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  • Dylan Anderson

Colorado’s property tax relief proposal, Proposition HH, explained

Measure will lower property taxes for next compared to what they would be over current law, but it also reduces money allocated for TABOR refunds.

Editor's note: Following the initial publication of this story, Routt County Assessor Gary Peterson shared his projection for the mill levy that will be assessed in Old Town on next year's tax bills. Below is an additional projection for how Prop. HH would impact taxes on a $1 million home in Old Town Steamboat, using Peterson's projection. On Tuesday, voters across Routt County will consider Proposition HH, a state measure aimed at relieving potentially steep property tax increases headed for property owners across the state next year.

Property tax increases are not because of an increased tax rate or a change in collections, rather they are being fueled by historic property valuation increases. Across Colorado valuations have risen a median of 40% and in Routt County that number is higher — about 74%.

That equates to a roughly $10 billion increase in the real value of all property in Routt County, according to projections from the county assessor’s office.

With this increase looming, the Colorado Legislature came up with SB 23-303 and Proposition HH in the waning days of the session to provide relief.

How are property taxes calculated and why are they going up?

Property taxes are based on the value of the property. Every two years, county assessors publish the real value of your property, which is used to calculate the valuation and the assessed value. Taxes that were paid this year were based on the valuation of property completed in June 2021.

Property Tax Formula:

[Property Value – Valuation Discount] x Assessment Rate = Assessed Value

Assessed Value x Mill Levy = Property Tax Bill

Those valuations were updated this year —Routt County saw an increase in valuations of about 57% — and will be first used on taxes for next year’s bills. Taxes levied on the updated valuations will not increase by the same 57%, as entities like Routt County and the Steamboat Springs School District are Tabor limited and will need to reduce mill levies.

Increases will likely be the smallest in Steamboat, since the overwhelming majority of taxing entities impacting city residents are limited by TABOR, and some entities like Colorado Mountain College and the East Routt Library District (Bud Werner) have already indicated they will ratchet down their mill levies and forgo the full increase in property tax revenue.

Will Prop. HH lower property taxes?

Depends on how you look at it.

Prop. HH changes two of the four inputs into the property tax formula, specifically the valuation discount and the assessment rate.

Under Prop. HH, the valuation discount would increase from $15,000 to $50,000 for 2023 tax bills (paid in 2024). That discount then drops to $40,000 for 2024 bills (paid in 2025) and stays in place at that level for primary residences until 2032. If you own a second home, you are no longer eligible for this discount starting for 2025 tax bills paid in 2026.

This flat rate has a greater impact on homes with lesser value but does reduce valuations across the board. For homes with higher valuations, the $50,000 discount has a lesser impact, but still an impact.

The second change is to the assessment rate for residential property, lowering it from 6.765% under current law to 6.7% if HH passes. This lowers the amount of value that property owners end up paying taxes on, and in turn, lowers tax bills.

So, for a $1 million home in Old Town Steamboat, here is how tax bills look with and without Prop. HH:

Old Town is within taxing district 20SS, which assessed just over 55 mills on the most recent tax bills.

Current Law: [$1,000,000 - $15,000] x (.06765) = $66,635 x (.055195) = $3,678 in property taxes

Under HH: [$1,000,000 - $50,000] x (.067) = $63,650 x (.055195) = $3,513 in property taxes

That is about $165 in savings or a 4.5% reduction in property taxes for next year's bill. According to a projection from Routt County Assessor Gary Peterson, the 20SS taxing district will assess about 43 mills on 2023 tax bills, a change that will come after Routt County and the Steamboat Springs School District ratchet their mill levies down because they are TABOR limit.

Current Law: [$1,000,000 - $15,000] x (.06765) = $66,635 x (.043) = $2,865 in property taxes

Under HH: [$1,000,000 - $50,000] x (.067) = $63,650 x (.043) = $2,737 in property taxes

This is about $128 in savings or a 4.5% reduction in property taxes on next year's bill.

This puts the range of potential savings from Prop. HH a $1 million home in Old Town Steamboat at $128-$165, depending on where the mill levy is set, assuming it is between 43 mills and 55 mills.

Prop. HH also contains additional relief from property taxes for seniors. Currently, if you are over 65 and have lived in your home for 10 years, you get an additional $100,000 in a valuation discount. If Prop. HH passes, this benefit would become portable, meaning you can move to a new property and retain the additional benefit. This hopes to promote seniors downsizing, as some have stayed in homes to avoid losing that benefit.

So if the question is: Does Prop. HH reduce property taxes for the 2023 tax year and beyond compared to what they would be without Prop. HH, the answer is yes. If Prop. HH passes, the tax bill property owners will pay next year will be smaller to a degree than they would have been without the measure.

But if the question is: Does Prop. HH make property taxes for the 2023 tax year lower than in the 2022 tax year, the answer is for most properties no. While Prop. HH will bring property tax relief, most properties still saw a large enough increase in valuation in the last two years to outweigh the efforts taken in Prop. HH.

How do TABOR refunds factor in?

Prop. HH doesn’t just impact property taxes. It also makes changes to how much revenue the state can retain from taxes, which in turn could reduce available funding for TABOR refunds.

As the Colorado Sun notes, opponents of Prop. HH argue it will eliminate TABOR refunds while supporters of the measure claim it preserves them. As The Sun put it, “Both claims are misleading.”

TABOR, or the Taxpayers Bill of Rights, was passed in 1992 and puts a cap on how the state budget can grow, limiting spending increases to a measure of population growth and inflation. Tax revenue collected above that cap needs to be refunded to taxpayers unless voters agree to increase that cap.

If that cap is exceeded — it has been each of the last three years, but just six times total since the 2005-2006 fiscal year — the state legislature has the authority to decide how that money is refunded.

Under current law, this is distributed in a series of income tiers with higher earners getting a larger refund. If Prop. HH passes, the Legislature passed a bill in the last session that replaces that methodology and instead sends everyone an $832 refund check next year.

If Prop. HH passes, it increases the amount of revenue that can be retained by the state by 1% each year. Democrats in the Legislature argue this is needed to backfill local districts that are collecting less revenue because of the other changes in Prop. HH — the increased valuation discount and lower assessment rate.

Taxing entities in Routt County likely wouldn’t see much of this backfill funding, as valuations locally have largely outpaced the reductions included in Prop. HH.

Based on nonpartisan projections from legislative staff, Prop. HH allows the state to retain an additional $170 million in the current fiscal year and $360 million in the next fiscal year. Under current law, these dollars are part of the pool of money to be refunded to taxpayers. So, if Prop. HH passes, that pool is reduced by these amounts, leaving less money for refunds.

In the upcoming two years, there would still be TABOR refunds if Prop. HH passes, based on current projections. The current fiscal year would still be expected to have a $1.5 billion surplus to be refunded and the following fiscal year that figure is estimated at $1.4 billion. TABOR refunds are possible in future years as well, but it gets hard to forecast the future because state budget surpluses are heavily impacted by short-term economic trends.

Still, the 1% increase compounds each year, so the amount of money not going to TABOR refunds increases over time.

Based on the same nonpartisan projections, Prop. HH could lead to a $2.2 billion growth in the state budget by fiscal year 2031-2032. This assumes that Colorado population grows as currently expected and a 2.5% inflation rate over the next decade. Slight changes in either of those assumptions could vastly change how Prop. HH impacts the state budget and TABOR refunds.

Prop. HH isn’t easy to understand. Here is more coverage explaining the measure:


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