Property taxes owed next year in the Denver area may increase by as much as 50% because of skyrocketing home values, county assessors warned Wednesday, as the Colorado legislature races to ease the financial burden before the 2023 lawmaking term ends May 8.
In Denver, the median increase in assessed home values, which are used to calculate property taxes, was 33%, Denver Assessor Keith Erffmeyer said. The median increase in Jefferson County was 36.5%. In Douglas County, County Treasurer Dave Gill wrote to homeowners that they should expect a 40% to 50% increase in their 2024 and 2025 property tax bills.
“It is prudent to be prepared,” Gill wrote.
Colorado’s property taxes, which fund schools and other local government services and programs, are among the nation’s lowest. But the real estate frenzy during the COVID-19 pandemic that dramatically increased home prices, paired with voters’ decision in 2020 to repeal the Gallagher Amendment, which prevented property taxes from rising too fast, set up a perfect storm for a property tax spike in 2024.
That poses a big financial problem for Coloradans on a fixed income and who bought their homes years ago when property taxes were much lower. It’s also an issue for people who have been pinched by rising inflation and weren’t prepared to pay thousands more.
Property values are assessed by county assessors every two years. But they are based on the value on June 30 in the preceding year. That means the 2023 assessed values, used to calculate taxes owed in 2024 and 2025, are based on how much properties were worth June 30, 2022, which is before home prices started falling as interest rates rose.
“Whatever’s happened since then is not anything we can consider for this particular revalue,” Erffmeyer said. “We’ll catch that the next time.”
Property taxes in Colorado are calculated by multiplying the statewide assessment rate by the value of a home as determined by a county assessor. That number is then multiplied by the local mill levy rate. (A mill is a $1 payment on every $1,000 of assessed value.)
If the value of a home, as determined by a county assessor, goes up, so does the owner’s tax bill.
In all nine Denver-area counties — Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Elbert, Jefferson and Larimer counties — residential property values increased between 35% and 45%.
“I’ve doing this work since the late 1990s, and that was the last time we had growth like this,” said Douglas County Assessor Toby Damisch. “But this is even greater.”
Damisch and Erffmeyer said if someone were to poll all 64 county assessors in Colorado, all of them would likely say the recent increase in home values is unlike anything they’ve ever seen.
In some parts of the state, namely in the high country, the median increase in residential home values was as high as 60%. Rural northeast Colorado saw the smallest median increase, at between 25% and 35%.
“Don’t be mad at the people at this table,” Colorado Property Tax Administrator JoAnn Groff told reporters at a news conference Wednesday with Denver-area assessors.
Groff cautioned Colorado residents not to take mailed notices of their estimated property tax bills at face value since the legislature is expected to slash residential assessment rates before the lawmaking term ends.
The legislature last year passed a measure reducing the residential assessment rate, which is supposed to be 7.15%, through the 2024 tax year for taxes owed in 2025.
- For single-family homes, the assessment rate for the 2023 tax year (for tax bills due in 2024) is currently 6.765%, with the first $15,000 of value before the assessment rate is applied exempt from taxation
- For the 2024 tax year (for tax bills due in 2025), the assessment rate for single-family homes is currently expected to be approximately 6.95%
But home values have shot up even more than lawmakers and Gov. Jared Polis anticipated, which led to calls before this year’s legislative session began in January to decrease the tax burden even more.
How are property taxes calculated?
Property taxes are determined by how much your county assessor values your property, what the state’s property assessment rate is and what your local mill-levy rate is.
A mill is a $1 payment on every $1,000 of assessed value.
With two weeks left in the lawmaking term, however, no proposal has been unveiled. Senate President Steve Fenberg, D-Boulder, said a bill will be introduced in the coming days.
“There have been various discussions with the business community, with advocates, with nonprofit organizations that work in this space,” he said. “We’re still putting some finishing touches on what the proposal is going to be. We obviously don’t have that much time left.”
Fenberg said lawmakers were waiting, in part, for county assessors to announce how much home values have increased since the last revaluation was in the spring of 2021.
“There are a few paths that we could take that we’re considering,” Fenberg said without offering specifics. “We could do a couple years (of relief) at a time. We could do one year. We could do something that’s more long term.”
Polis promised a long-term replacement this year for the Gallagher Amendment to stop the annual cycle of lawmakers slapping a Band-Aid on the problem of rising property tax bills. (If the fix passed this year is temporary, it will mark the third time in as many years that lawmakers have temporarily reduced property taxes.)
Gallagher prevented residential property tax bills from quickly rising by shifting the tax burden to commercial property owners through assessment rates, which help determine how much property owners pay in taxes. But Gallagher collided with another constitutional amendment, the Taxpayer’s Bill of Rights, in a way that hamstrung the government entities that rely on property tax revenue.
Fenberg said it’s not for lack of trying that the legislature hasn’t proposed a fix.
“It’s a complicated area,” he said. “There are a lot of stakeholders involved. It’s not about if we want to do something or if people think there’s a problem that needs to be fixed. It’s ‘what is the solution in a way that is actually going to pass.’”
In the vacuum left by the General Assembly’s inaction, however, conservative and liberal political nonprofits have begun pursuing ballot measures to make property tax changes.
Advance Colorado, the conservative fiscal nonprofit, entered the property tax conversation first this year with Initiative 21, which would be on the November statewide ballot. It would amend the state constitution to cap property tax increases at 3% per property and set aside up to $100 million in state TABOR surplus each year for fire districts.
TABOR caps government growth and spending each year based on population increases and the rate of inflation. Any money collected above the cap must be refunded to taxpayers unless voters say otherwise.
The Bell Policy Center, the liberal-leaning fiscal nonprofit, responded by filing eight proposed 2023 ballot measures for review by the state’s Title Board. The measures, submitted in partnership with the Colorado Education Association, the state’s largest teacher union, would reduce or cap property tax increases and/or use TABOR surplus to replace the revenue lost by school, fire district and local water project budgets.
What is TABOR?
The Taxpayer’s Bill of Rights, or TABOR, is a 1992 constitutional amendment that requires voter approval for all tax increases in Colorado. It also caps government growth and spending, mandating that tax revenue collected in excess of the cap be refunded to taxpayers. The cap is calculated using inflation and population rates.
Read more here.
Supporters of ballot initiatives must collect 125,000 voter signatures to get an initiative on the statewide ballot.
It’s even harder to get a constitutional amendment on the statewide ballot. That comes with the additional requirement that the voter signatures gathered include at least 2% of the registered voters in each of Colorado’s 35 state Senate districts.
Sen. Chris Hansen, a Denver Democrat who is playing a lead role in the property tax debate, said it’s important for Coloradans to keep in mind that rising property tax bills are in large part due to inflation. He said property taxes have to rise so that school and local government budgets can keep up with the inflationary pressures they face, too.
“Yes, property values have gone up,” he said. “But it’s not as severe as it might look, at first look, because that inflationary pressure sits underneath those price increases.”
Gallagher has been gone since 2020, so state and local officials, as well as interest groups, have known for years that a reckoning was coming in 2024.
The question now is whether there will be a lasting fix or whether leaders keep kicking the can down the road.
Property owners can appeal value assessments between May 1 and June 8. Some county assessors’ websites have already been updated with new values, but they should all be updated by May 1.
Colorado has deferral programs for people who can’t afford major increases in their property taxes.
The next revaluation won’t happen until the spring of 2025, meaning that Colorado taxpayer’s shouldn’t expect a big reduction in their property tax bills anytime soon — even if there is an economic downturn and housing prices drop.