Studies show Colorado property taxes are “extremely low.” So why do they feel so high?

Over the past year, property taxes have dominated Colorado’s state politics like rarely before.

Public outcry over a 40% jump in homes’ taxable values spawned a multi-million dollar ballot fight, a special legislative session and a bipartisan commission to study tax relief for homeowners. And there’s more to come, with a number of property tax measures vying for voter approval on the November 2024 ballot. 

There’s just one detail that’s difficult to square with the political panic: Study after study from researchers across the political spectrum shows that Colorado’s property taxes aren’t all that high. In reality, they’re close to the lowest in the entire country.

They’re “extremely low,” says Sen. Chris Hansen, D-Denver, who chairs the study committee. “I think you get the rapid rate of change and it makes it look like it’s — in quotes — ‘out of control.’ ”

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Consider the $2,900 tax bill on the median-value Denver home.

In Los Angeles, a homeowner would owe around $6,400 a year on the same $550,000 house, or $10,900 on the median L.A. home worth $940,000, according to a Colorado Sun analysis.

A New York City resident would expect to pay $6,700 on a $550,000 home — or twice that on the median New York home worth north of $1 million.

It’s not just high-cost coastal states, either. In Dallas, the median homeowner pays a little over $4,000 a year in taxes on a home worth $300,000. In Salt Lake City, homeowners can expect to pay $300 more per year than their counterparts in the Mile High City on a similarly priced home.

So why do property taxes feel so high to so many Coloradans?

For starters, home values have increased rapidly in recent years. Residential assessed values in the state have risen nearly 150% since 2010, according to Colorado Legislative Council staff data. They’ve grown 55% faster than inflation in the period.

Colorado’s assessment cycle only exacerbates the sticker shock. Unlike the cost of goods, which tend to go up gradually over time, two years’ worth of home price increases hit taxpayers all at once when county governments reassess property values every other year.

“What our citizens are feeling right now is the dramatic increase,” said Rep. Lisa Frizell, R-Castle Rock, who serves on the commission. “It’s cumulative. Since the pandemic people just saw their cost of living increase and increase and increase. Buying bread or eggs, or milk. This is just kind of another punch in the face.

“The question is at what point is the breaking point for families in this state?” said Frizell, a former Douglas County assessor.

There’s another factor less discussed by policymakers. Property taxes in Colorado are wildly unequal — so much so that homeowners in some neighborhoods are stuck with bills rivaling some of the highest tax states in the country.

For most, taxes remain low. But that doesn’t tell the whole story.

The disconnect between the typical low tax bill in Colorado and what some homeowners face has put policymakers in a bind as they try to come up with promised reforms to the state’s property tax system.

State lawmakers are responsible for setting the residential assessment rate and exemptions, which determine how much of a home’s value gets taxed. But everything else happens at the local level: counties assess how much homes are worth and local governments set the actual tax rates, known as mill levies.

Colorado now has over 4,700 local governments and special service districts, that overlap in thousands of possible combinations to produce someone’s actual tax bill.

The corner of East Wesley Drive and South Ceylon Way in Aurora provides a potent illustration of the problem.

The homes there, valued at around $600,000 each, look almost identical. The children who live there attend the same schools. They receive the same city services, draw their water from the same utility and check out books from the same library.

But families who live on one side of the intersection pay thousands of dollars more in property taxes each year than those who live on the other.

Three vastly different tax bills in the same neighborhood

Your tax bill may not look the same as your neighbors’. Colorado has more than 4,000 local government entities that all charge different rates. Taxes can vary greatly in metropolitan districts in particular.

Editor’s note: Tax rates are often expressed as a mill levy. A mill is a $1 payment on every $1,000 of assessed value.

Home value: $621,300
Tax rate: 161.9 mills
Tax bill: $6,142.73

Taxing Authority	Levy
Aurora School Dist. #28J	71.331
Arapahoe County	11.206
Developmental Disability	1.000
City of Aurora	8.407
Iliff Commons Metro Dist. #2	68.954
Urban Drainage & Flood	0.900
Urban Drainage & Flood (S Platte)	0.100

Home value: $612,600
Tax rate: 92.9 mills
Tax bill: $3,472.29

Taxing Authority	Levy
Aurora School Dist. #28J	71.331
Arapahoe County	11.206
Developmental Disability	1.000
City of Aurora	8.407
Urban Drainage & Flood	0.900
Urban Drainage & Flood (S Platte)	0.100

 

Home value: $607,200
Tax rate: 138.0 mills
Tax bill: $5,104.02

Taxing Authority	Levy
Aurora School Dist. #28J	71.331
Arapahoe County	11.206
Developmental Disability	1.000
City of Aurora	8.407
Sterling Hills West Metro Dist.	45.014
Urban Drainage & Flood	0.900
Urban Drainage & Flood (S Platte)	0.100

Photos: Olivia Sun, The Colorado Sun via Report for America
Source: Arapahoe County Assessor’s Office

The culprit is two of Colorado’s 2,000-plus metropolitan districts, special taxing authorities set up to fund infrastructure.

Over 70 of them charge higher tax rates than the average Colorado county, city and school district combined, a Colorado Sun analysis of Department of Local Affairs data found. That leaves their residents paying twice as much or more in taxes than the typical Coloradan.

And that’s not the only way the national statistics on Colorado’s low tax rates can be misleading.

Colorado homeowners pay the third lowest tax rate in the country. But because home values are so high here, that results in a tax bill that’s just below average, ranking 29th nationally, according to the Lincoln Institute of Land Policy. As a share of personal income, Coloradans pay the 15th most in property taxes — a number that’s gone up dramatically since 2009, when the state ranked 26th.

Temporary tax cuts passed by the legislature and a number of local governments have blunted the latest increase for many homeowners. But that’s small comfort to those who live in communities where housing costs have gone up the most.

Mike Meehan, a retiree in Avon, told The Sun his property tax bill still went up 24.8% after the cuts.

“On the other hand, my Social Security payment went up 3% — a mismatch of 21.8 (percentage points), and I am not happy,” Meehan wrote in an email. “Ultimately, my choices are to dip into savings to fund the difference or sell my house.

“Neither choice is palatable.”

Cooling home prices give policymakers pause

The big jump has given way to a cooler housing market, with home prices receding from their summer 2022 peak. And state economists expect housing costs to grow more slowly in coming years. But people’s tax bills this year reflect what homes were worth at their height.

“There’s always a danger of what generals would say is fighting the last war,” Hansen told The Sun. “We need to make sure we don’t do that.”

Colorado’s property tax commission on Friday referred a handful of tax relief recommendations to the full legislature for consideration, but they stop well short of the large, across-the-board tax cuts that conservatives and business groups outside the Capitol have called for.

Further complicating matters, lawmakers in both parties and Gov. Jared Polis have been quick to take credit for the positives that have resulted from rising property taxes. Next school year, the state expects to eliminate its K-12 school funding shortfall for the first time since the Great Recession.

That’ll be top of mind for the legislature’s Democratic majority as they weigh how much relief to provide going forward.

“There’s a lot of talk about us paying off the (funding deficit) for education this year,” said Rep. Chris deGruy Kennedy, D-Lakewood, another tax commission member. “It’s almost entirely because of local district revenue.”

Graphics by Danika Worthington, The Colorado Sun