by Sandia Belgrade, 

with Peter Peterson, 

County Assessor


JoAnn Groff, Property Tax Administrator for the state of Colorado, has announced that this county and many others will see an 18% budgetary reduction in funding. What’s happened to cause such a severe situation? Every two years since 1982, the Gallagher amendment, a constitutional measure approved by voters, has required that the residential property taxes assessed value statewide can comprise no more than 45% of the state’s overall assessed value. Non-residential properties make up the remaining 55%. The target percentage, referred to as the 45/55 split, is so that commercial and residential assessment rates can’t get too far off from each other. Because the 45/55 ratio is set statewide, Gallagher doesn’t take local market conditions into consideration. That means the formula which is driven by what happens in the Front Range, where the bulk of the state’s population lives, can have dire effects on rural counties. Most years Gallagher doesn’t come into play. If commercial values and home values rise at a similar pace, there’s no need for an adjustment. According to Peter Peterson, Saguache County Assessor, since 2003, the residential rate has been 7.96%. Next year, however, according to the Department of Local Affairs, that is projected to drop to 6.56%. Local officials apply that rate to their tax levies to calculate how much residential property owners owe.

What’s different this year?

There’s been a housing market boom in the Front Range, the urban corridor which includes places like Denver and Colorado Springs. Housing prices have gone through the roof coupled with a business downturn, such as a recent dip in the oil and gas industry. It means homeowners could wind up contributing more than their 45% share, throwing the ratio out of whack. According to Gallagher, under the state constitution, that triggers a mandatory tax cut for homeowners.

The State must reduce the residential assessment rate to 6.56% to maintain the ratio. The Taxpayer’s Bill of Rights (TABOR ) adds another layer of complexity. Gallagher can trigger an automatic reduction in the assessed rate, but Tabor states that if you lower a tax rate you cannot raise it again without voter approval. And no property owner is going to vote for an increase of their taxes.

Regional impact

Most rural counties will be hit hard, and our county government is going to be squeezed. The ripple effect on Saguache County could be severe; it has an equity imbalance because there is so little commercial property. With a reduced residential assessment rate, the County will have a shortfall, projected to be an 18% budgetary reduction in funding. Difficult decisions lie ahead for the Commissioners. For example, Las Animas County, due to loss of oil and gas revenue, lost one employee and County offices went to a 30-hour work week. It could happen here. Our County Commissioners will have to plan for a worst case scenario including a reduction in County services. Also affected will be emergency services and special districts such as the library district. The state is also projecting a $170 million shortfall for school districts across the state in 2018 which the state is required by law to replenish from its own coffers. Some are speculating that the revenue from marijuana might be able to help.

There is no easy fix

Lawmakers in both parties acknowledge the challenges that Gallagher poses. The challenge is to bring equity back to the entire system, but solutions are elusive.