A wonky battle playing out over the language in a potential 2022 ballot measure could have multibillion-dollar consequences for property owners and school- and local-district funding across Colorado.
The state’s Title Board, which is housed in the Colorado Secretary of State’s Office and decides how ballot measures are worded, has ruled that a business-backed 2022 initiative that would cap property valuation growth at 3% annually should include a warning to voters about how it could siphon $1.3 billion in forecast tax revenue from schools and local districts in its first year.
The idea behind the initiative is to help homeowners and businesses contend with rising tax bills as property values across the state soar. But property tax revenue is the primary vehicle for funding Colorado schools, and critics warned it could have major effects across government coffers.
The ruling stems from the Colorado legislature’s passage last year of House Bill 1321, a measure brought by Democrats requiring ballot measures that are cutting taxes to include an explanation of how much revenue would be slashed and what programs would be most affected. The new law also now requires measures raising taxes to explain how the new revenue would be spent.
The idea was to battle the provision in the Taxpayer’s Bill of Rights that requires voters be informed of how much money a tax hike would cost. Democrats have blamed that provision for two decades of failed ballot initiatives.
But there is disagreement about whether the new law should apply to the ballot measure capping property valuation increases at 3% since the initiative isn’t exactly slashing revenue — just limiting it.
The initiative still has a long way to go before it lands on the 2022 ballot. Supporters must collect 124,632 signatures from registered voters to get the question before voters in November, a tall — and expensive — task. Additionally, since the initiative may seek to change the state constitution, the signatures would have to include at least 2% of the total registered voters in each of Colorado’s 35 state senate districts. To pass, it would need the support of at least 55% of voters in November.
But already the measure’s backers are threatening legal action if the language stays as it is.
“Our ballot measure would never cut a single school district, never cut a single fire district, never cut a single district of any kind in any year,” said Mike Kopp, a former state senator who leads Colorado Concern, a business organization leading the push for the 2022 ballot measure. “Indeed, these districts will grow by hundreds of millions of dollars each year under our measure. The difference between slowing revenue growth and a funding cut is the difference between night and day.”
(The $1.3 billion figure was calculated by nonpartisan legislative analysts, who do fiscal reviews of ballot measures.)
Kopp said Colorado Concern may file a lawsuit unless the Title Board reconsiders its ruling on the ballot language text.
“We believe the courts will take our view,” he said.
There’s another complicating factor swirling around the debate. When Gov. Jared Polis reluctantly signed House Bill 1321 into law last year, he said in a letter that he was doing so, at least in part, because he felt ballot measures like the one backed by Colorado Concern wouldn’t be affected.
“The bill only applies to measures that increase or reduce state or local tax revenue by a determinable amount,” Polis wrote in the letter accompanying his signature. “Therefore, this legislation does not apply to measures that seek to slow the rate of increase of revenue because such measures do not necessarily result in a determinable increase or decrease in state or local revenue or funding for a particular program.”
Polis hasn’t taken a public position on the initiative. He demurred when asked about the measure last week by The Colorado Sun. “There’s a lot of ballot initiatives that are out there,” Polis said.
But since education is a focus for the governor and the initiative would limit funding to public schools, Polis will likely take a neutral or opposing position.
Two of the prime legislative sponsors of House Bill 1321 — Rep. Chris Kennedy and Sen. Brittany Pettersen, both Lakewood Democrats — say they very much intended to have their measure apply to ballot measures seeking to slow the rate of increase in tax revenue.
“This scenario is exactly why we wrote this bill,” Pettersen said. “It is a measurable reduction in taxes that impacts funding to services so many of us count on. And, as we all know, signing statements are not binding.”
Scott Wasserman, who leads the liberal-leaning Bell Policy Center, said he’s talked to lawyers who agree with the Title Board’s interpretation.
“I think there’s a pretty clear feeling that the governor’s signing statement doesn’t really mean anything,” Wasserman said. “I appreciate Mike Kopp’s creativity here, but it’s precisely this kind of measure that 1321 was designed to inform voters about.”
Wasserman vehemently opposes the valuation-limiting initiative, saying it would create an open-ended funding challenge for schools, likely forcing the legislature to dedicate more of its limited budget to education.
“I think the best way to describe this is that this essentially disconnects local community governments from the housing markets that they count on,” he said. “It creates a situation where home values are going up and up, but the local government can’t tap into that value. I think there are lots of ways to reduce property tax burden in response to growth, but this (may create) a permanent cap.”
The legislature last year, for instance, temporarily lowered the state’s property assessment rate, which is how property values are calculated for taxation, as a relief valve for property owners.
But supporters of the initiative — including Reps. Alex Valdez, a Denver Democrat, and Colin Larson, a Ken Caryl Republican — say the valuation-limiting initiative is a pragmatic approach.
“The No. 1 thing that I hear back from my constituents is housing affordability,” Valdez said. “What this initiative seeks to do is just limit the growth. It’s not a tax cut. It. Is. Not. A. Tax. Cut.”
Larson said the idea is simply to address what he called a “crisis.”
“It’s not for nothing that (the initiative) will decrease the revenues that the schools would have in the future,” he said. “Like 10 years down the road, yeah, if we did nothing theoretically the schools would have a lot of money. However I think if we do nothing and we allow (the rising tax bills to persist), the rising cost of living, the devastation that would be wrought on commercial properties and the tenancy of people in retail spaces, I think you’ll see a significant decrease in those tenants and people that are actually able to pay (for) those properties.”
A few other states have adopted measures limiting property tax increases, including California and Florida. But those states don’t have TABOR, which requires voter approval for tax hikes, meaning they can more easily find tax revenue in other places if needed.
If the valuation-capping initiative makes the ballot and is passed by voters in November it would take effect in 2023.
Colorado Sun staff writer Shannon Najmabadi contributed to this report.