For fire districts like Los Pinos Fire Protection District, the Colorado Legislature’s decision to place a property tax constitutional amendment on the November ballot could have big financial implications.
In late 2019, Los Pinos officials said the 325-square-mile district would run out of savings in two to four years. That is partially because property tax revenue, which makes up a substantial portion of the district’s income, had been falling for a decade.
“How much more can I cut?” said Tony Harwig, Los Pinos fire chief.
In 2010, Los Pinos had a $4 million-dollar budget. It operated five fire stations in the district, which covers parts of southeast La Plata County, the Southern Ute reservation, Archuleta County and northern New Mexico.
In 2019, its budget had fallen to about $1.5 million. It has one station, with one or two ambulances and one fire engine operating on each shift to cover the district.
“Once we run out of savings, I’ve got to cut something, and it’s going to be that ambulance. What does that do to the citizens of southeast La Plata County?” Harwig said. “It’s not the right thing to do.”
Fire districts across Colorado have faced similar revenue decreases because of a complicated web of state laws, particularly the Gallagher Amendment and the Taxpayer’s Bill of Rights.
In June, state lawmakers passed a landmark ballot measure with bipartisan support that asks voters to repeal the Gallagher Amendment, a constitutional provision that limits property tax collection.
Colorado has debated Gallagher for years. It has provided an estimated $35 billion in tax relief to Colorado homeowners since 1983, according to The Colorado Sun. But for rural areas, schools, fire districts and other locally funded special districts, Gallagher has cut local budgets.
“It’s the rural communities overall that have been hurt by the Gallagher Amendment,” said Carrie Woodson, La Plata County assessor.
The lawmakers took action this year in response to the growing economic crisis caused by the coronavirus pandemic and a projected 18% residential property tax cut triggered by Gallagher.
Los Pinos stands to lose up to $20,000 from an already tight budget depending on the outcome in November, Harwig said. Durango Fire Protection District, which is in a stable financial position, estimated it could lose $100,000, said Hal Doughty, Durango fire chief.
“This is just another chip-away, which could mean less and less services available,” Harwig said.
Los Pinos gathers most of its income from local property taxes, primarily from the oil and gas industry. The Gallagher Amendment and TABOR, however, make it difficult for the district to adapt to a changing economy.
“Los Pinos is a good example of how the Gallagher Amendment has hurt localities,” Woodson said.
When Colorado passed the Gallagher Amendment in the early 1980s, residential property values were increasing at a rapid rate.
“The concern was that people who have owned homes in Colorado for many years were going to be priced out of their homes by taxes. To help that, they came up with the Gallagher Amendment,” Woodson said.
Gallagher ensures that nonresidential properties, like oil and gas, agricultural or other commercial properties, contribute 55% of Colorado’s overall property tax base. Residential properties contribute 45%.
When oil and gas property revenue began to decline for Los Pinos, residential property tax revenue wasn’t making up the difference. The residential property tax assessment rate steadily decreased from 21% in the 1980s to 7.15% in 2020 to maintain Gallagher’s 55% and 45% split.
Some preliminary estimates suggest that percentage could fall to 5.88% in 2021, which would cause Los Pinos’ projected $20,000 property tax revenue decrease.
Woodson said the estimated decrease is “highly speculative,” and local governments will not have a more definitive residential assessment rate until December – a month after residents vote on the Gallagher Amendment.
“I think people need to decide, does the Gallagher Amendment make sense for Colorado anymore? And not necessarily based on what’s going to happen for the year 2021,” Woodson said.
The district could raise its mill levy, a property tax rate, to increase its income. But TABOR requires a public vote for any tax increase, an unpopular idea for many Colorado residents.
The Los Pinos Board of Directors decided to ask voters to increase the mill levy from 3.52 mills, the lowest rate in the county, to 9.5 mills. Residents were going to vote on a ballot measure in May, but the coronavirus pandemic hit Colorado. The district decided to postpone the effort.
The district is still considering asking for a mill levy increase during the November election, or “de-Gallagherizing,” freezing property assessment rates to avoid future decreases, Harwig said.
“We have to do something,” he said. “It’s do or die this election, or we’re going to be cutting back some more and that’s going to be detrimental to the area.”