It goes without saying that the Gallagher Amendment, passed by Colorado voters in 1982, coupled with passage of the TABOR Amendment in 1992, is proving challenging to governments and special districts reliant on property tax collections to provide services. Charged with crafting a balanced budget by year’s end, county manager Mike Bordogna presented the San Miguel Board of County Commissioners (BOCC) at Wednesday’s regular meeting with several options to consider as they seek to stabilize revenues.
The first option, as presented, would be to do nothing and cut services, a choice the board rejected. Bordogna gave several examples of how cuts would look, based on a projected loss of revenue totaling $1,128,378. Entire departments, such as public health, the attorney’s office or the Information Technology department would be gutted.
Option 2, as Bordogna laid out in his presentation, would be to do nothing and rely on the state’s efforts to overturn Gallagher and freeze the residential assessment rate (RAR). With that option, Bordogna said there would be “a greater degree of certainty,” though it is not at all guaranteed the ballot measure will pass in November.
“I’m banking on the state measure not passing,” said commissioner Hilary Cooper.
Going to the voter for a mill levy increase was the third option before the board. But that option’s effectiveness — if approved by voters — bore its own limitations.
“It would take 2.06 additional mills to account for the change in the RAR,” Bordogna’s memo explained. “This would disproportionately impact non-residential tax payers (because they pay over four times the taxes that residential does). It also does not prevent future declines in the RAR.”
The commissioners ruled that option out, as well.
That left options four and five, ballot measures to either ask voters to stabilize current and future tax rates by allowing the collection of “at least the same amount of taxes as the previous year,” (Option 4), or to freeze the current RAR in a manner similar to state’s ballot measure, and one that would only go into effect if voters rejected the state measure.
Untangling the intricacies of how RAR is calculated and understanding the mechanics of the paired effects of Gallagher and TABOR on residential property taxes is not a topic on which many can speak with any fluency. The BOCC and county staff have long recognized that, whatever course of action they choose to take, educating voters will be a significant task.
According to Wikipedia, “The Gallagher Amendment … set forth the guidelines in the Colorado Constitution for determining the actual value of property and the valuation for assessment of such property.”
Bordogna’s memo tackles it further. “Based on a 45-55 split, the 45 percent of property taxes from residential property was allowed floating tax rate, but non-residential was fixed at 29 percent. Residential value accounts for over 75 percent of Colorado's valuation and continues to increase. The only way to continue to maintain the 45-55 split is for the continued decline of the Residential Assessment Rate (RAR).”
Enter TABOR, the so-called Taxpayer’s Bill of Rights. Also a Constitutional amendment, TABOR puts every tax hike or bond measure in the hands of the voter. A 2019 Colorado Sun story puts it this way: “Coloradans want better schools, faster commutes and safer streets, but they usually don’t want to pay higher taxes to get them. And thanks to a tangle of voter-approved constitutional spending restrictions and mandates, that fundamental tension between services and spending is more complicated to navigate in Colorado than just about any other state.”
With TABOR layered on Gallagher, a lowered RAR means that raising the rate must go to the voter. Currently, the RAR at 7.15 percent, it is predicted to decline to 5.88 percent in the next valuation cycle (a 17.8 percent decline), according to Bordogna’s memo. That means, the memo continues, that communities whose tax base is primarily residential are disproportionately impacted. Staff recommendation was to “submit a question to the voters that addresses the assessment rates for all classes of property once, rather that a mill levy increase, which is likely to only offer a short term solution,” or to present a ballot measure to freeze rates at current levels.
Though it would be the most difficult to put in simple terms, should the commissioners eventually opt to go to the voter, the board gave direction to Bordogna and county attorney Amy Markwell to research Option 4 further and come back to nest week’s special meeting with more information.
“I don’t like the idea of an increase in the mill levy,” said commissioner Kris Hosltrom, noting that it would be little more than a temporary fix. “Option 4 seems the most reasonable to pursue.”
Commissioner Lance Waring also voice his support for looking further into potential ballot language and mechanics of Option 4.
Cooper expressed frustration with the challenges presented by Gallagher and TABOR, but said some kind of action would likely be required.
“I’m not sold on any ballot measure,” she said. “We’ve got to do something to address this. I’m just not sure what to do right now.”
The commissioners face a Sept. 4 deadline to file ballot language with the county clerk.