America's Property Tax Advisor

Colorado - Ghost of Gallagher?

BY JOE MONZON, DENVER, FEBRUARY 2021

Colorado voters approved Amendment B in the November 2020 election that does away with the Gallagher Amendment and unlocks the assessment freeze used to determine property taxes.

 

Now, just three months later a group is starting the process to qualify a ballot proposal for November 2022 that would bring back parts of Gallagher.

 

Background

 

The 1982 Gallagher Amendment, named after the former state lawmaker, Dennis Gallagher, was sent to voters at a time when homeowners across the country were revolting against rising property taxes.

 

Unlike other states that adopted property tax reforms during this era, the Gallagher Amendment was designed not just to cut taxes on residents, but also to shift the property tax burden to businesses. It required 45% of the state's property tax base be levied on homes and 55% on commercial properties.

 

Over the years, the assessment ratio for all properties other than residential was maintained at 29%, as Gallagher requires, but the residential ratio fell from 21% to 7.15%. It was likely to fall to 5.88% before Amendment B was approved.

 

Looking Ahead

 

Without Gallagher, tax bills will rise in combination with property appreciation. Analysts say this will continue to contribute to the unaffordability of residences in Denver and many cities throughout the front range and the resort communities.

 

Separate from Gallagher, the Taxpayer Bill of Rights (TABOR) remains in place and is meant to limit the growth of government based on population increases and inflation. Theoretically TABOR should keep property taxes in check. However, all but four of Colorado’s 178 school districts have already “de-Bruced” (meaning they are not bound by TABOR and can continue to collect unlimited property taxes). Eighty-five percent of Colorado’s municipalities and 51 of 64 counties have also convinced their voters to let them opt out.

 

Lowering Assessment Ratios for All

 

The group Colorado Rising State Action campaigned against Amendment B and is now setting the stage for a ballot proposal that would reduce the residential assessment rate to 6.5%, and the commercial property assessment rate from 29% to 26%.

 

"Even if the assessment rate stays the same, your value of your house goes up and that means that you pay more money," said Michael Fields, executive director of Colorado Rising State Action. "We wanted to start early enough, so people could have the discussion, 'is this something they want,' but also put a little bit of pressure on the legislature to come up with a fix before it really hurts homeowners in the upcoming years."