It’s a very special time of year.
Spring buds are blooming. The fields have greened. And the state legislature is going to have another very complicated, very costly argument about property taxes.
Yes, once again, state lawmakers are debating a big plan to reduce property tax rates. Once again, they’ll be racing to do it in the final days of the legislative session. And once again, it’s all part of an intricate negotiation between some of the state’s most powerful players.
This time, however, Sen. Chris Hansen thinks it will turn out differently.
He’s soon to introduce an 80-plus page bill that is meant to lower property tax bills for home and business owners while also making some notable changes to the property tax system itself.
This year’s taxapalooza is “designed to be a permanent approach,” the Democratic caucus’s tax guru said in a recent interview. “These are structural changes, reforms that we think will greatly improve the system in the state of Colorado. And they’re not set to expire. This is meant to be a construct that can be sustainable over a long period of time.”
But his proposal has less than two weeks to win over other lawmakers, as well as the different interest groups that are threatening to put their own tax proposals on the ballot this November. And on Friday, it ran into some questions from the state’s new bipartisan tax commission — signaling the potential for some turbulence over the session’s final weeks.
Other policymakers, including at least one Democratic lawmaker, are putting forward an additional idea: They want to institute a TABOR-style cap on the property taxes collected by many local governments and districts. That idea gained support from the bipartisan tax commission on Friday.
Trying to end an endless debate
Property taxes have been one of the biggest issues in the state in recent years.
Sharp increases in property value have resulted in several big jumps in property tax bills since 2019. That’s been especially surprising for Colorado homeowners, who until recently were shielded by a constitutional amendment that kept residential tax rates unusually low.
The result: Lawmakers passed last-minute property tax cuts in 2021 and 2022. In 2023, voters rejected the wide-reaching changes offered by Democrats in Prop. HH, so lawmakers called a special session and made another temporary cut.
But policymakers are getting frustrated with the stop-gap approach.
So Democratic lawmakers created a bipartisan commission to talk through some long-term changes.
That panel collectively came up with a series of changes, many of which were in Hansen’s initial proposal:
- Reducing taxes owed for owner-occupied homes by up to 10 percent for four years
- Permanently reducing commercial rates
- Permanently smoothing out year-to-year increases in property tax bills
- Allowing homeowners to defer more taxes and pay them later
- Eventually “decoupling” school funding, so that property taxes paid toward local school districts may not be affected by future tax cuts
Hansen’s bill also attempts to avoid one political landmine. Previous efforts have cut into the state’s TABOR refunds — by using that money to instead pay back local districts for the effects of the property tax cuts.
Hansen’s proposal would instead spend an estimated $400 million a year from the state’s savings to cover backfill costs, he said. It would fully cover the effects on schools and emergency services, but only partially cover the effects on other local governments and districts.
But the idea has run into significant questions from the tax commission, and an alternate proposal — to create a “hard cap” on the growth of property taxes from year to year — appears to be gaining steam.
Critics want more time and stricter limits on taxes
Rep. Lisa Frizell, a Republican who serves on the property tax commission, said that while the panel voted in support of ideas in the package, she didn’t expect to see them all introduced so quickly.
The last-minute bill leaves legislative staffers little time to analyze the potential long-term fiscal effects of the changes, Frizell said, with the legislative session ending May 8.
“The reality is, they don't have accurate data on which to model. So they're trying to do the best that they can in a very short period of time. We feel that this requires a much deeper dive if we're going to start pushing all these concepts out, especially in combination,” she said in an interview.
JoAnn Groff, the state property tax administrator, raised a red flag about Hansen’s proposal for “smoothing” taxes, saying it might not work as written. Several commissioners said that some of the long-term changes should wait for later.
“With only about 12 days left, I think we really have to focus on what can be implemented and understood,” said Elbert County Commissioner Chris Richardson, also a tax commission member.
Should the state just cap property taxes?
On Friday, an alternate idea emerged and gained strong support on the tax commission: In addition to temporarily cutting property tax rates, some commissioners support a permanent TABOR-style cap on property tax growth.
