How removing the Gallagher Amendment could work in Glenwood Springs
Voters could decide in November whether longstanding statewide restrictions on property tax ratios should be removed.
As part of a bipartisan effort, both state and local officials are planning to add questions to the November ballot that would effectively remove the Gallagher Amendment from Colorado’s constitution.
Added in 1982, the amendment set out to ensure homeowner’s wouldn’t bear the brunt of funding government. But as the housing market boomed and home values skyrocketed, businesses were left to pick up the tab, said Karl Hanlon, Glenwood Springs city attorney.
Prior to the Gallagher amendment, when residential properties accounted for about 45 percent of the state’s total taxable property values, houses were taxed at about 30 percent of their assessed value.
The amendment mandated that local and state governments couldn’t collect more than 45 percent of their property tax revenues from residential valuations, according to information provided by Building a Better Colorado.
As residential properties’ taxable values increased, now accounting for about 80 percent of the state’s total taxable property values, the amount a local government could tax a residential property decreased to ensure the 45 percent ratio was maintained, dubbed a ratcheting effect, Hanlon said.
To determine how to tax a property, a local government multiplies the property’s base market value by an assessment rate dictated by the state constitution and modified by the Gallagher Amendment.
Since 1982, residential property tax assessment rates have shrunk from around 30 percent to about 7 percent in 2020. Meanwhile, all non-residential properties are taxed at 29 percent of assessed value as they have been since the Gallagher Amendment was approved.
Reduction of services
Property taxes are collected locally and spent locally, Building a Better Colorado reported. Colorado has not imposed a property level tax since 1964.
The funds primarily go to school districts, but also fund special districts — such as fire and library districts — cities, counties and junior colleges.
Analysts predict the ratcheting effect in 2021 could drop residential property tax rates down to about 6 percent, which would result in the city of Glenwood Springs losing about $131,000 in revenue from property tax mills and could significantly impact the city’s fire districts, Mayor Jonathan Godes said.
“We look at this as a potential cut of $131,000, which is essentially two less people available to fight fires,” Godes said.
The revenue problem is compounded by decreasing sales tax revenue as a result of the pandemic, Hanlon said. School districts rely heavily on property tax revenues, but the city’s fire districts can pull money from the general fund, which is fed — in part — by sales taxes.
With both sources of revenue declining, Godes said maintaining the city’s current level of services would be challenging.
In addition to some state legislators’ initiative to “de-Gallagherize” Colorado’s constitution, the Glenwood Springs City Council approved a motion, July 2, to craft language for additional questions on the ballot that would further de-Gallagherize the city’s revenue in the future.
Although the city’s ballot questions have not been released yet, Hanlon explained the intention of the questions will be to ensure the tax rate for assessed residential value does not drop below its current rate of about 7 percent.
Hanlon said property tax percentages would not increase as a result of the city’s ballot question.
Godes added, “The goal is to not have our most basic services — health and safety — see a reduction in revenue.”
The city’s ballot question is separate from the state’s question, though both ask the voters to commit to similar changes.
If the Legislature’s ballot question failed, Hanlon said the city’s ballot question would insulate the city’s revenues from further ratchet effects. But the question is still important if voters approve Legislatures’ de-Gallagher effort, he added.
“It allows us to maintain revenues where they’re at, which under the proposed repeal of Gallagher … there could, frankly, be a reduction (of residential property tax percentages),” Hanlon said. “Keeping in mind that with the Tax Payer’s Bill of Rights Amendment (TABOR) in place, the repeal of Gallagher does not mean a local jurisdiction could increase the taxes on your property without going to an election to make that happen.”
While most of the City Council approved the motion for city staff to craft de-Gallagher questions for the November ballot, Councilor Tony Hershey voted against the motion.
“I think it’s duplicative to have it on a local ballot,” Hershey said. “Why not see what happens on the state ballot first.”
In general, Hershey said he does not support either the state or the city’s movement to de-Gallagherize. The potential hike in residential property taxes — though any increase would need voter approval as per the TABOR amendment — is too much, he explained.
“The TABOR amendment is next,” Hershey speculated. “The government will spend as much money you give them.”
Instead of additional questions to remove or hamper the Gallagher Amendment, Hershey said he’d rather see school and fire districts directly ask voters for more money by way of additional property mill increases, which would apply to businesses as well further increasing the tax burden on commercial properties while marginally increasing residential taxes.
“I’m opposed to (removing) Gallagher, because I think the government spends too much money and not in the right way,” Hershey.
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