Rosa Bañuelos, an 80-year-old east Denver resident, lives on a fixed income and knows devastating decisions are ahead if state lawmakers don’t take action to limit her property tax bill increase.
She fears she would have to go without buying necessities — or even lose her home.
She shared her story at a news conference held by Gov. Jared Polis and Democratic state lawmakers. Showing his cards at the last minute, the governor revealed a proposal on May 1 to curb increases on Coloradans’ property tax payments and enact what Democrats say is a “long-term solution” to prevent growing home values from raising property tax bills.
“This will decrease the property tax rate for every homeowner in our state,” said Polis, whose office says the proposal would cut the added amounts Coloradans owe by double-digit percentages.
Driven by a costly real-estate market, home values — as calculated for property tax purposes — have spiked since the last time homeowners received notices of value two years ago. Since then, residential properties in the Denver metro area typically saw value increases between 35% and 45%, a group of county assessors from across the Front Range announced April 26.
Early May is around the time homeowners start receiving their newly calculated property values from assessors' offices, and the Democrats’ eleventh-hour announcement comes on the heels of public officials openly hoping homeowners would get relief from state lawmakers.
Democrats say their plan can blunt the increase in Coloradans’ tax bills without undercutting the ability of school districts and other local governments to provide services.
“We know people want their schools funded. We know people want fire response to arrive quickly,” said state Rep. Mike Weissman, an Aurora Democrat. “They want libraries and other community (amenities) like parks that are funded with property taxes.”
Polis and the Democrats waited until the last minute “to fix a problem they knew was coming all along,” state House Minority Leader Mike Lynch, a Republican of Wellington, said in a statement.
The clock is ticking on the state legislature’s regular session, the four-month period when lawmakers pass bills.
“The people of Colorado should be skeptical of the governor’s hastily introduced plan with only one week left in the session,” Lynch said.
Whether the plan wins approval ultimately depends on Colorado voters. Here’s a look at what could change.
Cutting the increase
Statewide, assessed values of homes are expected to increase by 33% on average compared to the most recent assessed values, for which Coloradans paid 2021 and 2022 property tax bills, according to the governor’s office.
Looking at the impact of rising home values on Coloradans’ tax bills, the governor’s office provided an example scenario of a $600,000 home whose value grows 30%.
On average, that home would have faced a roughly $4,500 tax bill, according to the governor’s office.
Factoring in the effect of state Senate Bill 22-238, a recently passed law, the tax bill falls to about $4,300.
What Coloradans pay in property taxes depends on a few numbers. Local government entities like counties and school districts set the tax rates — property tax rates are officially called “mill levies.” Also at play is the “assessment rate,” another number that helps determine how much in property taxes a person owes. The state legislature sets the assessment rate.
With a proposed assessment reduction, the example tax bill would fall to about $4,100. And with a proposed cap — another part of the Democrats’ proposal — on top of that, the tax bill would slide further down to roughly $3,900.
The increase in the typical tax bill in that scenario, compared to 2022, would be about $1,000 if state lawmakers took no action. If the proposed assessment reduction and the proposed cap succeed, the rise in property tax bills could decrease by around 40% to 60%, according to the fact sheet. (That’s taking into account the effect of SB 238, which would cause about 20 percentage points of that decrease on its own, according to the sheet.)
But the savings provided through SB 238 expire, so all those savings would only continue if voters approve the proposal, a governor’s office spokesperson said.
What else proposal includes
If the proposal moves forward, Colorado voters will decide whether to approve it in November.
Parts of the Democrats’ plan, according to the governor’s office, include:
• Reducing the residential property assessment rate to 6.7% in 2023 and 2024, and continuing that reduction for primary residences — not second homes or investment properties — in future years.
• Reducing the taxable value of residences by $40,000 in 2023 and 2024, and continuing that reduction for primary residences in future years.
• Capping the growth in district property tax collections, excluding school districts, at inflation and allowing local governments to override the cap after giving notice to property owners.
• Protecting funding for public education and “backfill” revenue to fire districts, water districts, ambulance and hospital districts in areas of the state that aren’t growing as fast as others by dedicating a portion of the state TABOR surplus to backfill.
(That’s a reference to the Taxpayer's Bill of Rights, which limits the amount of money that the state government can collect and spend, or save, each year. Revenue above the limit — sometimes called a “TABOR surplus” — generally gets refunded to taxpayers. TABOR is an amendment to the Colorado Constitution.)
• Providing seniors who currently receive the homestead exemption a larger reduction of $140,000 and allowing them to continue to receive that reduction if they move.
The homestead exemption “portability” in the plan ensures that seniors can use the exemption even if they have to downsize or otherwise make a change, said state Sen. Chris Hansen, a Denver Democrat.
“Seniors on fixed income, they’re going to be able to use that exemption for the rest of their lives, even if they change their home situation,” Hansen said.
If voters give it the green light, the Democrats’ proposed measure would last a decade, under a 10-year “sunset” timeframe, the fact sheet says.
The governor’s office fact sheet says the proposal protects funding for school districts, fire districts, counties and other local services by dedicating a portion of the state TABOR surplus.
That would allow the state to retain roughly $167 million in 2024, reducing the state TABOR surplus from an estimated $2 billion to an estimated $1.8 billion and reducing taxpayer refunds by $46 in 2024, the sheet says.
“Taxpayers can still expect to receive a surplus refund of $700 this year and over $400 next year,” the sheet says.
Ins and outs of property taxes
It’s the job of county assessors’ offices to establish accurate values of homes and other properties to determine how much property owners will owe government entities in taxes — a process meant to ensure that the amount of taxes people pay is fair and equitable.
(The assessor doesn’t set the tax rate but determines the value of the property that the tax rate then gets applied to.)
The property valuation homeowners were receiving around early May is based on data as of June 2022, near the recent peak in the real-estate market.
So even though home prices have declined since then, property values reflect last year’s exceptional highs.
The expected 33% assessed value increase statewide is an average that applies across all residential properties, including single-family homes, condos and townhomes, duplexes, triplexes and multifamily, according to the governor’s office.
‘Among lowest in nation’
The governor’s office said the proposal, along with previous legislation, will ensure Colorado’s property taxes “remain among the lowest in the nation.”
Nationally, Colorado has relatively low residential property taxes, according to an analysis by the conservative Tax Foundation. Colorado ranked 47th in property taxes paid as a percentage of owner-occupied housing value in 2020, according to the foundation.
Note: The state legislature's regular session was set to end in early May, and the Democrats' proposal could be amended after this story was finalized.