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Property taxes

Expect debate about merits, demerits of Senate Bill 233

Is limiting the taxes devoted to school and special district funding so straightforward as to be a yes or no to a 4% maximum statewide increase, a question that will be on the ballot in November?

We think not. How taxation is applied is more complex than that.

What passed both houses of the Colorado Legislature last week by an aggregate of 92-8 to be referred to the voters – and extraordinary example of bipartisanship agreement – is a measure that recognizes the differences between the importance of funding PreK-12 education and special districts, and the need to give commercial properties a break.

It also includes a cap, which appeals to many, of a maximum increase of 5.5% beginning in taxable year 2025. School funding, however, can exceed that percentage.

This all comes, of course, because of Colorado’s popularity as a state in which to live and work, partially accelerated by COVID-19. Along the Front Range’s I-25 corridor tech firms are paying well, while the mountains have attracted those who can work at home or are retired. Property values jumped, if not soared, by as much as 40% in the two years ending June 30, 2023, requiring attention to the percentages of value that are multiplied by differing mill levies. Attractive as it would be, dampening the size of tax bills does not lie with a single number applied at some level, as some want.

Four significant points in Senate Bill 233 if it receives voter support: Property taxes will increase next year, but not by as much as they would have. More than $900 million less, according to those who are advocating for passage.

School funding is favored.

Taxpayer’s Bill of Rights – TABOR – refunds certain to occur from the state’s strong economy in the next few years will not be touched. That refunds would have been reduced to fund a portion of Proposition HH that failed last November made HH a non-starter for voters.

One component will be in place in perpetuity: Property taxes, except for those that fund schools, will not be able to increase by more than 5.5%.

And, there will be some money, $10 million, available to backfill special district shortfalls in certain cases.

Specifically, for 2025 the residential rate applied to values will drop to 6.4%. For schools, however, the rate will be 7.15%, the first time there will be two different rates.

After 2025, commercial property will be taxed at 25% of its value. For 2025, it will be 27.9% with the first $30,000 excused. Much is made of the elimination of the Gallagher Amendment, which protected residential tax bills by increasing taxes on commercial real estate, but that shift had become too extreme. Commercial property owners deserve consideration in what they pay.

Expect plenty of debate between now and November as to the merits and demerits of SB 233, particularly in contrast to the question, already approved for the ballot following signature gathering, that would set a 4% cap statewide on property tax increases.

Those who own property that’s increased in value are pleased; now to bring taxes more into line.