For Colorado’s local governments to continue providing similar levels of service, the Gallagher Amendment will need to be repealed, the Garfield County assessor said at Tuesday’s Garfield County Board of County Commissioners meeting.
“The complicated nature of trying to fix this problem … is that somewhere, somebody is going to have to lose,” County Assessor Jim Yellico said. “And, the people that would lose are your voters.”
Added to Colorado’s Constitution in 1982, the Gallagher Amendment was created to ensure home owners wouldn’t be stuck with the lion’s share of funding government. To accomplish this, the amendment mandated that local and state governments couldn’t collect more than 45% of their property tax revenues from residential valuations.
Currently, that 45% cap means homeowners only pay taxes on about 7% of their home values, but assessors across the state predicted that could drop to as low as 5% in the next couple years.
On the opposite side, non-residential properties, whose values have also increased, continue to pay taxes on 29% of their property values.
A bi-partisan effort of both state and local officials is scheduled to add questions to the November ballot that would effectively remove the Gallagher Amendment from the state’s constitution, but there’s still questions about the long-term ramifications.
Associated Governments of Northwest Colorado Executive Director Bonnie Petersen presented the commissioners with some of the pros and cons of the repeal.
“The formula set up by Gallagher is impacted by growth on the front range, which we all know is out of control,” Petersen said. “As that residential sector grows and those valuations go up, every time we assess property values, residential (tax) rates go down in rural communities.”
Without a repeal, residential property tax rates could continue to go down, providing less money for governments to conduct their day-to-day operations.
“The state and all of our communities are facing budget shortfalls,” Petersen said. “That has all sorts of domino effects in terms of local governments, and there’s significant concern.”
Repealing Gallagher could cap the rate at about 7% because of language in the TABOR amendment, which could prevent an increase in the assessment rate without the people’s vote, she said.
But, some aren’t convinced TABOR is airtight.
“There is concern the word assessment is not in TABOR,” Petersen said. “So questions arose as to whether Legislature could change the assessment.”
Additionally, if voter’s repeal Gallagher, they would be voting to raise their own taxes.
Based on predictions by Dennis Gallagher, the Gallagher Amendment’s author, Petersen said if repealed, property taxes could cost the state’s residential land owners an additional $203 million in the first year of the repeal.
Yellico said for commercial property owners to pay less and governments to continue providing the current level of services, residential property taxes would need to increase.
“That’s on the voters,” he said. “And voters don’t tend to raise their own taxes.”
County Commissioner Tom Jankovsky said he did not support repealing Gallagher.
“I believe in limited government,” Jankovsky said. “And we’ve got to deal with what’s been dealt to us.”