective 6.5% tax rate, Bell Policy Center President Scott Wasserman said.

The bill also would grant relief to commercial properties, pushing their current 27.9% assessment rate down to 27% next year and 26% in 2026 before settling permanently at 25% in 2027 and beyond. Colorado Chamber President/CEO Loren Furman said giving a break to nonresidential properties, which legislators didn’t do in a 2023 special session, will combat Colorado’s higher-than-average cost of doing business that is making it less economically competitive.

SB 233 also would remove limitations that let property owners apply for a tax-payment deferral only if their bills go up by 4% or more, and it would offer limited reimbursements to local governments that see a decrease in assessed value in part because of the bill. While members of the property-tax commission had backed the idea of allowing property owners to pay tax bills in monthly installments rather than just in one or two lump sums, sponsors left that provision out of the bill when told it would be difficult to administer.

How the bill came together

Bill backers said the key to SB 233 is that it offers substantial tax relief while also putting safeguards in place to ensure it does not take too much money from local governments or require the state government to backfill too much and redirect general funds. They lauded its nonpartisan nature too, with Senate President Steve Fenberg, D-Boulder, saying he was proud the 19 property-tax commission members “put politics aside, took a look at what was out there, came at it from an honest place and came up with a solution.”

Yet, it took a bipartisan and hard-fought effort to cement the details of the bill that got legislators from both sides of the aisle on board.

Sen. Byron Pelton described how Republicans considering what it would take to get their support met at a Starbucks and wrote their ideas, most of which were included in the bill, out on a napkin. Supporters described around-the-clock talks over the past four days that got a particular assist from Polis during Sunday’s “14-hour phone call” between Hansen and Kirkmeyer. Sponsoring Rep. Chris deGruy Kennedy, D-Lakewood, lauded the very active and cooperative participation of Furman and Wasserman, who put aside ideological differences to come to a consensus.

Kirkmeyer said it was important to her that sponsors would not fund the bill either with Taxpayer’s Bill of Rights refunds. Instead, SB 233 will take $352 million from the State Education Fund to backfill school-district losses next year and reduce the general-fund reserve requirement from 15% to 14%, providing an extra $157 million in funding.

Property-tax bills still will rise — but by less

A regulator added to the bill for school districts also would reduce the backfill to them if property-tax revenues from their taxing district are high enough to comprise 60% of their budget. Many school districts get 50% or more of their funding from the state government under a formula that reflects backfill needs from any state-mandated changes in tax laws, but the higher residential assessment rate for school districts is expected to change that.

Even with the $1.3 billion reduction in tax bills that SB 233 is estimated to produce, legislators, local governments still will collect about $2 billion more in property taxes next year than during the last reassessment cycle, because of rising property values. But Polis emphasized that number could have been much higher without the cooperative work of the bill backers and the property-tax commission members who spent five months looking at ways to give people property-tax relief without hamstringing government services.

“I think especially after what happened with HH, there is no … partisan solution on property taxes,” Polis said. “It’s a complex math problem.”

And figuring out that equation now will fall into voters’ laps if Fields and Davia continue to move forward with their two ballot measures, as they said Monday that they plan to do.

Ballot battle on property taxes still coming

Initiative 50, which already is approved for the November ballot, would put a lower 4% cap into the state constitution without offering carveouts for cities or school districts. Initiative 108, which is cleared for signature collection, would cut residential assessment rates to 5.7% and commercial rates to 24% next year and direct legislators to reimburse local governments for lost revenue that could reach $2.1 billion, according to estimates.

Fields said that because the current residential assessment rate is 6.7% with an allowable $55,000 subtraction in value, that puts the effective rate at 6.3%, lower than SB 233 would set it once school-district carveouts are included. And while property-tax commission members criticized the backfill requirements as decimating state funding, he said he believes that most taxpayers would prefer their money to go to local forms of government.

“If you’re cutting your rates, it’s got to come from somewhere. And people are much more likely to want the money to go to local education and fire and water,” Fields said in an interview. “I think if people want it to come from somewhere, they want it to come from the state giving their money to local government.”

Kirkmeyer, who noted that SB 233 is set up to only distribute about $20 million in backfill from general-fund revenues, said she is likely to add amendments to the bill to meet the requests of local governments. While she didn’t specify what those might be, two fire chiefs told the Senate committee they would like amendments to extend backfill to special districts like theirs that are providing essential services and lose money because of the bill.