The Democratic majority at the Colorado Capitol will try to deliver the same level of property tax relief for homeowners this year offered under Proposition HH, the ballot measure soundly rejected by voters last week, when lawmakers convene starting Friday for a special legislative session.
Owners of commercial properties, however, would get no additional break for their property taxes due next year under the Democrats’ plan, which was unveiled Thursday.
Just like Proposition HH, the bill would reduce the residential assessment rate for the 2023 tax year only to 6.7% from 6.765% and exempt the first $50,000 in a home’s value from taxation.
The assessment rates and value exemptions for commercial properties would remain unchanged for the 2023 tax year from levels — 26.4% to 27.9%, depending on the type of commercial property — set by state lawmakers in 2022 under a different property tax relief measure that was later deemed insufficient to combat the effect of rising property values on Coloradans’ tax bills. Proposition HH would have offered more of a break to commercial property owners.
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.
The Democratic special session plan calls for $200 million in general fund dollars to fully reimburse schools and fire districts for the revenue they wouldn’t collect because of the property tax relief.
All other local districts, including hospital and EMS districts, would only get state dollars to make up for their losses if their property tax revenue gains are set to rise less than the rate of inflation. That’s less reimbursement than would have been offered under HH and it will mean that a limited number of local districts will get state aid.
The plan doesn’t call for using any Taxpayer’s Bill of Rights surplus or general fund reserve dollars to reimburse school and local districts for their property tax losses, pools of money Polis last week during a news conference announcing the special session suggested the legislature could tap into.
Proposition HH would have cut into TABOR surplus to make those reimbursements possible while also additionally boosting K-12 funding.
The Democrats’ special session plan also differs from Proposition HH in that it would last only one year. Additionally, the proposal wouldn’t offer any new relief to seniors and disabled veterans.
The Democrats’ legislation, sponsored by Senate President Steve Fenberg, D-Boulder, and state Sen. Chris Hansen, D-Denver, will be debated when the special session starts Friday. Speaker Julie McCluskie, D-Dillon, and Speaker Pro Tempore Chris deGruy Kennedy, D-Lakewood, will be the lead sponsors in the House. The measure will be introduced in the Senate.
Lawmakers were summoned to the Capitol for a special session by Gov. Jared Polis following the 18-percentage-point failure of Proposition HH, which was predominantly written by the governor’s office and placed on the ballot by Democrats in the legislature. Democrats plan to come up with a long-term property tax plan next year when the legislature returns for its normal lawmaking term, which begins in January and ends in early May.
Democrats are expected to introduce other bills during the special session that would expand the earned income tax credit — possibly even doubling it — as well as set aside money to help renters and boost funding for a program that provides summer meals for children who come from low-income families.
Democrats also plan to introduce a measure during the special session to make TABOR refund checks the same for every taxpayer to distribute surplus collected in the 2022-23 fiscal year, as would have happened if Proposition HH would have passed. That’s instead of the default refund mechanism in which refund checks are based on six income tiers with lower earners getting less.
The earned income tax credit expansion, however, could cut into the TABOR surplus by hundreds of millions of dollars and reduce the amount of money available for state taxpayer refunds. The credit provides aid — up to thousands of dollars — to lower-income families.
Republicans in the legislature will propose a different property tax relief plan that would offer more of a break for homeowners and businesses, but it would also drain the state’s general fund reserve — a rainy day fund — of hundreds of millions of dollars to reimburse schools and local districts for their lost revenue.
“We have shared our plan with the Democrats and hope they are sincere in bridging the divide and bringing real property tax relief to the people of Colorado,” House Minority Leader Mike Lynch, a Wellington Republican, said in a written statement.
The GOP plan is almost certainly a nonstarter in the General Assembly, which is controlled by Democrats.
Fenberg, speaking to reporters on Thursday at a news conference, said the Republican plan wasn’t a realistic proposal and he called it irresponsible. Hansen called using general fund reserve dollars to reimburse local districts a “terrible idea.”
“We worked very hard on a bipartisan basis to get that reserve to 15%,” he said, pointing out that eating into the reserve could hurt the state’s credit rating and that the reserve should really be about 19%. “We worked hard to build up that reserve for a reason. I am very hesitant to go that direction.”
But Republicans will say that the Democratic plan doesn’t offer enough property tax relief to homeowners since it is identical to what was proposed by Proposition HH. Conservatives will also complain that the Democratic property tax relief plan offers no help for businesses.
Local districts, which hadn’t pored over Democrats’ proposal on Thursday, are likely to fiercely fight the measure. They thought Proposition HH offered too little reimbursement — and the new plan offers even less.
Businesses will almost surely fight the property tax legislation, too, since their property taxes are already four times higher than what homeowners pay.
Fenberg, however, defended the plan, saying it “responsibly provides badly needed tax relief to Coloradans.”
“We are trying to provide the relief that we can given the constraints of how much money we have for backfill,” he said. “If we do much deeper cuts and tax relief, we need to find money for backfill or we just don’t do backfill.”
McCluskie said Democrats’ priority is providing property tax relief to homeowners over offering a break to businesses. She said she hopes commercial property taxes will be addressed in the long term.
The Democratic property tax plan is likely to change as it moves through the legislative process. Progressives are pushing for a larger exemption on homes’ taxable value, which would provide more relief for owners of less expensive homes.
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.
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Lawmakers must act quickly if they want to offer relief to homeowners for the 2023 tax year. Local governments have to set their budget by Dec. 15. The Thanksgiving holiday also is an artificial deadline for the special session, which must last at least three days.
Separately, Democrats have floated a bill seeking $30 million in immediate rental assistance that would have to be spent before July 1. But the final amount will likely be subject to further negotiation.
Proposition HH’s rental assistance funding would have topped out at $20 million annually, with none set aside this budget year.
Another bill set to be introduced during the special session is a virtual lock to pass. Sen. Jeff Bridges, D-Greenwood Village, said there’s widespread bipartisan support for a measure to spend close to $5 million over the next two years to fund the summer electronic benefit transfer program, which provides food assistance for low-income children.
Polis has said the state could qualify for $35 million in additional federal funding if the state contributes a small share.