Ballots will hit mailboxes in a little over a week and put forth several questions to voters, of which the most hotly debated is Proposition HH. Although it has ostensibly been billed as a property tax relief measure, onlookers, proponents and opponents of the measure have cast it in starkly different terms.
Supporters of the measure, including many of the legislature’s Democrats and Gov. Jared Polis, have pitched it as a response to skyrocketing property values.
“Bottom line is people need property tax relief,” Polis said.
If passed, Prop. HH would also funnel a significant amount of money toward for public education thanks to a provision of the law that would enable to state to retain more tax revenue. But its most vocal supports shy away from highlighting this effect.
Republicans call the measure an end-run around Colorado’s Taxpayer Bill of Rights and say it purportedly offers tax relief while in reality, just makes a grab at taxpayers’ cash.
“Prop HH is a bait-and-switch,” said La Plata County Republican Committee Chair Shelli Shaw in an email to The Durango Herald. “Proponents are using the potential for nominal property tax relief to take away Colorado TABOR refunds indefinitely.”
Taxing entities, such as county governments and fire districts, have said the measure could cost them hundreds of thousands of dollars.
The multiplicity of characterizations stems from one of the more common critiques of the sprawling ballot question (it occupies 13 pages in the voter pamphlet): the measure’s wording is confusing and its impacts are complex.
If approved by voters, Proposition HH would impact property taxes and TABOR refunds through 2032.
Supporters of the measure have focused on its impacts on property taxes. If approved, it would temporarily lower the assessment rates of properties and expand reductions in valuation.
Residential properties will be assessed at a rate of 6.765% after a $15,000 reduction in market valuation in 2023. Under current law, most of those properties would be assessed at a 6.976% rate in 2024, and a 7.15% rate in 2025 and beyond.
If Prop. HH passes, the assessment rate for residential properties would drop to 6.7% after a $50,000 reduction in market valuation this year; the reduction in value would shrink to $40,000 in 2024, and the assessment rate would remain steady.
From 2025 through the law’s sunset in 2032, the 6.7% assessment rate would not change. Owner-occupied primary residences and other multifamily residences would continue to enjoy a $40,000 reduction in value, while “other residential” properties would not. Primary residences occupied by senior citizens would benefit from a $140,000 reduction in market valuation.
After 2032, assessment rates would jump back to 7.15%.
Other classes of property, such as lodging, commercial, industrial or agricultural property, would see similar reductions in the assessment rate.
However, the law would also have an additional provision: it would change the formula established by TABOR and Referendum C. The state’s constitution caps the amount of money that it can retain and spend; if passed, Prop. HH would grow that limit by 1% each year.
According to the fiscal note compiled by the Legislative Council Staff, the increased cap would allow the state to increase expenditures by millions so that taxing entities can be reimbursed for revenue lost from the decrease in assessment rates. In 2024, the so-called backfills to local governments would cost an estimated $161 million.
The idea, proponents say, is to provide property tax relief for taxpayers without slashing the revenues of taxing entities.
The bill would also create a new public school fund and, using the extra 1% of revenue retained by the state, transfer $72 million into it the first year. A smaller amount of money, no more than $20 million, would also be transferred into a fund for housing development grants.
The money would first be used, like the backfill fund, to compensate school districts for lost tax revenue. But if the economy performs well, that fund could grow.
According to reporting from Colorado Public Radio, Prop. HH could direct as much as $789 million in retained revenue to the education fund in 2027.
Although some supporters admit that Prop. HH is not the perfect solution, it has more flexibility than Initiative 50, a proposed constitutional amendment that will go before voters next year. The initiative could impose a less flexible cap on property tax revenue growth.
Prop. HH would invariably impact TABOR refunds, opponents warn.
For the 2023-24 fiscal year, the state estimates that the 1% expansion to the TABOR cap would result in the state retaining $167 million. In 2024-25, that number would grow to $359 million.
