Colorado passes bill to prevent property tax ballot measures

The Colorado Legislature concluded a special session Thursday by passing a bill to bypass property tax cut initiatives on the Nov. 5 ballot that have hurt the state’s municipal bond market.

House Bill 1001 Incorporates Agreement with supporters of Initiatives 50 and 108, who agreed to remove the ballot measures and forgo pursuing similar ones for the foreseeable future as long as state officials adhere to the agreement’s provisions.

Gov. Jared Polis called the results of the special session he ordered “an important step toward ending the property tax wars in Colorado.”

“I look forward to seeing the risky ballot measures defeated and this legislation signed into law so that small businesses and homeowners can keep more of their hard-earned money,” he said in a statement.

Initiative 50, a proposed constitutional amendment Putting a 4% cap on statewide property tax revenue growth that could only be lifted with voter approval was of particular concern to Colorado bond market professionals.

They warned of the lack of critical details on how it would be implemented if approved with the required 55% of voters. They also warned that the measure would be increase the issuer’s borrowing costs and provoke litigation, in particular against metropolitan districts, which financing public infrastructure for housing developments through property taxes levied on the new land.

“The bill as currently written accomplishes the dual goals of reducing property taxes for Coloradans while maintaining necessary protections for special district debt that drives housing affordability in the state,” Zach Bishop, head of Piper Sandler’s special district public finance investment banking group, said in an email.

Ann Terry, executive director of the Colorado Special Districts Association, which represents metro, fire, health, water and other districts, said that while it was too early to determine the bill’s impact, some districts could be hurt financially.

The special session began Monday with a number of bills, including a proposed constitutional amendment for a Nov. 5 vote that would guarantee Local control of property tax changesWhile that measure passed the House, it failed to make it out of a Senate committee on Wednesday, leaving only HB 1001 and HB 1003involving personal property tax exemptions for agriculture, received final approval.

HB 1001 extends the $1.3 billion in property tax cuts for 2024 and 2025 expected under Senate Bill 233, which became law earlier this yearadjusting revenue growth limits for school districts and local governments and reducing property assessment rates.

According to HB 1001, Property taxes would be reduced by an additional $255 million in 2025, rising to $295 million in 2026, and the state will be required to make up a portion of the lost local revenue, according to the Colorado Fiscal Institute.

Amid rising home values, state lawmakers have been trying to rein in property taxes in the absence of a mechanism to keep them in check. The state’s 1982 Gallagher Amendment, which sought to protect homeowners from rising tax bills, It was repealed by voters in 2020.

The business group Colorado Concern, which along with Advance Colorado backed the ballot initiatives, had argued that Initiatives were needed “because lawmakers have not taken state property tax inflation seriously.”