Colorado House gives preliminary approval to property tax reductions in special session

House Appropriations Committee approves the deal on a bipartisan 8-3 vote. Two progressive Democrats voted against the bill.

By Marianne Goodland August 27, 2024

from The Denver Gazette

The Colorado House on Tuesday gave preliminary approval to the surviving three bills in the special session that the governor convened to tackle the state's soaring property taxes. 

That includes the compromise reached by Gov. Jared Polis, lawmakers and the groups behind two initiatives that seek tax cuts that are deeper than what policymakers enacted earlier in the year.

However, there appears to be no guarantee all three measures will make it to the final vote, an outcome that likely means a bitter and expensive battle waged over the two initiatives that state election officials already certified for the ballot.

That uncertainty permeated the last two days of session, contributing to a sense of foreboding and heightening the risk for several parties. Notably, the failure to pass the compromise would mean voters will decide whether to adopt deeper tax cuts this November, with repercussions for local governments' revenue and residents' pockets.    

For now, the compromise is advancing.

The House Appropriations Committee heard the measure on Monday, and approved the bill on a bipartisan 8-3 vote. Two progressive Democrats voted against the bill, which pointed to the challenges it needs to overcome to reach to the governor's desk.

Before passing it, the committee modified the measure with technical amendments from House Speaker Julie McCluskie, D-Dillon, one of the bill's bipartisan sponsors.

A second reading debate that could have taken place on Monday was postponed until Tuesday to continue negotiations on the measure.

Progressive Democrats have been unhappy with the compromise, partly due to what they have called a "backroom deal" between legislative leaders, the governor and the two groups backing Propositions 108 and 50.

The two groups — Advance Colorado, led by Michael Fields; and Colorado Concern, headed by Dave Davia — pledged to withdraw their two ballot measures should the deal bill be signed into law. 

Proposition 108, which seeks statutory changes, would reduce residential property assessment rates to 5.7% and non-residential property assessment rates to 24%. The state would be required to backfill the lost property tax revenue. Estimates on that backfill go as high as $3 billion in general fund dollars, just shy of 25% of the total available from this revenue pot.

Proposition 50, which would amend the state constitution, would impose a 4% annual cap on property tax revenues. Voters would have to approve retention of revenues above the cap.

Critics have warned that should those ballot measures succeed, the state would be forced to cover those cuts with K-12 education funding just after the state has finally paid off its 15-year debt to K-12, known as the budget stabilization factor.

Progressive Democrats are also unhappy with what they claim as the beneficiaries of the deal — wealthy homeowners who would get a larger property tax cut than those with home values closer to the state median of about $550,000. They said wealthy homeowners with second homes (or more) would also benefit, while those who need the property tax relief most, individuals toward the lower end of the income scale, wouldn't see that kind of relief.

The ballot measures' proponents countered that lawmakers have had numerous opportunities to provide meaningful relief to residents against soaring tax liabilities — some rising as high 60% in some areas — but that they have failed to do so, necessitating the ballot action.

The proponents also pointed to the failure of Proposition HH, which the Democrats sent to the ballot a year ago, and to the compromise legislation lawmakers enacted action a few months ago as examples of lawmakers insufficiently responding to residents' plea for relief.

On Tuesday, only the House worked on bills.

The Senate Finance Committee on Monday had killed the two measures floated by senators, and with nothing to do on Tuesday, gaveled in and then went home for the day.

The senators' turn will come on Wednesday. The three bills approved by the House on a preliminary voice vote on Tuesday will head to a final vote on Wednesday morning, and then cross over to the Senate. After their introduction, the bills will be heard in committee, and those that make it out of will head to the Senate floor for debate.

Should the Senate debate those measures on Wednesday, a final vote could take place as soon as Thursday, wrapping up lawmakers' work on the special session.

Complicating matters is a separate proposal some Democrats want to sent to the ballot that is not part of the deal.

House Concurrent Resolution 24B-1001 would ask voters in November to require local voters to approve any reduction in property taxes sought through a statewide ballot initiative.

Local property tax revenue funds the operations of school, fire districts or county governments. Taxing jurisdictions in urban counties have reaped the windfall from dramatic increases in property valuations in the last several years, which have yielded a ton of revenue for local governments without having to actually raise the rates. Rural counties, however, have not had that same windfall.