“The bill is expected to allow the state to retain about $200 million more each year than in the prior year, provided that state revenue meets or exceeds the cap,” the legislative fiscal note reads.
By 2031, the final year the law would be in effect, the Prop. HH cap could exceed the Referendum C cap by $2.2 billion.
What does this mean for your TABOR refund? This year, relatively little.
A single filer with an adjusted gross income of $50,001 to $100,000 would see their refund shrink by about $24.
Next year, their refund would shrink by about $42. In 2025, it would shrink by $89.
But as the compounding revenue from the Prop. HH cap grows, the impact on TABOR refunds is likely to do the same. However, the exact impact is unknown given the unreliability of long-term economic forecasting.
What else would you like to know about Prop. HH? What are you confused about? Email firstname.lastname@example.org with your questions.
Polis says that given the dire need for property tax relief, the small impact to TABOR refunds is a worthwhile trade off.
“Homeowners simply can’t afford another $500 or $600 per year on top of what they’re already paying,” he said.
La Plata County Assessor Carrie Woodson says her office does not yet know exactly how the measure would affect property taxes. The process of certifying valuation for every property in the county takes a significant amount of time, she said.
The median home value in La Plata County is $640,000, meaning its assessed value (after the value reduction) under current law is $42,280. The median mill levy in the county is 46.242, meaning the property taxes owed on that home would be about $1,955.
If Prop. HH passed, the taxes on that same home (assuming it is an owner-occupied primary residence) would drop about $130, to $1,828.
In 2025, assuming the assessed value of that home had not changed, Prop. HH would reduce the property taxes by $257.
Median home value in La Plata County: $640,000
Median mill levy in La Plata County: 46.242
2023 property taxes on median home with median mill levy without Prop. HH: $1,955
2023 property taxes on median home with median mill levy with Prop. HH: $1,828
Reduction of median TABOR refund in 2023: $61
Shaw, chair of the GOP in La Plata County, is among those who say that the decrease in property taxes would not benefit renters, who would still see their TABOR refunds shrink.
“They will carry the burden of increased taxing and spending and the elimination of their TABOR refunds with no property tax relief at all,” Shaw said.
Locally, the biggest unknown is how the measure could impact tax revenues for entities such as La Plata County.
“We’re trying to figure it out,” County Manager Chuck Stevens said.
The county is in the midst of drafting the 2024 budget, and will not scramble to adjust projected revenues if the measure passes on Nov. 7.
Polis is firm in his assertion that most local jurisdictions will be made whole – but those in La Plata County are unsure.
The concept of the bill is that by lowering the assessment rate, the taxing entities are denied revenue; those entities would be compensated for that most, if not all, of that loss by the state using the expanded TABOR cap.
“The fact is, home values have gone up 40% over the last few years, so if a lot of these districts see a 36% increase, that’s still pretty good for them,” Polis said. “Meanwhile, it will save homeowners over $500 per year.”
However, entities with populations under 300,000, such as La Plata County, would not be eligible for backfill if the assessed valuation of property in the district rose by 20% or more.
Fire and similar special districts would receive 50% reimbursement for lost revenue.
Although the complexity of the law has obscured any specific clarity on its local impact, local leaders are concerned. County officials have said it might reduce revenue by $567,000, although they are unsure.
Stevens said the county is “counting on zero back fill.”
The Durango Fire Protection District is estimating Prop. HH would cost the department $373,753.
“We're busier than we've ever been and our costs are much higher than they've ever been,” Chief Hal Doughty said. “So it's a really frustrating thing from a fire chief’s standpoint, trying to run an organization when there's effort after effort after effort to lessen the amount of money that we have to operate with.”
Ballots should begin to arrive in mailboxes the week of Oct. 16 and are due back by 7 p.m. on Nov. 7. Ballots should not be mailed back after Oct. 30 and may be returned in person at locations across the county. More details can by found on the county election’s webpage.