Coloradans have the third-lowest effective property tax rate in the nation. For many homeowners, that’s a good thing, and the Gallagher Amendment, which we adopted to our state constitution in 1982, is a big reason why.
On the other hand, this has led to our small business owners paying four times what homeowners pay in property taxes. The Gallagher Amendment has reduced local funding for services like K-12 schools, fire districts, and other special districts.
Amendment B and local ballot measures propose to freeze those property tax savings, prevent another tax increase on small business owners, and prevent further cuts to the public services we rely on.
The Gallagher Amendment was part of a package of property tax changes in our state constitution which the Colorado legislature referred to voters as Amendment #1 on the 1982 ballot.
The Gallagher Amendment was the culmination of a property tax revolt that began in Colorado in the late 1970’s as a result of growing frustration among Colorado voters about the increasing property tax which they were paying as extremely high inflation and high growth, especially along the Front Range, caused their property values to grow.
Prior to the passage of Amendment #1 in 1982 (the comprehensive property tax proposal which included the Gallagher Amendment), there was no statewide oversight to ensure that each county assessed property values in a consistent manner. Some counties chose not to reassess the value of some classes of property (i.e. Residential) in order not to increase the tax burden for those property owners, and some counties chose not to reassess ANY of their property during some scheduled reassessment cycles. Consequently, there was a lot of inequity in property values across the state.
While the Gallagher Amendment was intended to address specific challenges at a specific time when it was proposed and passed in 1982, changes in real estate market conditions over time and the voters’ adoption of subsequent constitutional amendments which retroactively affect the Gallagher Amendment have created unforeseen and unintended consequences that are causing significant challenges for Colorado today.
Today, Residential property makes up about 80% of the actual market value of all property in the state. However, the Gallagher Amendment has frozen the ratio of Non-residential and Residential property values at their 1982 levels and limits the taxable value of all Residential property to never constitute more than approximately 45% of the state’s total property valuation.
Because the growth in value of Residential property in the state has outpaced the growth in the value of Non-Residential property, the Gallagher Amendment has forced down the Residential Assessment Rate in order to abide by the Gallagher Amendment’s requirement that Residential property make up no more than 45% of the total value of all property in the state.
When Colorado adopted the Gallagher Amendment in 1982, this Assessment Rate for Residential property was 30%; today, it’s been forced down to 7.15% to 5.88% despite home values being up 10% from the last time the legislature was forced to set this rate according to the latest projections.
Regardless of how you end up voting on various issues on the November ballot be sure to remember that Amendment B and local initiatives will not raise property taxes but rather freeze them at current rates. Be an educated voter, avoid knee-jerk yes or no voting, and take the time to learn about how Gallagher impacts our quality of life in rural Colorado when casting your ballot this election cycle.
Chris Romer is president & CEO of Vail Valley Partnership, the regional chamber of commerce. Learn more at VailValleyPartnership.com