What does Colorado's property tax compromise mean?

Colorado property taxes are calculated based on the assessed value of a property, which is a percentage of its actual market value. The state currently uses an assessment rate, currently 6.765% for residential properties and 29% for most commercial properties. This assessed value is then multiplied by the local tax rate, or "mill levy," which varies by county and district. The mill levy is expressed in mills, with one mill equaling $1 in tax per $1,000 of assessed value.

This system ensures that property taxes support local services like schools, roads, special districts, and emergency services. Yet rising property values can lead to higher property taxes, as taxes are based on the assessed value of the property. When property values increase as they did during the last assessment period, the assessed value - calculated as a percentage of the property's market value - also rises, resulting in a larger tax bill.

Colorado lawmakers passed bipartisan property tax relief as the 2024 legislative session ended. This was celebrated as a meaningful legislative solution and a culmination of post-Gallagher work, years in the making. Yet special interest groups pushed forward with ballot initiatives to go above and beyond the relief levels outlined by the legislature.

HB 1001, passed in a recent special session of the Colorado Legislature, is the “compromise deal” bill that led to the removal of initiatives 50 and 108 from the November 2024 ballot. The details of the deal remain largely similar to what was reviewed at the Commission on Property Tax meeting last month.

What does this mean for you? The new bill lowers residential assessment rates further — from 7.15% to 6.25% for property taxes going to local governments and 7.05% for those going to schools — and expands the new 25% assessment rate for nonresidential properties to include vacant land and state-assessed utilities. It also establishes annual property-tax revenue growth caps of 5.25% for local governments and 6% for schools, though it exempts new construction and revenues reserved for bond repayment and offers flexibility for local governments and schools to grow more after economically slow years.

What have we learned from the past few years of post-Gallagher property tax negotiations? We know that in Colorado, one size fits all solutions does NOT fit all. We have endless examples of how, across Colorado’s geographic regions, we have different challenges, demographics, and economic drivers.

We’ve learned that robust local stakeholder involvement through the legislative process is preferred to ballot initiatives. Local representatives need to be at the table throughout the discussion to account for Colorado’s various and regional economies and drivers. The front range and western slope have different needs; the same hold true for the mountains and the eastern plains.

We’ve learned that short-term, band-aid fixes are not sustainable. Special interest groups threatening annual ballot initiatives that would negatively impact special districts and override local elections is not a way to govern and a sustainable long-term legislative solution is needed.

Colorado was able to come up with a compromise solution that will provide as much tax relief to residential and commercial property owners as fiscally responsible, while ensuring that local governments and special districts can continue to provide the critical services that are specific to their communities.

Colorado’s 2024 property tax reform shows that compromise - balancing diverse interests and fostering regional cooperation - produces pragmatic, lasting solutions. It provides homeowners and businesses relief while ensuring local governments can continue delivering critical community services. Ultimately, legislative compromise is the cornerstone of long-term fiscal stewardship for Colorado.

Chris Romer is president & CEO of Vail Valley Partnership, the regional chamber of commerce. Learn more at VailValleyPartnership.com