This is a pretty loaded question but the primary factor affecting your taxes is your home's market value, as assigned by the Assessor's office on the June 30th appraisal date. As mentioned in the previous blog post, properties in Colorado are revalued for tax purposes every other year in the odd-numbered years using the market approach to value. Since property taxes are paid in arrears, that means each even-numbered year the tax amount can change. There could be an increase or decrease depending on market conditions at the time of the June 30th appraisal date. So let's be real here. Unless you've been living under a rock, you are aware that the real estate market post-Covid has been hotter than ever.
There are also government and local forces that influence, not just the value of your home, but also the rate at which your home is taxed. Such was the case in 2021 when voters in the Summit Fire and EMS Fire Protection District voted to approve a property tax increase to support the organization's efforts. Additionally, in 2020 Colorado voters approved repealing the Gallagher Amendment which was the state's floating residential assessment rate. This froze the residential assessment rate at 7.15% with no indication of a replacement plan.
When and why was the Gallagher Amendment passed?
This measure was passed in 1982 and was the culmination of a property tax revolt that originated in the late 1970's. Homeowners, concerned about skyrocketing residential property taxes, pressured the state legislature to address the problem.
What exactly did the Gallagher Amendment do?
Gallagher divides the state's total tax burden between residential and nonresidential (commercial) property. According to the Amendment, 45% of the total amount of state property tax collected must come from residential property, and 55% of the property tax collected must come from commercial property.
Furthermore, the Amendment mandates that the assessment rate for commercial property, which is responsible for 55% of the total state property tax burden, be fixed at 29%. The residential rate, on the other hand, was annually adjusted to hold the 45/55 split constant.
Why did the voters repeal a measure that saved them money on property taxes?
The pandemic was a major driving force. At that time, public agencies had already laid off around 40,000 workers across the state and Gallagher was expected to trigger an additional $491 million in cuts to school districts and $204 million in cuts to county governments. Those figures don’t include the impact on cities and special districts. But the drop in property tax revenue had also set off a cascade of problems for the public sector, squeezing local budgets in rural areas that can least afford it, while shifting more costs to a state government that has financial challenges of its own.
To summarize, the interplay of the 2021 reappraisal and recent voter approved initiatives caused property taxes due in 2022 to increase more than what you've seen in the past. This is an example of what we call in appraisal the four forces that influence value:
1. Physical and Environmental Characteristics
This includes the quality of conveniences; availability of schools, shopping, public transportation; as well as barriers to future development (build-out) which is pertinent here in the mountains.
2. Economic Influences
An example of this would be the historically low interest rates we've been experiencing for a while now. This creates a demand as more people can afford to borrow money.
3. Political or Government Regulations
The repeal of the Gallagher Amendment is a recent example of this. Other examples are building codes, zoning laws, public health measures, monetary policies and government housing.
4. Social Ideals and Standards
With the uptick in remote workers there are more folks than ever before able to work and live in our beautiful mountain community. This has created a higher demand for housing which was already in limited supply.