As the Front Range grows, tax revenue shrinks in rural Colo.
The Denver Post
In a mobile home park where the Eastern Plains meet the Denver suburbs, the Sable Altura fire station sticks out like a sore thumb from its modest surroundings.
Its fire engines are state-of-the-art — shiny trucks you’d find at one of the big metro fire departments 20 miles west. The trouble is: Years after replacing its run-down vehicles with the help of grant dollars, the ever-shrinking district can’t afford to hire firefighters to operate them.
District officials insist they make do with what they have, but what they have isn’t enough to reliably respond to emergencies 24/7.
Wages are low. Turnover is high. Volunteerism is down. Costs are up.
And for Sable Altura and other rural fire districts facing a financial pinch, it’s only going to get worse.
Booming home values along the Front Range are triggering cascading statewide property tax cuts, providing relief to urban homeowners but squeezing government agencies in rural areas where property values weren’t growing in the first place. The reason: a little-known property tax-limiting provision of Colorado’s state constitution.
In big population centers, which are better equipped to handle a drop in revenue, property values are rising so fast that their budgets will grow anyway. It’s the places that can least afford it that will see their tax revenues decline in the coming years. Places that have about half the volunteers they need. Places that spend heavily to train young firefighters only to lose them to higher-paying jobs in metro Denver. Places where response times get longer and longer each year.
“Outside the Front Range, it’s a big deal,” said Garry Briese, executive director of the Colorado State Fire Chiefs. “It truly is the urban-rural divide.”
All told, the property tax cuts will shave more than $450 million off residential bills in 2018, a Denver Post analysis of Department of Local Affairs property valuation data found. In half of the state’s 64 counties, there will still be more property-tax revenue because the growth in value is outpacing the 9.5 percent cut.
But the other 32 counties will see a net loss of money. And nearly all of them are located outside the Front Range.
“Those who have, get more,” Briese said. “Those that don’t have, don’t get enough.”
The Gallagher effect
Fourteen years have elapsed since Colorado’s Gallagher Amendment triggered a statewide cut like this — so long, that even lifelong Coloradans can be forgiven if they’ve never heard of it.
Added to the state constitution in 1982 — a time that saw taxpayer revolts across the country — the amendment set a limit on how much of the statewide property-tax load could fall on homeowners. Residential properties under the Gallagher formula could make up no more than 45 percent of the state’s property-tax base. Other properties make up the remaining 55 percent.
That means whenever home values rise faster than those of commercial, industrial and agricultural properties, the residential assessment rate — the formula that determines a property’s assessed value — must drop.
It has dropped so far that residential properties are now assessed at 7.2 percent — down from 21 percent when Gallagher was adopted and from 7.96 percent last year. Commercial properties have stayed at the same rate as in 1982 — 29 percent. But that’s little consolation to a predominantly residential district such as Sable Altura.
Decades of annexations by Aurora and Denver have shrunk the district in unincorporated Adams and Arapahoe counties from 158 square miles to 24. Fire Chief Matt Hilinski says he has just eight businesses left, along with 2,200 residents.
Others around the outskirts of Denver face similar challenges.
In the Elizabeth Fire Protection District, east of Castle Rock, property values are increasing, but not fast enough. Department Chief TJ Steck expects to lose about $191,000 from the Gallagher reduction — about the equivalent of two full-time employees when factoring in the cost of equipment.
He thinks his department will be OK in 2018. It’s the future that worries him.
“Here’s the real issue with it: We’re still recovering from the 2008-2009 downturn,” Steck said.
“We’re all going to be in trouble”
It’s a common refrain: Revenues shrank during the recession, while expenses kept growing. But while most urban areas eventually bounced back, rural Colorado never did.
“Our ‘normal’ went down by 20 to 30 percent,” said Chief Ron Thompson, from Grand County. “We don’t go up at the same rate [as Denver]. We may go up 2 or 3 percent, and they go up 30 percent.”
Thompson’s Grand Fire Protection District, southwest of Rocky Mountain National Park, is arguably one of the lucky ones. It has been able to maintain services — but only because it stockpiled such a huge reserve before the financial crash. Today, Thompson spends nearly $200,000 more than he brings in each year. If it weren’t for the tax-shrinking Gallagher, he could’ve cut his operating deficit in half. Instead, his revenues are expected to grow by a paltry $11,000.
“We’re eating our own flesh, if you will,” Thompson said. “We’re living off our reserves.”
Thompson has started loaning fire trucks out to places such as California to make a few extra bucks. But it doesn’t add up to much. So while big cities are taking advantage of the economic boom and saving for a rainy day — Denver maintains a 15 percent reserve — places such as Grand are spending emergency funds like it’s still 2008.