At least one local government decreased their mill levy to provide relief. Douglas County commissioners in January approved an 18% reduction in the rate and sent back $37.8 million, which translated to roughly $200 for each property owner.

Douglas County saw some of the highest property tax valuation increases in the metro region — 47% for the median residential property increase.

The two conservative groups have called House Concurrent Resolution 24B-1001 a deal-breaker, as has Sen. Barbara Kirkmeyer, R-Weld County, one of the sponsors of the deal.

It has a tough hill to climb in the Senate. The resolution would require 24 votes in the chamber — and Democrats hold 23 seats. Republicans have said they will not support the measure. It's also unclear if all 23 Democrats would back it.

During the debate on the resolution on Tuesday, Republicans attempted to amend it.

That included a lengthy debate about wolves — on the premise that if local citizens could make decisions about statewide ballot measures on property taxes for their communities, they ought to be able to make other decisions about statewide ballot measures that affect their areas, such as the reintroduction of wolves.

That amendment failed. Six Democrats, mostly representing rural communities, crossed the aisle to vote with Republicans on the amendment.

The path is a little less fraught for the deal bill, House Bill 24B-1001, although indications are that the final vote in the House could be close.

At the heart of the bill is its provisions to:

• Cut the effective residential property tax rate to 6.3% or 6.4%, depending on assessment growth

• Reduce the commercial property tax rate to 25%

• Cap growth to 5.25% for local governments and 6% for inflation growth, whichever is greater, for school districts

• Ensure a "clear and non-biased ballot language" in the required vote of the people to opt out of the local cap

Lawmakers debated for about three and a half hours on the measure Tuesday, adding two amendments that McCluskie negotiated overnight and into the early part of Tuesday.

The first amendment affects the cap on property tax revenue growth for local districts.

McCluskie said the caps are limiting, so the amendment provides a carry-forward for local governments and schools. If they do not hit the ceiling, they can carry forward any of the balance of that cap that they did not use into the second year of a two-year assessment period. The cap is 10% for local governments and 12% for schools over a two-year assessment period.

"This provides a smoothing if there's an up and down in assessed valuations, either growth or decline," she said.  

The second amendment extends the life of the state's property tax commission, a panel set up in last year's special session on property taxes. The commission would have another six months, until June 30, 2025, to evaluate "the equity of valuation for assessment established for property" in both Senate Bill 24-233 and HB24B-1001.

Progressive Democrats offered four amendments but none succeeded.

One came from Rep. Javier Mabrey, D-Denver, and modeled after a bill postponed Monday by the appropriations committee. Mabrey said the property tax deal will disproportionately benefit wealthier Coloradans, although he said renters are much more at risk than homeowners.

"Where is the special session for renters?" he said.

His amendment, he said, would ensure additional relief is targeted to those who need it and would not allow the additional tax relief to be directed toward those with second homes.

An amendment from Rep. Tammy Story, D-Evergreen, would have allowed school districts to retain more property tax revenue.

The House also gave its preliminary approval to House Bill 24B-1003, which seeks to make permanent a business personal property tax for agriculture equipment and expand that exemption to greenhouses that grow crops in a "raw and unprocessed state" — meaning not for retail. 

The fourth bill left standing out of the original 13 at the beginning of the day, HB24B-1007, would have reduced assessment rates by up to 2% for accessible housing properties constructed after January 1, 2025. It had a $900,000 cost to state education funding in the first year and $1.8 million in the second. The bill was awaiting a hearing with the House Appropriations Committee.

However, sources told Colorado Politics early in the day the bill would not move forward. 

Also on Tuesday, the Denver Metro Chamber of Commerce, which backs the compromise, said it was encouraged by the legislative solution, so much so that it has not taken a position on the two ballot measures. 

"Yesterday, we also agreed to add our own commitment to that of Advance Colorado and Colorado Concern to not offer any property-tax related ballot measures for at least six years if the legislature passes this compromise and does not act contrary to its purposes," the chamber said. "We made this commitment for clarity that our Chamber supports and will continue to support this compromise agreement which provides meaningful tax relief and protection from tax spikes in the future."