GALLAGHER AMEND.
Repeal this broken tax formula
Let’s talk for a moment about the good, the bad and the really bad of The Gallagher Amendment. First, the good. As the values of homes, particularly on Colorado’s Front Range, have exploded, the Gallagher Amendment has pumped the breaks on the commiserate property tax increases that come with the increased value.
The amendment requires that residential property not account for any more than 45% of the revenue generated by property tax in the whole state of Colorado. Because residential values have out- stripped commercial property values, the assessment rate for residential property has been ratcheted down.
The effect has been a lower taxable value ( assessment rate) for homeowners which has helped to soften the blow of the tax increases incurred by the growth in property value.
The ratchet has been fairly drastic. When Colorado voters put The Gallagher Amendment into place in 1982 the assessment rate for residential property was 29%. Today the rate is 7.15%, and unless voters repeal the amendment it will likely drop another percentage point or two in the next year to less than 6%.
Which brings us to the bad. Not all jurisdictions have seen the exploding property tax values that have justified the lower tax rate. So while overall property tax collections in the state have increased by 53% in the last five years, in some areas, the amendment has actually resulted in lower tax revenue for rural Colorado cities, counties, fire districts, schools, etc.
The state backfills the school districts when their revenues fall, but none of those other taxing districts get state money to help offset the reduction. This could mean cuts to services. How big are the cuts going to be?
Current estimates say the state could be forced to backfill schools as much as $ 450 million in the next fiscal year if voters don’t pass Amendment B. Rural cities, counties and special taxing districts could be devastated.
“I’m from rural Western Colorado and Gallagher has definitely disproportionately affected us out here,” Rep. Matt Soper, R- Delta, told the editorial board last week. “A good example would be the Plateau Valley Health Clinic, which is actually a special district hospital.
They are almost entirely funded from their mill, and they have had a good payer mix over the last couple of years from oil and gas, but oil and gas has now left that part of the state and they are very worried what the future looks like. And here’s the reality they are going to go back to the voters and ask for a mill increase which means higher taxes on rural Colorado.”
Soper is one of four sponsors of the bill at the Colorado General Assembly that put the Gallagher repeal on the ballot. The others are Rep. Daneya Esgar, D- Pueblo, Sen. Jack Tate, R- Centennial, and Sen. Chris Hansen, D- Denver. The bill passed with bipartisan support too: 74 out of 100 lawmakers supported it.
Why is there such a mix of urban, suburban, rural, Republican and Democratic support for this measure? The answer is the really bad part.
When small and rural jurisdictions get hit hard by a drop in property assessment rate, they go to voters to have them increase the local mill levy. If the voters say no, then services get cut. If the voters say yes, the burden for that tax increase disproportionately hits businesses large and small. That’s because while the residential tax assessment rate has gone down, the commercial rate has stayed at 29%. An increase in the mill levy ( the local tax rate) really hurts businesses, many of whom are on the cusp already as they wait for the economy to rebound following coronavirus lockdowns.
We understand Colorado taxpayers my feel nervous about ceding a powerful tool that has kept property taxes relatively low in Colorado compared to other states. However, the unintended double whammy on businesses at this juncture in history is untenable. We urge voters to support Amendment B. And we can all take comfort in the fact that lawmakers cannot increase the assessment rate without a vote of the people because the Taxpayer’s Bill of Rights is very much still intact.
Members of The Denver Post’s editorial board are Megan Schrader, editor of the editorial pages; Lee Ann Colacioppo, editor; Justin Mock, CFO; Bill Reynolds, general manager/ senior vp circulation and production; Bob Kinney, vice president of information technology; and TJ Hutchinson, systems editor.