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In this Oct. 22, 2019 file photo, a sign stands outside a home for sale in southeast Denver. (AP Photo/David Zalubowski, File)

A property tax arms race involving some of the state’s most powerful people is unfolding behind the scenes at the Colorado Capitol in the final days of the 2022 lawmaking term, jeopardizing a fragile deal unveiled this week.

The deal, backed by the governor and negotiated over several weeks, would reduce projected property tax increases by $700 million over the next two years in order to head off an even bigger reduction being pushed by business interests. 

But a group of conservatives is unhappy because the agreement, executed through Senate Bill 238, would reduce the tax refunds Coloradans would get next year. They are threatening to move forward with a far-reaching measure on the November ballot that would permanently slash property taxes by more than $1 billion each year. 

The bipartisan proponents of Senate Bill 238, meanwhile, have drafted a competing ballot measure that would change the Colorado constitution and prohibit property tax changes from being made through the statewide ballot. They are threatening to move forward with the initiative, which would require the support of two thirds of the House and Senate. That’s if the conservatives behind the bigger property tax cut effort don’t back off. 

Billions of dollars in funding for schools and local governments hang in the balance. The fight also comes as homeowners and businesses face soaring tax bills as property values shoot up across the state.

Those involved in the negotiations have likened the situation to a high-stakes game of chicken.

Senate Bill 238 was the result of weeks of behind-the-scenes negotiations between Democratic Gov. Jared Polis, Democratic leadership in the legislature and Colorado Concern, a nonprofit representing the state’s business executives. 

Colorado Concern drafted a host of ballot measures that sought to cap property valuations for taxation purposes at around 3%. The measures were expected to reduce property tax revenue for local governments and schools by $1.3 billion in their first year. 

Colorado Concern agreed to stop pursuing its initiatives in exchange for a bill cutting property taxes by $700 million total in the 2023 and 2024 tax years, with the state kicking in roughly $400 million to backfill the revenue loss for schools and local governments, which are primarily funded by property tax revenue. 

Opponents of the plan, however, have taken issue with how Colorado would come up with some of that $400 million. Roughly half that sum is already set to be refunded to taxpayers next year under the Taxpayer’s Bill of Rights, which caps how much revenue the state can collect.

Michael Fields, a conservative fiscal activist with a deep funding network, is among the opponents. He said the use of TABOR refund money to backfill the reduced revenue was a surprise to those working on the deal.

“A lot of people are pretty mad that the deal got changed at the last minute to (include) $200 million coming from TABOR refunds,” he said. 

(The figure coming from TABOR refunds has since risen to $225 million because of an amendment to the bill that was adopted in the Senate.)

Colorado state representatives stand for a morning prayer as the 2022 legislative session opened Wednesday, Jan. 12, 2022, in the state Capitol in Denver. (AP Photo/David Zalubowski)

Fields said he is weighing whether to move forward with a 2022 ballot initiative slashing property taxes by a much greater amount, potentially through a change to the state constitution. 

“We are waiting to see what the final deal looks like before deciding to move forward or not,” he said. 

State Rep. Colin Larson, a Ken Caryl Republican who worked with Colorado Concern on the negotiations, said he “negotiated in good faith and reached a good deal” and that the tension playing out now “is about honoring your word.”

He, too, is threatening to move forward with a ballot measure cutting property taxes by a much larger amount unless the TABOR refund provision is removed. He said if the provision isn’t struck, “we have no other choice.”

“If they want to come and talk, they know exactly what will get us to lay down our arms,” he said. 

State Rep. Colin Larson. (Handout)

On the other side, state Sens. Chris Hansen, D-Denver, and Bob Rankin, R-Carbondale, the prime sponsors of Senate Bill 238, have drafted a ballot initiative that would change the state constitution and prohibit property tax changes from being made through statewide ballot measures. The initiative would come in the form of legislation that would have to be supported by two thirds of the legislature to make the November ballot. 

Hansen suggested the measure could be introduced within the next few days if Fields and Larson don’t withdraw their measures seeking a permanent tax cut. 

“We are looking at several ideas and options if the titles do not get pulled,” Hansen said. “We are committed to delivering sustainable property tax relief but making sure that we can still fund the schools and the services. And the (tax cut) ballot initiatives would undercut our ability to do both.”

State Sen. Chris Hansen, D-Denver, right, speaks with Senate Majority Leader Dominick Moreno, D-Commerce City, on Thursday, May 5, 2022. (Jesse Paul, The Colorado Sun)

Rankin said discussions about trying to pass a constitutional amendment preventing statewide property tax changes have been in the works for weeks.

“I feel very strongly that the state should not be in the business of changing property taxes,” he said. “It’s a local issue — should be managed locally.”

Hansen hinted that the proposed constitutional amendment isn’t the only card he is holding. He said the legislature could also be called into a special session over the summer to address the situation.

Larson, meanwhile, said he’s confident that Hansen and Rankin lack enough votes in the legislature to put a measure seeking to change the Colorado constitution on the November ballot. But a draft of the proposed amendment, which has been viewed by The Colorado Sun, has been circulating among the 100 legislators as its proponents try to secure support.

Colorado Concern declined to comment, but has endorsed the agreement reached through Senate Bill 238. 

Under one scenario, which appears highly unlikely, both the measure dramatically reducing forecast property tax revenue and the one prohibiting property tax changes on the statewide ballot could go before voters in November. 

If both pass and the constitution is amended, the state could be locked in to the more extreme reduction with no easy, clear way to reverse it. 

Colorado Sun staff writer Shannon Najmabadi contributed to this report.

Jesse Paul is a Denver-based political reporter and editor at The Colorado Sun, covering the state legislature, Congress and local politics. He is the author of The Unaffiliated newsletter and also occasionally fills in on breaking news coverage....