Commissioner Loren Furman of the Colorado Chamber of Commerce suggested a limit on the property tax revenue that could be collected by many local districts.
Such a cap would allow perhaps only a six percent annual increase in property tax collections for many local entities. However, schools could be exempted — and with schools making up the majority of most people’s tax bills, that might limit such a policy’s impact. (Such a cap could also exempt growth in the tax base that comes from new construction, rather than simply rising property values.)
The tax commission itself doesn’t have any decision-making power, but its preferences could influence what lawmakers do. And several Democrats and Republicans have come out in favor of the cap approach.
Rep. Chris deGruy Kennedy, a Democrat, worked with GOP Rep. Frizell to bring forward the cap idea. On Friday he said capping the growth of taxes at the local level would ultimately let cities take responsibility — which he said would be better than constantly having the state cut rates and provide backfill money.
“It means we will put in place a growth cap that constrains the future growth [of local property tax revenues] and that will essentially be a signal to the voters of Colorado that we do not want to repeat what happened in the 2023 assessment where property taxes went up sharply in one year,” he said.
Meanwhile, Rep. Bob Marshall, a Democrat, has also proposed his own property tax measure. It would ask voters to cap how much local districts’ property tax revenues can grow. However, local districts could also choose to override the limit by taking a public vote on it.
Hansen’s plan, Marshall said, “is trying to do too much for too many people, trying to make everybody happy.”
The idea of a cap drew skepticism from Mayor Guyleen Castriotta of Broomfield, saying that putting top-down limits on local funding could repeat some of the problems of TABOR.
Still, the bipartisan tax commission — including Sen. Hansen — ultimately expressed support for the idea of a cap.
The state already has a limit on some local entities’ property tax growth, but voters in many local districts have waived the limit.
One challenge: satisfying influential groups
There’s a big reason why lawmakers want to rewrite property tax policy now.
If they don’t, then other groups are set to ask voters to do it on the November ballot.
Colorado Concern, a major business interest group, has been working with the conservative group Advance Colorado on a tax proposal. Their measure could slash taxable values back to 2022 levels and put a strict limit on the tax base’s future growth.
A group on the left, the Bell Policy Center, has also proposed its own slate of measures, including one that would put new taxes on the highest-value homes.
But at least some of those outside groups may drop their measures if they’re satisfied with what the legislature does. That happened in 2022, and it seems to be a possibility this year.
“We just have to find that sweet spot and we would lay our arms down for the right legislative solution,” said Dave Davia, CEO of Colorado Concern, on Thursday.
Scott Wasserman, president of the Bell Policy Center, said that he is willing to disarm his group’s own ballot measures, assuming the other side does too.
“I think this is a really targeted proposal that delivers relief in the right way. And also is careful not to destroy local community budgets or the state budget,” he said on Thursday of Hansen’s proposal.
But the third major player, the conservative group Advance Colorado, may not be interested in a deal.
While it’s currently working with Colorado Concern on proposals, Advance Colorado has already secured a place on the ballot for its own measure, Initiative 50, to create a statewide cap on property taxes.
The details of that measure even concern some Republicans like Frizell, who said it would have “extreme” effects on the overall state budget because of the backfill obligations it would create. DeGruy Kennedy suggested that the commission could instead put its own cap on the ballot, with the hope voters would go for it over Initiative 50.
Michael Fields, a leader of Advance Colorado, has signaled that his measures are moving full steam ahead.
“We’ve been pretty clear that there has to be a permanent cut to the residential and commercial rates, [and a] cap that only voters can opt out of,” he wrote in a text to CPR News on Thursday.
And he said the tax commission’s talk of a cap on Friday wouldn’t go far enough, since it exempted taxes paid towards schools.
The Hansen bill hasn’t yet been introduced. Even at top speed, it would require at least three days to get through the legislature. Meanwhile, some lawmakers said they were hearing whispers of a special legislative session to take on property taxes, again.
