It’s official: Gov. Jared Polis announced on Thursday morning that he is calling the Colorado Legislature back for a special session in 11 days to pass an expanded property-tax-relief package and avoid a ballot showdown on the subject.
The call came three days after Mark Ferrandino, director of the governor’s Office of State Planning and Budgeting, detailed for an influential commission a proposal negotiated by state officials and the initiatives’ proponents, Advance Colorado and Colorado Concern. The bill would reduce existing assessment rates for most kinds of property, would impose stricter caps on annual growth in statewide property-tax revenue than legislators approved in a law signed in May and would add $300 million in additional tax savings to that law.
Polis and Democratic legislative leaders called the decision one to protect the state from the potential that the “dangerous” Initiatives 50 and 108 could pass and require backfill payments to local governments that would reduce general-fund spending significantly. Meanwhile, ballot proponents and Republican legislative leaders lauded the chance via the special session to bring even greater tax relief to Coloradans following the passage of the bipartisan tax cut just three months ago.
The session is set to begin at 10 a.m. on Aug. 26 and could last as little as three days.
How the special session came about
“The cost of inaction is too high. We refuse to gamble with our schools, our economy, our future,” the Democratic governor said in a news release. “Proposed ballot measures threaten to gut funding for K-12 and higher education, and Coloradans are counting on us to find a path forward that saves people money on property taxes while preserving these critical institutions.”
Advance Colorado President Michael Fields and Colorado Concern President/CEO Dave Davia boasted that the coming special session will bring greater relief for Colorado residents and business owners at a time when they are burdened by property taxes. Even after passage of a largely partisan relief package at a special session last fall, many Coloradans faced increases in property-tax bills last year of 30% because of a spike in property values.
“We applaud Governor Polis’ decision to call a special session to address property tax relief,” Davia said in a news relief. “It’s time to make Colorado more affordable – and focusing on the rising property-tax issue is a critical first step for homeowners and small businesses across our state.”
Polis’ executive order calling the special session limited the issues to be discussed at it to those “concerning property taxes starting with the property tax year commencing on January 1, 2025.” But legislators in the past have gotten creative with how they interpret such a call and introduced bills that some observers have considered tangential.
Dueling tax-relief efforts
Initiative 50, which already has been certified for the ballot, would cap annual statewide increases in property-tax revenue at 4% and require a statewide vote if governments wanted to keep revenues more than that. Initiative 108, which is currently undergoing examination of its submitted signatures, would reduce 7.15% residential assessment rates to 5.7% and 29% commercial and agricultural assessment rates to 24% in 2025 and require the state to backfill local governments seeing a revenue decline because of the measure.
Legislators, fearing that voters frustrated with recent tax bills would back the measures and take billions of dollars from the state budget, introduced and passed Senate Bill 233, which amounts to a $1.3 billion tax cut, in the final three days of the 2024 session. It capped annual growth in statewide property-tax revenues for local governments at 5.5% but exempted revenue going to school districts or pledged to repay bonds and other debt. It also lowered commercial assessment rates to 25% and residential rates to 6.95%, calculated after residents deduct 10% of home value, up to $70,000.
The new deal, as explained by Ferrandino to the Commission on Property Tax on Monday, would bifurcate residential assessment rates, lowering the portion funding schools to 7.05% and the portion funding local governments to 6.25% — and pushing down rates slightly further when the growth of average property values exceed 5%. It would impose a 6% annual growth cap on property-tax-revenue growth for schools and lower the local-government cap to 5.25% annually, though it would allow greater hikes in high-growth school districts and prevent any ratchet effect during recessions.
Special session to address business concerns
Ferrandino estimated that the proposal would reduce statewide property-tax bills another $255 million next year and $295 million in the 2026 property tax year as compared to SB 233. Sen. Barbara Kirkmeyer, the Brighton Republican who co-sponsored SB 233, said it also would leave in place exemptions to the statewide property-tax-revenue cap included in her bill, include those for new construction and for property taxes that have been set aside by local governments to repay bonds and other debt issues.
Those exemptions are seen as key to many business leaders who have been critical of the potential impacts of Initiatives 50 and 108. Bond attorneys and developers warned that the inflexible 4% growth cap in property-tax revenues would leave many special districts, which are building the vast majority of new homes along the Front Range, unable to repay promised debt and slow down new development significantly.
While Polis has backed the idea of a special session, some Democratic legislators have been more reluctant, saying that they passed property-tax relief in May and feel like they have been negotiating with terrorists holding the state hostage to their ballot initiatives. House Majority Leader Monica Duran, D-Wheat Ridge, referenced in a news release Thursday the “wealthy special interests” who have pushed the ballot interests and said she’s glad the session can protect school funding the measures could have jeopardized.
“More work was necessary”
But other legislative leaders, sensing the push from constituents for more tax relief, painted the upcoming special session as an opportunity to lower bills further.
“During this year’s legislative session, we succeeded in bringing the people of Colorado the largest property tax cut in our state’s history,” read a statement from Senate Republican leadership. “As pleased as we are of our monumental achievement, we have always maintained that more work was necessary to bring Colorado taxpayers relief.”
Fields and Davia pledged in a statement not to bring back similar measures in the future in the Legislature passed the agreed-upon compromise — as long as officials don’t go back on the provisions of the agreement in the year ahead. Fields also encouraged local governments to provide additional tax relief to residents, as some have done since the start of this year.