EDITORIAL: My Attempt to Focus on Property Tax Increases
My camera — a 13-year-old Nikon DSLR that I bought second-hand from my daughter — was having trouble with its auto-focus last Tuesday morning, so I didn’t realize, until I got back to the office, that my photo of Archuleta County Assessor Natalie Woodruff, presenting a property tax report to the Board of County Commissioners, was “out of focus.”
My initial reaction, when I started processing the photos, was disappointment. But then I thought to myself… how appropriate the photo might be, if the editorial it illustrated were an attempt to bring our local property taxes into better focus?
Ms. Woodruff was discussing the change in the final residential assessment rate estimate for property tax years 2017-2018, which has been estimated by the Colorado Department of Local Affairs Division of Property Taxation at 7.20 percent. The rate last year, for residential property, was 7.96 percent. The property tax rate for all other types of property — vacant land, commercial, resource extraction, agricultural, industrial — is frozen at 29 percent, a value established by the Gallagher Amendment back in 1982.
So… if the residential assessment rate is falling from 7.96 to 7.20… we might have the impression that the property taxes we’ll pay next year on our homes, here in Archuleta County, will be less than what we paid this year. Right?
Not so fast, cowboy. It’s not that simple. (Remember, we’re talking about government.)
The re-calculation is a result of the Gallagher Amendment, which was added to the Colorado Constitution in 1982 as one of the results of a property tax revolt that originated in the late 1970s. Homeowners, concerned about skyrocketing residential property taxes, pressured the state legislature to address the problem, and in 1982, Speaker of the House Bev Bledsoe appointed nine members from the General Assembly to study the problem and recommend solutions. The Gallagher Amendment — named for Denver city auditor Dennis Gallagher — was the result of the panel’s efforts to find a workable solution to rising residential property taxes.
The Gallagher Amendment divides the total Colorado property tax burden between residential and ‘nonresidential’ 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. The Amendment also mandates that the assessment rate for ‘nonresidential’ property be fixed at 29%. The residential rate, on the other hand, is (supposedly) adjusted every two years to hold the 45/55 split constant.
On Monday, April 17, the Division of Property Taxation released a fresh estimate of the new residential assessment rate, based on updated value estimates from county assessors for the following property classes: vacant land, residential, commercial, industrial, agricultural, natural resources and producing mines.
Back in January, the County had heard a previous estimate for the residential rate: 6.56 percent. That number was based on the (skyrocketing) price of residential real estate — mostly on the Front Range and in mountain resort communities.
Out in the boondocks of Colorado, where home prices have been relatively stagnant, county governments and school districts and fire districts and libraries are looking at what might be a substantial drop in revenue, in 2018.
Assessor Natalie Woodruff, addressing the BOCC on Tuesday:
“Our projection, when we first heard about the rate going to 6.56 percent, was that our revenue would be lowered anywhere from $300,000 to $450,000. Give or take.
“Currently, in the residential category, it looks like our resulting change in revenue, at the 7.2 percent estimate, we will still increase by about $223,000.”
Unlike some rural communities, Archuleta County has seen a significant increase in residential home prices. That means our local government entities will actually see a slight growth in tax collections.
“So, we’re going to try and put together some tax information for the taxpayers, in case they protest.”
Local taxpayers have the right to protest their property assessments, if they believe the Assessor has assigned the wrong value to their home or business.
“Residential values went up [on average] 14.5 percent. However, with the reduction in the residential rate, [homeowners’] actual tax bills are going to go up less than 6 percent.
“So, they’re getting more than double their value. So it’s kind of a ‘win’ situation for them. They’re getting higher value on their property — if they want to sell or refinance, anything like that — it’s a very good thing for them. And yet their taxes will not increase by that same 14.5 percent.”
As they say, there’s a silver lining to every cloud, if you know how to look for it. Your home values in Pagosa — if you want to sell or refinance — are headed upwards. If you have no intention of selling or refinancing, however, you can look forward to a “less than 6 percent” tax increase next year, for the benefit our local government agencies.
Hopefully, your income has also increased by 6 percent. To keep everything in balance, so to speak?