Introduced and passed by Colorado voters in 1982, the Gallagher Amendment intended to keep property taxes low, something it has accomplished as Colorado had one of the country’s lowest property-tax rates in 2019. (The 55/45% split made sure homeowners in Colorado wouldn’t pay more than 45% in state property taxes, leaving those with industrial and commercial properties to cover the rest while protecting those homeowners.)
While the commercial property (nonresidential) tax rate has stayed at 29%, a rise in property values has lowered residential property tax rates from 21% to 7.15%, which is also due to the split mandate set in the Gallagher Amendment.
Although homeowners have enjoyed decades of savings, small businesses have largely felt steep increases, and due to the mandated split, if the assessment rate decreases for property taxes, businesses will be forced to continue to pay a sum they may not be able to afford after difficulties surviving lost revenue during the pandemic. (Though, the commercial rate, locked in at 29%, largely would remain unchanged if the bill passes or not. It has stayed the same for years since Gallagher was introduced, and if passed, would stay at 29%.)
Now, with ballot measure Amendment B asking voters to repeal the Gallagher Amendment, Coloradans will have a choice of how they wish to pay their tax dollars, and the decision isn’t simple.
A repeal of the Gallagher Amendment from the state’s constitution would freeze tax rates, which means homeowners may have to pay slightly more since there would be no automatic decrease. Opponents of Amendment B believe it would only hurt homeowners facing uncertainty during a pandemic that has forced financial hardship for many and forced several to the brink of eviction.
But without a repeal, millions could be lost in funding for school districts while fire departments would continue to feel the brunt of lost revenue, including Montrose Fire Protection District. Essentially, any agency relying on property tax revenues could feel the impact for years to come with residential rates expected to decrease from 7.15% to 5.88% next year without a repeal.
How could the initiative impact Montrose?
The introduction of the Taxpayer’s Bill Of Rights (TABOR) in 1992 changed the possibilities for local communities. With TABOR in the fold, governments in Colorado can’t raise taxes without voter approval. Also, mill levies (tax rates applied to an assessed value of a property) can play a role in how everything shakes out. Montrose Regional Library and the Montrose Fire Protection District (MFPD) have asked voters for mill levy increases in recent years, which impacted commercial properties and small businesses in Montrose.
“When they increase their mill levies on residential folks, they have to also increase it on nonresidential folks, on commercial people,” Montrose County Assessor Brad Hughes told the Montrose Daily Press.
“That’s how the mill levies get higher on these commercial properties, and ultimately they would pay higher taxes.”
This similarly occurred when Montrose Regional Library made a request, looking to recover after the assessed value declined after the Great Recession in 2007-2009.
“They went and asked voters for that increase, which got them back to their original operating level, however, for commercial people, when you add additional mills, that’s a direct tax increase for them,” Hughes said.
It’s also much more complex due to questions remaining on the future of market value, though much of this is relative and on the basis of what a specific county’s figures look like. For instance, according to ATTOM Data Solutions, Montrose County has an average estimated home value of $300,907, with an average property tax of $1,251. The figures are much higher on the Front Range, with tax rates consistently above 0.50%, compared to the 0.42% in Montrose.
“You can’t say that someone’s taxes are going to go up or down because of this amendment passage. There are just too many variables right now,” Hughes said.
In terms of how the Montrose Fire Protection District (MFPD) could be impacted, it’s clear there could be some challenges if Amendment B does not pass, despite a 2018 mill levy increase that was passed to offset losses the district was facing in 2019 due to the Gallagher effect.
Since MFPD relies on property tax revenue (with other fees that also help slightly) as a special district, any decline in that revenue would limit hiring plans, resources and increase response times. This, coupled with operating expenses that may lead to less staff, could limit the department’s ability to aid someone nearby experiencing a stroke or heart attack if it can’t make it within minutes. With less revenue, the MFPD, theoretically, could find itself shy of an ambulance or staff, further limiting resources.
Similar challenges could be presented to the library. Less revenue means limiting availability, inventory, resources that are up-to-date (including online) and an inability to improve the building.
However, if the bill passes, entities relying on property tax revenue can achieve a bit of breathing room and security with the pandemic continuing to drive up uncertainty.
Breaking down the ballot language
Though the question on the ballot seems straightforward, there are a few portions that warrant some further context, Hughes says.
The first sentence of the question, which reads, “Without increasing property tax rates,” has some deeper meaning due to language within TABOR.
“They’re not going to increase property tax rates because of TABOR,” Hughes said. “The 7.15% and the 29%, you can’t raise either one of those. ... it’s kind of misleading because the rates can only stay flat or go down.”
Also, the last portion of the ballot language oversimplifies how the commercial assessment rate is set.
“It’s taking it out of the constitution, putting it into the statutes, legislature, in Colorado law as opposed to the constitution, so therefore, changes to it and how it’s administered now become a function of the legislature and not from a vote of the people,” Hughes said. “... all this is really doing is freezing the rates.”
With the rates frozen, if B is passed, there will be additional local assessed value for the taxing entities, but for now, it’s unknown if it will mean higher taxes for the community.
“We know that market values in Montrose are going up,” Hughes said. “If market values are going up, and the assessment rate is frozen, then the only other component is the mill levy, and really, that would be the taxing entities that have to determine where their mill levies are to operate their budgets.”
Josue Perez is a staff writer for the Montrose Daily Press