Two November ballot questions, if passed, will change how property taxes are determined.
The state question will change assessment rates and percentage of taxes paid by residential properties. The county question will change limits on county mill levies.
At November’s general election, Park County voters will be asked two questions regarding how property is assessed and taxed. One is by the state, and the other is by the county.
The state will ask Colorado voters to repeal the Gallagher amendment.
The amendment is one of two ways property taxes are limited. The other is the Taxpayer Bill of Rights, or Tabor.
The amendment has governed how property values have been assessed since 1982. Before then, property taxes were skyrocketing, which led to the amendment.
The amendment set assessment rates as a percentage of actual property value.
The assessment rate multiplied by the actual property value determines the assessed value of a property.
The assessed value is the portion of a property’s actual value used to determine property taxes.
That assessed value multiplied by the local government mill levy equals the amount of property taxes due to that entity.
The state legislature passed and voters approved the Gallagher amendment in 1982 to address rapidly increasing residential property taxes.
At that time, the residential property assessment rate was 21 percent of the total property value. Nonresidential property assessments were permanently set at 29 percent of the total value of the property.
Gallagher also limits residential property taxes to 45 percent of the state’s total property values and nonresidential property taxes were set at 55 percent of the total.
According to a Gallagher fact sheet on the state website, the 45/55 split was chosen because that was the general percentage of residential property versus the percentage of nonresidential property values in 1982.
With the rapid residential growth beginning in the 1990s and continuing through today, the 45/55 split could not be maintained without reducing the residential assessment rate.
To keep the 45/55 percent of taxes over the years, residential property assessment rates had to be reduced from the original 21 percent of actual value.
The legislature determines the residential assessment rate every two years to keep residential taxes at 45 percent of total, according to the fact sheet.
Today, the residential split is about 75 percent of all property values, but still is taxed as if residential is 45 percent.
Nonresidential property is about 25 percent of total property values instead of 55 percent, it was in 1982.
The 2020 assessment rate for residential property is down to 7.15 percent of the actual value, according to the county commissioners’ resolution placing the county question on the ballot.
As an example, if a residential property is valued at $100,000, then assessed value for taxing purposes in 2020 is $7,150.
In 1982, with a 21 percent assessed value, residential assessed value on $100,000 was around $21,000 or about three times more than today.
If a property is nonresidential, it was valued at 29 percent or $29,000 in 1982. Today the assessed value is still 29 percent.
The assessed value of a property is multiplied by the necessary mill levy to determine the amount of taxes per property each taxing entity can levy.
A mill levy is the tax rate applied to each $1,000 of the property’s assessed value.
In the above example of a $100,000 residential property with an assessed value of $7,150 and a mill levy of 20, the county tax would be $7.15 multiplied by 20 to equal a county tax of $143.
Tax on that same $100,000 property in 1982 would have been around $425.
As the residential taxes per property have gone down, nonresidential assessed values and taxes have gone up.
The 2020 ballot question will repeal Gallagher, but doesn’t replace it. It is unclear how assessment rates will be determined if the question is approved and Gallagher is repealed.
County ballot question
Park County commissioners voted Aug. 12 to ask voters to allow the county to increase the county mill levy to maintain revenue lost by any state assessment rate reductions.
The county question will allow the commissioners to change the mill levy every year.
Commissioner Dick Elsner said the county question will protect the county from decreased property tax revenue.
The county question is not tied to the passage or defeat of the state question. If approved, the county question will take effect Jan. 1, regardless of whether the state question is approved.
Elsner said if Gallagher is not repealed by voters in November, next year’s assessment rate will drop from 7.15 percent to around 5.5 percent in order to maintain the 45/55 split.
If that happens and the county question fails, it will cause a 1.65 percent reduction in residential assessed values and taxes over 2020 values.
Commissioner Ray Douglas said voters need to realize the county’s sales tax can’t be used to help run the county. It does not go into the general fund, but into the land and water trust fund.
If voters approve the county question, the commissioners will adjust the mill levy to raise the same amount of taxes as levied in the previous year plus the additional revenue allowed by Taxpayer Bill of Rights.
TABOR allows additional revenue each year as determined by the annual rate of inflation plus the percentage of annual population growth.
According to the county resolution, if Gallagher is repealed, the county could be faced with yearly uncertainty on what the assessment rate will be for that year, both for residential and nonresidential properties.
“It (county question) is a good way to stabilize our revenue,” Elsner said.
Commissioner Mike Brazell said he had a different opinion about the question, but would let the voters decide. He didn’t sign the resolution.
If passed by county voters, the mill levy adjustment will begin Jan. 1, 2021.
Each property’s total tax is based on the sum of all taxes levied by each government entity in which the property is located.
Park County’s tax share has traditionally been around 30 percent of total taxes per property.
The commissioners approved the payment of vouchers in the amount of $374,633. Public works accounted for $230,140. General fund spent $88,214. Six other funds spent the remainder of approximately $56,000.