The current battle over property tax is just the tip of the iceberg

The Legislature, the Governor and Advance Colorado and Colorado Concern, the groups behind Initiatives 50 and 108, fought to write a bill in the special session to reduce property taxes beyond the 2024 session. SB24-233The stimulus was the increase in the property tax burden that resulted from the rapid growing Property values ​​in many areas of the state achieved that goal, a bill passed, and groups withdrew their initiatives from the ballot.

That was a good job. But unfortunately there are still Some fundamental problems with the tax structure that They have not been addressed. So, I hope these questions will come up again in the future.

Our state and local government entities are funded primarily in five basic ways: income/capital gains tax, sales tax, property tax, and fees. and Federal grants. Fees may be for operating costs (charged per unit and based on costsuch as water treatment and delivery) or for capital facilities required due to growth (charged based on intended use, such as water tap fees used to purchase water rights and build reservoirs, treatment plants, and pipelines). Fines for violations of laws are generally (but not always) a minor part of budgets.

Property taxes are collected by school districts (both for operating costs and for new schools), some water districts (including operating ones) I capital costs, depending), fire districts (same), county governments (same), etc. They are charged based on the value of the property, but the percentage of the value (the assessment rate) that is used to calculate the taxes is very different for different types of properties. For example, residential property prices might fall by around 6%, while commercial property prices might rise by around 29% (plus, sometimes, a relatively small downward “value adjustment”). But This structure generates various equity problems.

The recent property tax hike occurred primarily in Front Range towns and resort areas. There, increased demand for residential property due to the pandemic shift to remote work caused home values ​​to rise rapidly. (The demise of the Gallagher Amendment, which limited residential versus commercial taxes, also contributed.) Demand for housing was already rising, but the COVID-19 surge intensified it further. Since property taxes are levied solely on the basis of valuation and not need, people’s taxes rose sharply, disproportionately to the costs of providing facilities and services.

To me, this indicates the need to adjust the assessment rate first. below for properties (mostly residential) in counties hardest hit by the pandemic surge. This would bring property taxes down to where they would have been without the increase. The second step would be to implement an automatic adjustment system, based on county-specific data, that would keep tax levels in sync with normal cost-of-living increases. The combination would solve this part of the problem in the long run.

There are other important inequalities in property taxes. For example, some property taxes are levied in ways that are completely They bear no relation to imposed costs. Commercial properties do not need schools directly (but they do for their workers’ children), but these properties pay assessment rates several times higher than residential ones. Some water districts collect property taxes, but property values ​​bear little relation to individual water use. New water rights, reservoirs, etc., should legitimately be charged for through water impact fees. new development that is Creating the need, not imposing it on those who have already paid their share. Fire protection is more closely tied to property values, at least, but assessment rates should be equal, not much higher for commercial properties. And the lack of impact fees for new fire stations is a major missing piece.

Other capital-intensive facilities are needed due to Growth, such as parks and recreation centers, libraries, and road expansions, all equally deserve development impact fees. To address the need for more alternatives to adding lanes to expand road capacity (especially where this cannot be done), a new form of development impact fee could subsidize the buses, trains, carpools, bike lanes, etc. needed to keep traffic levels and air quality at acceptable levels. This could be a one-time fee to fund a capital pool whose profits would pay for these services, or an ongoing charge.

Finally, affordable housing deserves more attention from the Legislature. We need mandatory inclusionary housing requirements that require developers to build a significant fraction of permanently affordable units alongside their at market price. And we We need mandatory fees to link jobs and housing, so that new job developments pay for housing. those workers who otherwise could not afford to live where they work.

This is all a lot of work; it’s time to get started.

Steve Pomerance is a former member of the Boulder City Council. Email [email protected].