The leaves have mostly fallen from the trees, the air is brisk and ballots have been mailed. It’s election season. This year, though national politics often dominate the political landscape during a presidential election year, voters in San Miguel County will be asked to address Ballot Question 1A. With just one county ballot initiative this election, it’s one that merits voters’ attention.
If passed, it would allow the Board of County Commissioners to “adjust the county mill levy rate for the sole purpose of sustaining existing levels of revenue from future state-imposed reductions in residential assessed valuation rates,” according to a county news release.
“People think that if the value of a home is going up, (the county) is getting more tax money,” explained county manager Mike Bordogna. But, he said, the reality of a piece of 1982 legislation called the Gallagher Amendment is that when it comes to residential property taxes, “the percentage of taxes that can be collected keeps being decreased because of this amendment.”
Amendment B, a state ballot initiative, also seeks to repeal the Gallagher Amendment.
Back in the 1980s, the passage of the Gallagher Amendment was a response by Colorado voters to concerns of rising property taxes. At the time, home values accounted for about 45 percent of the state’s total property values, with the remaining 55 percent comprised of all other types of property such as commercial, industrial and agricultural properties. The Gallagher Amendment, once passed, fixed the ratio for where tax revenue could come from: Statewide, the taxes collected from residential properties could not exceed 45 percent of the state’s total tax revenue.
The decades leading up to the 1980s were a time of dramatic growth in industry and manufacturing across the United States, and, Bordogna explained, there was a mentality that businesses should shoulder a higher tax burden than homeowners. The measure was intended to put the brakes on rising property taxes while maintaining a balance of sourcing tax dollars fairly from both homeowners and businesses. However, in the decades since the legislation was adopted, home values have increased at a rate consistently outstripping non-residential property values. Today, total home values in Colorado account for about 80 percent of the state’s total property values, and as such, the assessment rates have had to continually go down to keep the portion of the tax revenue pie to the required 45 percent.
The amendment has had the effect of lowering the property tax assessment rate over time from 21 percent in 1982 — meaning 21 percent of a home’s value was taxed — to 7.15 percent in 2018. Current data estimates that rate will be lowered to 5.88 percent in 2021.
So what does this mean for San Miguel County’s bottom line?
If the county’s voters decline to pass, by a simple majority, Ballot Question 1A, and state’s voters decline to pass Amendment B, then the county is looking at collecting a lot less tax revenue with which to fund public services.
“It’s going to result in an overall loss that’s going to be closer to $1.5 to $2 million dollars,” said Bordogna of the scenario in which 1A and Amendment B both fail. “If you think about $2 million dollars, that the entire budgets for public health, IT, county attorney and our administration all combined. If neither measure passes, we’re going to have to make some drastic cuts in public services.”
As Reeves Brown, a project coordinator for the non-partisan group Building A Better Colorado, said about the Gallagher effect, “The Gallagher Amendment has and will continue to erode the residential tax rate and corresponding tax base that funds all local services, as long as residential property values continue to outpace the growth of non-residential property values.”
He added, “And rural communities, quite unintentionally and unfortunately, will be affected the worst” by the lowering assessment rates.
Ultimately, 1A would provide the Board of County Commissioners with the authorization to adjust the county’s mill levy — the tax rate applied to assessed value — as a means of sustaining the tax revenue base and avoid major cuts to public services.
“If the state measure and 1A do not pass, we will begin implementing cuts in services immediately, with the goal of ramping down most service levels,” Bordogna said. “How and where would still need commissioner input. This includes all county services; things like law enforcement, road maintenance, mental health and early childhood contributions, public health, and emergency management.”