Now is not the time to reduce property taxes in the richest neighborhoods around metro Denver — while increasing them on small businesses in our rural areas and inner-cities. It takes everyone to support a community…
— from the ‘Yes on B’ website.
When folks discuss the 1982 Gallagher amendment (and yes, it does get discussed… especially among government officials who rely on property tax revenues) the discussion most often focuses on one certain section of the amendment… that section requires non-residential property in the state to pay 55% of the state’s total property tax bill each year. As a result of that amendment language, the tax rate paid by residential property has been reduced… and reduced again… and reduced again… year after year… while the non-residential rate has remained at 29%.
In 1982, residential properties were taxed at 21% of value. By 2020, the rate had fallen to 7.15%. It is predicted to fall below 6% in the near future, if nothing changes. This will be a bitter pill to swallow for rural Colorado, because the rates are determined largely by property values in big cities, where we find plenty of large and valuable commercial properties, paying hefty property taxes… something very few small Colorado towns can match.
One saving grace, for a community like Pagosa Springs, is the Gallagher requirement that vacant residential property pay the same rate as commercial. We have quite a bit of vacant residential property in our community, and it all gets assessed at 29%.
But how about agricultural property? That’s another class of non-residential property, right? Paying 29%?
The Gallagher amendment requires county assessors to value residential property according to ‘comparable sales’ in nearby neighborhoods. Vacant land is also judged by comparable sales of vacant land. Commercial properties can be valued based on a few different factors, but typically the business’ income weighs heavily on the appraised value.
Agricultural properties can be appraised only on the basis of the income generated by the property itself. Sales of similar properties cannot be taken into account when setting the value.
Here in Archuleta County, the agricultural industry overall has historically shown a net loss on sales of products. Individual farms or ranches might be profitable, but the industry, overall, does not appear to be.
Meanwhile, many of our outlying county roads service almost exclusively agricultural properties. Those lengthy roads are not necessarily cheap to maintain. The provision of other county services to outlying properties can also be more expensive, due to the distance from the urban core. So we have a curious dilemma — an industry that is costly to service, and that provides meager economic benefits, but pays very little in terms of property taxes.
A Colorado land owner who allows cattle to graze annually on his or her ranch property qualifies as an agricultural business, and probably pays next to nothing in terms of property taxes on the land itself. (If there’s a home on the ranch, that gets assessed at the residential rate of 7.15%.)
I am looking, for example, at a 2,200 acre property south of downtown Pagosa Springs, classified by the County Assessor as ‘Agricultural Ranching’. Although the home located on this property was appraised in 2018 at $1.7 million (and assessed at $125,000)… the 2,200 acres of agricultural land had an assessed value of $2,120.
I am looking at a vacant 1/4 acre lot in Pagosa Lakes, that’s likewise assessed at a 29% rate. Assessed value? $6,240.
Nevertheless, the Gallagher amendment probably did the right thing in basing the value of agricultural land on income rather than on ‘comparable sales’. Throughout Colorado, large chunks of agricultural land have been purchased by very wealthy individuals, who may have no deep, abiding interest in ‘ranching’ and who may have paid much more for the land than an actual rancher or farmer could afford to pay. In fact, I would bet that nearly all sales of ‘agricultural ranches’ in Archuleta County, over the past few decades, have been to just these types of wealthy buyers.
No doubt, those past purchases have driven up the asking price on available ranch properties.If agricultural property taxes were based on ‘comparable sales’, the way vacant residential land is valued, we would soon have no actual ranchers or farmers who could afford their tax payments.
On the other hand, here in Archuleta County, we have numerous very wealthy individuals who own vast stretches of ranchland and forest, and who pay very little in the way of property taxes — because they still run enough cattle on the property to qualify as ‘ranchers’.
As far as I can tell, Amendment B, on your November ballot, will do nothing to change the very low property tax rates paid by farms and ranches… and although the current system exhibits some obvious unfairness, Colorado would almost certainly destroy its agricultural industry completely, if agricultural property paid at the same rate as vacant residential property.
What Amendment B will change is the steadily-declining rate on residential property, by freezing it at 7.15%. If you view the map on Tax-Rates.org, Colorado has one of the lowest property tax rates in the US, measured as a percentage of home value. Only 10 states had a lower rate. (Our readers may also be interested in knowing that Texas has one of the highest rates, surpassed only by New Jersey and New Hampshire.)
We can also vote ‘No’ on Amendment B… watch our property tax rates drop even further… and see how that plays out.