Colorado legislators appear headed for another debate about lowering property taxes after an influential commission largely backed a compromise plan Monday to cut taxes further if backers of two wide-ranging initiatives removed the measures from the November ballot.
It’s not an absolute certainty that Gov. Jared Polis would call a special session to consider the framework deal agreed to by initiative proponents Colorado Concern and Advance Colorado with legislators and other officials who have been involved in negotiations. But with Polis having signaled a willingness to consider the idea and with the governor-backed Commission on Property Tax getting some level of support from most of its members to the general details in the plan, pressure is building to avoid a pricey ballot battle.
Initiative proponents too may be looking for a way to avoid unknown results at the ballot, particularly after business leaders such as homebuilders and developers — who normally would back property-tax cuts — warned in recent weeks that Initiatives 50 and 108 could stifle the bond market and slow new residential construction significantly. While Advance Colorado President Michael Fields did not speak at Monday’s commission meeting, Sen. Barbara Kirkmeyer, the Brighton Republican involved in negotiations, said repeatedly that he’s committed to pull the initiatives down if the deal passes.
And while Polis did not attend the meeting, the director of his Office of State Planning and Budgeting, Mark Ferrandino, did. And Ferrandino, who has warned that the billions of dollars the state would lose because of the initiatives might lead to draconian cuts like closings of some college campuses, suggested that Fields has made legislators an offer that they can’t refuse.
How the new plan differs from others
“This seems to be a good path forward, both hopefully to end the property-tax battles given the commitment (by proponents) and to de-risk the budget,” Ferrandino told the commission. “I think it at least, at a minimum, significantly reduces the chances of ballot initiatives dealing with property taxes in the near future.”
Mark Ferrandino, director of the Office of State Planning and Budgeting, speaks Monday to the Commission on Property Tax.
Initiative 50, which already has been certified for the ballot, would cap annual statewide increases in property-tax revenue at 4% (following 30.1% growth in 2023) and require a statewide vote if governments wanted to keep revenues more than that. Initiative 108, which is currently undergoing examination of its submitted signatures, would reduce 7.15% residential assessment rates to 5.7% and 29% commercial and agricultural assessment rates to 24% in 2025 and require the state to backfill local governments seeing a revenue decline because of the measure.
Legislators, fearing that voters frustrated with recent tax bills would back the measures and take billions of dollars from the state budget, passed Senate Bill 233, which amounts to a $1.3 billion tax cut. It capped annual growth in statewide property-tax revenues for local governments at 5.5% but exempted revenue going to school districts or pledged to repay bonds and other debt. It also lowered commercial assessment rates to 25% and residential rates to 6.95%, calculated after residents deduct 10% of home value, up to $70,000.
The new deal would bifurcate residential assessment rates, lowering the portion funding schools to 7.05% and the portion funding local governments to 6.25% and pushing down rates slightly further when the growth of average property values exceed 5%. It would impose a 6% annual growth cap on property-tax-revenue growth for schools and lower the local-government cap to 5.25% annually, though it would allow greater hikes in high-growth school districts and prevent any ratchet effect during recessions.
Giving tax breaks to industrial properties
Meanwhile, Ferrandino said, it would expand the nonresidential properties paying 25% assessment rates by 2027 to also include industrial properties, business personal property and vacant land. The only nonresidential properties that wouldn’t get a break under the new plan would be oil-and-gas operations and producing mines.
Ferrandino previously estimated the ballot measures could require the state to backfill $2.25 billion to $3 billion local governments, though he revised that figure down to $668 million to $1.5 billion on Monday. This deal likely would cut Coloradans’ taxes $255 million for property-tax year 2025, though that total would rise in the future as nonresidential rates fall lower, he said.
Commission on Property Tax Chairman Sen. Chris Hansen (seated) and vice chairman Jefferson County Commission Andy Kerr listen to a presentation on Monday.
Kirkmeyer also said she expects any bill coming in a special session would preserve the exemptions to the statewide property-tax-revenue cap spelled out in SB 233, including new construction and money pledged specifically by local governments to pay bond debt. Initiative 50 does not spell out any such exemptions, and developers have said that would cause developers of special districts, which rely on property-tax revenues to repay bonds, to be involved in a slew of lawsuits if the initiative were to pass.
A majority of commissioners offered at least some level of support for the plan, saying it could avoid the potential of voters approving too-heavy cuts at the ballot while remaining within the spirit of SB 233. Republican legislators and county elected officials on the property-tax commission said they believed the deal even would improve on what the Legislature passed at a time when homeowners are calling for more tax relief.
“(SB) 233 was necessary. We had nothing in place for this year and taxes would have gone up without it,” said Chris Richardson, an Elbert County commissioner who is running for an open state House seat. “If 233 was a good first step, I think this is another step in the right direction. We are here because of perceived or real failure in the hearts of our taxpayers, who believe they are overtaxed.”
Opposition to new tax proposal
Several commission members expressed wariness of agreeing to such a deal, however.
Some local-government and school-district representatives said the $1.3 billion in cuts from SB 233, which does not include new backfill for local governments, represented the most they could lose without trimming what they feel are essential services. They and others also said they didn’t like the idea of negotiating further cuts with special interests wielding ballot initiatives as weapons after they felt they already had compromised by passing SB 233.
Commission on Property Tax members Chris Richardson, an Elbert County commissioner, and state Rep. Lisa Frizell, hold up five fingers to signal their support for a new property-tax proposal on Monday.
There was debate over whether SB 233 was supposed to represent a deal with ballot proponent that would get them to drop their initiatives. Sponsoring Sens. Kirkmeyer and Chris Hansen, D-Denver, said there was only a legislative deal, not a deal to pull down the measures. But Rep. Cathy Kipp, D-Fort Collins, said she and others in the House Democratic caucus backed the bill largely because they felt such a deal was in place.
And that debate turned Monday to what level of commitment ballot backers would give if the Legislature acceded to their requests this time. Hansen said Advance Colorado and Colorado Concern had agreed not to put up any new property-tax ballot measures for 10 years if this bill passes. Kirkmeyer, however, said she hadn’t heard the 10-year figure specifically and felt the deal focused on this ballot but with good faith for future years too.
“I believe that most of us in the state Legislature believed there was a deal. So, we believe that somebody has gone back on a deal,” Kipp said. “And that, frankly, is not how we operate in this building … So, I personally am less agreeable to this deal.”
Impediments to special session?
While Kipp was in the minority on the commission — only Broomfield Mayor Guyleen Castriotta and Special District Association of Colorado CEO Ann Terry expressed similarly strong reservations to a new bill — she may be more in line with her caucus. And that could prove the biggest impediment to passing the deal in a special session.
Observers have noted that more progressive members of the House — including Democrats Elisabeth Epps and Tim Hernandez, who ran afoul of legislative leaders before losing primary elections — could put up an effort to stop the plan during a special session. Some also wonder if Republicans could benefit more from the session just two months before a crucial election by putting forward a united front in favor of a tax-cut idea that’s likely to be popular with a wide swath of voters.
Many feel that Polis, if he calls the special session, is likely to do so for the week of Aug. 26 — after the Democratic National Convention but with enough time to pass and sign a bill before the Sept. 9 deadline for setting the final makeup of the November ballot.