Colorado passes bill to to avert property tax ballot measures

The Colorado Legislature wrapped up a special session Thursday with the passage of a bill to circumvent property tax cut initiatives on the Nov. 5 ballot that troubled the state's municipal bond market.

House Bill 1001 incorporates a deal with Initiative 50 and 108 backers, who agreed to remove the measures from the ballot and forgo pursuing similar ones in the foreseeable future as long as state officials adhere to provisions in the agreement.

Gov. Jared Polis called the results of the special session he ordered "an important step for Colorado to end the property tax wars." 

Bloomberg News

"I look forward to seeing the risky ballot measures pulled down and signing this legislation into law so small businesses and homeowners can keep more of their hard-earned money," he said in a statement. 

Initiative 50, a proposed constitutional amendment to put a 4% cap on statewide property tax revenue growth that could only be lifted with voter approval, especially worried Colorado bond market professionals. 

They raised alarms about a lack of critical details on how it would be implemented if passed by a required 55% of voters. They also warned the measure would raise issuer borrowing costs and spark litigation, particularly against metropolitan districts, which finance public infrastructure for housing developments through property taxes levied on the new tracts.

"The bill as currently drafted does meet the dual goals of lowering property taxes for Coloradans while maintaining the protections needed for special district debt that drive housing affordability in the state," Zach Bishop, head of Piper Sandler's special district group public finance investment banking, said in an email.

Ann Terry, CEO of the Special District Association of Colorado, which represents metropolitan, fire, health, water, and other districts, said while it was too early to determine the bill's impact, some districts could be harmed financially. 

The special session began Monday with a flurry of bills, including a proposed constitutional amendment for the Nov. 5 ballot that would ensure local control of property tax changes. While that measure passed the House, it failed to get out of a Senate committee on Wednesday, leaving only HB 1001 and HB 1003, which involves personal property tax exemptions for agriculture, receiving final passage.

HB 1001 expands on $1.3 billion in property tax cuts for 2024 and 2025 expected under Senate Bill 233, which became law earlier this year, by adjusting tax revenue growth limits for school districts and local governments and reducing property assessment rates. 

Under HB 1001, property taxes would be cut by an additional $255 million in 2025, rising to $295 million in 2026 with the state required to make up for a portion of the lost local revenue, according to the Colorado Fiscal Institute.

Amid a surge in home values, state lawmakers have been trying to rein in property taxes in the absence of a mechanism to keep them in check. The state's 1982 Gallagher Amendment, which strived to protect homeowners from rising tax bills, was repealed by voters in 2020.

Business group Colorado Concern, which along with Advance Colorado backed the ballot initiatives, had contended the initiatives were needed "because lawmakers have failed to take the state's property tax inflation seriously."