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Colorado Democrats want same property tax rate cut in special session that was in failed Prop HH

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Sara Wilson

(Colorado Newsline) Colorado Democratic lawmakers plan to run a property tax relief package similar to the one offered in the defeated Proposition HH, which voters rejected by nearly 20 points earlier this month, during a special legislative session that convenes Friday.

The primary property tax bill would reduce the state’s residential assessment rate for the 2023 tax year to 6.7% from 6.765%. It would also exempt the first $50,000 of a home’s value. Those are the same numbers from the first year covered by Proposition HH, which Democrats posed to voters as a way to lessen the impact of rising property taxes hike due to rising home values in the state.

Lawmakers will now use a special session to address the problem’s immediate effects on next year’s taxes. While the failed proposition spanned a decade, lawmakers can only consider the current tax year during the special session and will need to leave long-term and more complex efforts on tax policy for the regular session that starts in January.

“At the end of the day, (Proposition HH) was about a long-term, comprehensive approach to this moment that we’re living in. The voters had their say, but that doesn’t mean the problem went away. It just means that we now need to set our sights, for the time being, on a short-term solution to the short-term problem at hand,” Senate President Steve Fenberg, a Boulder Democrat, told reporters Thursday.

Democratic Gov. Jared Polis called a special session following the failure of Proposition HH, which Democratic lawmakers placed on the ballot during this year’s regular session and campaigned for. The session will last until at least Sunday.

The Democrats’ plan would use $200 million from the general fund, which was already set aside for property tax relief, to partially repay school districts, fire districts and local governments the money they wouldn’t collect because of lower property tax rates. That backfill mechanism would not cut into surplus money over a cap set by the Taxpayer’s Bill of Rights.

School and fire districts would be first in line for repayment under the bill, followed by hospital and EMS districts and local governments. Any backfill to those local governments would be narrowed, however, to areas with growth rates that are less than 13.5%.

We have gone to great lengths to get local government associations and other stakeholders involved in the process while remaining focused on delivering real property tax relief. 
– House Minority Leader Rep. Mike Lynch

Democrats say they are trying to provide as much relief as possible given the constraint on how much money there is for backfill.

“This is what we thought was reasonable to separate out the districts and the counties that would be negatively harmed if we didn’t do backfill, versus the ones that have had the kind of growth that has been gangbusters, where they are seeing growth that far exceeds the increase in their expenses,” Fenberg said.

The Democrats’ plan does not cover commercial properties, which were included in Proposition HH.

That major bill will be introduced in the Senate by Fenberg and Sen. Chris Hansen of Denver. In the House, it will be sponsored by Speaker Julie McCluskie of Dillon and Speaker Pro Tempore Chris deGruy Kennedy of Lakewood.

Democrats plan to introduce other bills that fit into the scope of Polis’ special session call, including one that would make TABOR refund checks equal for every taxpayer, which would have happened if Proposition HH passed. Lawmakers do not know how much the checks would amount to yet.

TABOR is a state constitutional amendment adopted in 1992 that limits the amount of revenue the state can retain and spend. The limit rises based on inflation and population growth, and revenue collected in excess of the limit must be refunded to taxpayers.

“This is something we’re bringing back to make sure that for low and middle income Coloradans, they’re getting a fair shake of the TABOR refunds,” deGruy Kennedy said.

Additionally, Democrats plan to run bills to infuse an additional $30 million into a rental assistance program, increase the earned income tax credit and administer a federal program that funds summer meals for low-income children.

GOP plan

Republicans plan to introduce their own property tax relief bill during the special session. It would reduce the residential rate to 6.5% and the commercial rate to 25% and exempt $80,000 from residential home values. The plan would use over $600 million from the general fund reserves to pay for the rate cuts.

“We have gone to great lengths to get local government associations and other stakeholders involved in the process while remaining focused on delivering real property tax relief,” House Minority Leader Rep. Mike Lynch said in a statement. “We have shared our plan with the Democrats and hope they are sincere in bridging the divide and bringing real property tax relief to the people of Colorado.”

Democrats, however, are not likely to support much, if any, of the alternative plan. Fenberg called the Republican plan irresponsible.

“It is providing deep tax cuts and spending our reserves as a state to backfill the local governments. It isn’t long-term. It isn’t a responsible thing to do, because if and when we hit a downturn, we’re going to need those reserves. And if we don’t have them, because we have used it all for backfill, then we essentially are just creating more problems for ourselves as a state,” he said.

Democrats control substantial majorities in the state House and Senate.

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