Colorado legislators on Thursday finished the task of sending a “small but very meaningful” expansion of a previously approved tax break to Gov. Jared Polis, adjourning a special session whose result will avert a high-dollar ballot battle on the subject.
Members of the Colorado Senate approved House Bill 1001 by an overwhelming 30-4 vote, one day after the House backed it by a 45-18 margin only after several Democrats criticized the four-day session as a “fecal sandwich” forced upon them by “oligarchs.” Polis lauded the effort as “an important step for Colorado to end the property tax wars” and said he will sign the bill as soon as proponents of two further-reaching property-tax-cut initiatives officially pull their measures off the November ballot.
It was that deal — passage of $248 million more in tax cuts in exchange for the removal of Initiatives 50 and 108 from the ballot by Advance Colorado and Colorado Concern — that both drove the special session and unnerved more than a few legislators. Some elected officials felt leaders of the conservative and business groups were weaponizing their initiatives, which would have cut taxes by $2.4 billion and established a 4% annual cap on statewide property-tax revenue growth, to extract more gains.
What the new tax break does
HB 1001 built on passage at the end of the regular legislative session of Senate Bill 233 — a $1.3 billion break that lowered assessment rates for residential and commercial properties and set a 5.5% annual growth cap for property-tax revenues going to local governments.
The new bill lowers residential assessment rates further — from 7.15% to 6.25% for property taxes going to local governments and 7.05% for those going to schools — and expands the new 25% assessment rate for nonresidential properties to include vacant land and state-assessed utilities. It also establishes annual property-tax revenue growth caps of 5.25% for local governments and 6% for schools, though it exempts new construction and revenues reserved for bond repayment and offers flexibility for local governments and schools to grow more after economically slow years.
Sen. Chris Hansen, D-Denver, called Thursday’s vote the culmination of years of work that began with the repeal of the Gallagher Amendment, an antiquated property-tax formula that shouldered nonresidential properties with assessment rates four times those of homes and dried up school- and special-district funding in residential-heavy communities. The deal that included passage of HB 1001 put education on a sustainable path, he said.
Sen. Barbara Kirkmeyer, the Brighton Republican who cosponsored HB 1001 with Hansen, said the new bill is a “small but very meaningful extension of 233” that represents not a capitulation to special interests but an attempt to do more for property owners. The combined provisions of the two measures will help overburdened homeowners, small businesses and senior citizens and will protect local governments from even larger cuts, she said.
Sen. Barbara Kirkmeyer explains her property-tax-break bill to the Senate one last time on Thursday.
“Huge win” mollifies proponents of ballot initiatives
And proponents of the ballot measures confirmed that they will commence the process to remove Initiatives 50 and 108 from the November ballot, calling the additional breaks in the new bill mark a “huge win” for Colorado residents. They began developing the ballot initiatives following 40% average home valuation hikes in 2022 that led to 30% average increase in property-tax bills last year, and they feel the state now has created long-term relief, they said in a statement.
“For two years, we have said the solution taxpayers need is to cut taxes significantly and then put a cap in place so Colorado can avoid this crisis in the future,” said Advance Colorado President Michael Fields, who also agreed not to bring other property-tax initiatives for the next six years. “This bill gets that job done.”
While Senate debate did not include the same dramatic rhetoric that the House debate featured, the trio of Democrats opposing the bill — Sens. Lisa Cutter of Morrison, Nick Hinrichsen of Pueblo and Sonya Jaquez Lewis of Longmont — still criticized the process.
Hinrichsen called the deal an affront to local control and said on Wednesday night that it was “tantamount to giving a second veto to outside organizations that don’t have any legal obligation to act with transparency to the people of Colorado. Jaquez Lewis on Thursday criticized legislators for allowing tax breaks in SB 233 and HB 1001 — including deductions of 10% of a home’s value, up to $70,000 — to go to owners of second or third homes; a bill to bar that practice died in a House committee Monday.
Colorado state Sen. Nick Hinrichsen speaks against House Bill 1001 in the Senate on Wednesday.
Opposition from both sides to tax bill
“The biggest cuts are going to those who have the biggest houses,” Jaquez Lewis said. And that’s why I feel we could have done more.”
Meanwhile, the lone Senate Republican to oppose HB 1001, Mark Baisley of Woodland Park, said the bill the bill doesn’t address the underlying issue that caused the property-tax-bill spikes. Baisley has pushed for local governments to build budgets around their needs and then assess property taxes — a change he feels would avoid hikes in tax bills during times of increased property valuation — but hasn’t gained any traction with his idea.
The tax savings for nonresidential property owners and for homeowners will vary depending on how much their land and buildings are worth and what their local mill levy is. Bill sponsors have pegged average homeowner savings over the course of a two-year assessment cycle will be $500 from SB 233 and another $80 from HB 1001.
The average savings for commercial, agricultural and industrial property owners will vary more widely, but the assessment rates for those properties will fall from 29% to 25% over a multi-year period. And Polis noted that the savings that state-assessed utilities such as Xcel and Black Hills Energy will receive must be passed along to customers, resulting in savings of about $100 over the next five years combined for average residents.