“We’re trying to sit on as much as we can,” Thompson said, but if revenues don’t start to grow, the reserves will eventually run out.
The nightmare scenario for small departments such as Grand and Elizabeth is that the housing boom continues, forcing the assessment rate further down, only to have the bubble burst, sending home values — and tax revenues — tumbling.
“If there’s another economic downturn in five years and we don’t have the reserves to absorb it, we’re all going to be in trouble,” Steck said.
Not likely in the cards
For Sable Altura, true self-sufficiency probably isn’t in the cards.
A structure fire typically takes a crew of 16 to fight it. National Fire Protection Agency standards recommend four on an engine.
The district has five full-time firefighters and two part-time staffers spread across three shifts and staggered 24/7. Add in its 34 volunteers, and Chief Hilinski typically has enough on duty to send two or three to respond to an emergency, but only if it happens during the day. At night, the fire and ambulance service might be down to a single person on call.
Rich Solomon, Sable Altura’s battalion chief, figures he’d need twice as many volunteers to guarantee three firefighters on an engine round the clock, and that would still be one shy of national standards. But volunteer firefighters are in short supply nationwide. And Sable Altura can’t pay enough to keep the firefighters it has long-term.
“We lose almost every good person we recruit,” Solomon said.
“Target is starting at $14 an hour. McDonald’s is starting at $12 an hour. And we [were] paying $10.86,” Hilinski said.
The district’s board of directors recently bumped a training captain’s pay up to $45,000, about half of what Hilinski says is competitive for the person’s skill level and experience. Entry-level pay was recently raised to $13 an hour for emergency medical technicians and $16 for paramedics.
An entry-level firefighter in Aurora makes more than $22 an hour.
Given his district’s fiscal restraints, Hilinski just hopes to provide a basic, reliable level of service.
“We’re not going to beat Aurora,” Hilinski says. “But we’re really trying to do a job. And the community wants us to be their fire department.”
The good news for Sable Altura’s 2,200 residents is they’ve got backup. The six small departments that make up the Interstate 70 fire protection group provide mutual aid to one another. And if their neighbors to the east can’t handle it, Aurora or Denver steps in. But in some parts of the state, that proposition is becoming dicier and dicier.
“Those mutual aid response times are getting a little bit longer each time,” said Charles Balke, chief of the Clifton Fire Protection District in Mesa County.
“Our problem is we have so many calls that we need more people,” said Balke, whose emergency call volume is up 26 percent since 2008. “I just can’t afford to put people on given our financial restraints.
“We were [struggling before Gallagher]. And we were talking about in a couple years having to go back to the voters [for a tax increase] if we didn’t see increased property values.”
Stanching the bleeding
Voters in seven fire districts this month, including Sable Altura, approved small mill levy increases that should stanch the bleeding for now. But it’s only a Band-Aid. The Colorado Legislative Council expects another Gallagher-related cut in 2019.
If things keep ratcheting down, “we’re talking about legitimately, in a few years, maybe facing layoffs,” Solomon said. “You hate to say that you’ve overextended yourself, but we do what we have to do right now to make sure that we get enough staff to an emergency. And for us, our ‘enough’ staff is a lot different from what the people in the city are sending. We do with three people what they do with eight.”
And the conservative voters who populate most rural districts are famously tax-averse.
“The problem is: The places that we’re asking to do a mill increase, their income hasn’t gone up either,” said Briese, the fire chiefs association director. “So this is a Catch-22. You need the mill increase because the taxes aren’t there, and then the people aren’t going to vote for an increase in tax because the jobs and their income [are] not there.”
Briese says a statewide legislative fix is needed. But a statewide solution is complicated, and elusive.
Dennis Gallagher, the former state lawmaker after whom the amendment is named, has suggested applying the formula on a local basis instead of statewide, so the entire state wouldn’t be subject to the whims of the Front Range’s economy. But even that wouldn’t help a department such as Sable Altura, which shares counties with Aurora and Denver.
Some fire officials say they’d be able to sock away money and weather the dips, if the assessment rate could rise as well as fall. But another constitutional amendment — the Taxpayer’s Bill of Rights, or TABOR — requires voter approval any time taxes rise. So to reverse a Gallagher cut would mean a statewide vote to raise property tax assessments in any year where the formula dictated an increase.
Colorado Mountain College this year attempted a localized version of this that would have automatically increased its mill levy when the assessment rate went down, but voters said no.
Completely eliminating the complicated interplay between Gallagher and TABOR statewide would require a constitutional change. That’s a tall order — and politically fraught. If such an arrangement had existed during the Great Recession, tax rates would’ve gone up just when residents could least afford it.
Instead, government feels the pinch even when times are good.
“What happens in 10 years? What are we down to then?” Solomon said. “Because we can never go up.”