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Colo. Voters Repeal Amendment On Property Tax

By Daniel Tay · November 4, 2020, 12:38 AM EST

Colorado voters on Tuesday approved repealing the Gallagher Amendment, which governs property assessed values to ensure residential property value constitutes a set percentage of the state's property tax base, with the repeal coming after years of disagreement over the amendment.

Voters in the state passed Amendment B, which repeals the state constitution's Gallagher Amendment. That amendment, passed in 1982, requires that commercial property's assessed value make up about 55% of the state property tax base while residential property value makes up about 45%. As a result of the repeal, the assessment rates for both commercial and residential property — the percentage of a property's actual value that is taxed — will remain where they currently are, at 29% for commercial and 7.15% for residential.

As of late Tuesday, the amendment was approved 58% to 42% with 86% of the votes reported.

The Gallagher Amendment fixed the assessment rate for most commercial property at 29%, while the assessment rate for residential property moved to maintain the 55-45 ratio. Because of the greater growth in total residential property value as compared with commercial property value in the state, the residential property assessment rate has steadily dropped since Gallagher's enactment.

The ballot measure required only a simple majority of the popular vote to pass under Colorado law, as it proposed a simple repeal of the amendment. Amendments to the constitution require a 55% majority.

A bipartisan coalition of lawmakers passed the resolution in June placing the repeal of the Gallagher Amendment on the ballot. S.C.R. 1 passed the House by a 47-18 vote, with all of the chamber's Democrats and six of the 24 Republicans voting for the resolution, and passed the Senate by a 27-7 vote with one excused, with all of the chamber's Democrats and eight Republican senators voting for it.

Sen. Chris Hansen, D-Denver, a sponsor of the resolution, previously told Law360 the novel coronavirus pandemic's negative impact on commercial property values without a similar effect on residential property values would cause an even larger gap between commercial and residential assessment rates. That would make immediate action on the amendment "imperative," Hansen said.

The rise and fall in values for the different types of property could have resulted in the residential assessment rate being cut from 7.15% to 5.88%, according to a presentation to the state joint budget office in May by the Department of Local Affairs' Property Tax Division. This 17.8% reduction in the rate would have been the second-largest drop in history since voters adopted the Gallagher Amendment in 1982.

Additionally, if the rate had dropped, the Colorado Taxpayer Bill of Rights, or TABOR, would have required any effort to raise the rate to go to a vote, because under TABOR any tax increase must be approved by popular vote.

Besides Hansen, the resolution's sponsors were the Joint Budget Committee chairwoman, Rep. Daneya Esgar, D-Pueblo; Rep. Matt Soper, R-Delta; and Sen. Jack Tate, R-Centennial.

A suit by former Democratic legislator Dennis Gallagher, the author of the Gallagher Amendment, and other former legislators, which asserted that lawmakers inserted biased language regarding the repeal of the Gallagher Amendment into a state-issued voter guide, was dismissed by a Colorado court in September. The challengers were part of Protect Our Homes Colorado, a group that opposes repealing the Gallagher Amendment.

The residential assessment rate is set at the state level, but property tax is collected at the local level in Colorado. If the estimated 5.88% residential assessment rate had been applied to the residential property value from the 2019 assessment, school districts across the state would collect $491 million less in revenue, according to the division.

Although property taxes are collected locally, state finances could have been implicated as well had the amendment not been repealed. Under the state's school financing laws, the state backfills student spending if school districts do not raise enough funding through property tax. Applying the estimated rates to the 2019 values would result in the state having to backfill $246 million, according to the division.

Additionally, reductions in the residential assessment rate might have raised property taxes on businesses, which would further hurt companies already struggling from the economic slowdown brought on by the pandemic and potentially hinder post-pandemic recovery. Some localities have so-called floating mill levies that rise whenever the residential assessment rate drops, allowing localities to maintain tax revenue while putting a tax increase on commercial properties.

--Editing by Vincent Sherry. 


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