Introduction

After historic recent tax increases, Coloradans face competing policy options this November for the future of the state’s property tax structure. One legislative bill, SB24-233, and two citizen ballot initiatives, Initiatives 50 and 108, offer competing visions for limiting the rate of increase in property taxes and resulting impacts on local property taxing districts. The property tax ballot measures slated for November are only the latest in a 50-year property tax saga. After inflation in home values in the 1970s caused property taxes to surge, Colorado voters adopted the Gallagher Amendment to the state constitution in 1982. The amendment controlled the growth in residential property taxes over time, though it included no similar protection for commercial properties. In 2020, the legislature proposed a new constitutional amendment to repeal Gallagher. With promises of future property tax reform that protected both residential and commercial property owners, voters approved the legislature’s proposal at the ballot box that November. The constitutional change resulted in higher residential assessment rates relative to previous law, raising property taxes in tax years 2021 and 2022.[i] However, these increases paled in comparison to the tax hike for tax year 2023. Legislators tried several times to address the looming tax hike in the early 2020s, with mixed results. They promoted temporary measures in 2021 and 2022 that reduced the rate of increase in residential property taxes caused by Gallagher’s repeal. However, they chose not to enact new long-term protections. With no taxpayer protection in place, the sharp rise in home values in 2021 and 2022 threatened an unprecedented surge in residential property taxes for tax year 2023. Meanwhile, commercial property taxes also continued to rise. With historic property tax increases on the horizon in 2023, the legislature referred Proposition HH to the ballot. It asked voters to approve a large increase in overall state taxes over the long term in exchange for a marginal reduction in the rate of increase in property taxes for 2023.[ii] Voters rejected the measure at the ballot box by nearly a 20-point margin. The demise of Proposition HH triggered an extraordinary legislative session in November during which the legislature passed another temporary property tax reform measure, SB23B-001. The bill still permitted the largest increase in property taxes in nearly 50 years in tax year 2023 with no long-term protection for taxpayers.[iii] However, the special session also produced House Bill 23B-1003, which created a property tax task force charged with crafting a plan for long-term property tax reform. Many of the task force’s recommendations made it into SB24-233 this year, but the bill will only take effect if voters reject both competing citizen-initiated measures, Initiatives 50 and 108. This report evaluates the impacts of all three measures.

• Senate Bill 24-233 establishes separate assessment rates for school districts and non-school districts and reduces statewide assessment rates for residential, commercial, and agricultural properties. It establishes a revenue growth cap for taxing entities other than school districts and home-rule municipalities and requires backfills to local governments. This bill passed earlier this year but takes effect only if Initiatives 50 and 108 fail.
• Initiative 50 creates a statewide property tax revenue growth limit of 4% and requires statewide voter approval to exceed it. This measure has qualified to appear on the 2024 ballot.
• Initiative 108 reduces statewide assessment rates for residential and non-residential properties except mining and oil and gas. It also requires that the state backfill revenue local governments lose as a result of the reduced rates. This measure is awaiting approval to appear on the 2024 ballot.

This report summarizes the direct impacts of SB24-233, Initiative 50, and Initiative 108 on taxpayers, revenue and the state budget. It outlines outcomes from each of these measures under possible combinations of scenarios—whether one, both, or neither of the citizen-initiated measures passes. Through the report, readers will gain a better understanding of what their choices at the ballot box this November could mean for their property tax bills and for state and local governments moving forward.

 

Key Insights

• Property taxes have grown at twice the rate of population plus inflation over the past three decades. Colorado taxpayers experienced a $2.4 billion or 19% statewide increase in their total property tax burden this year, increasing 4 times faster than population plus inflation. Many districts grew even faster. This broader context provides valuable insights often overlooked if simply examining impacts against policy baselines or in single years.
• Impacts to the taxpayer – Initiative 108 and 50 provide largest potential for property tax relief.
  • Under Initiative 108 the average homeowner will see over $510 in savings between 2024 and 2026, whereas taxes will go up under SB24-233 even if value stays the same.
  • Under Initiative 108 for every $1,000,000 in value, a commercial or agricultural property owner will save $1,754 in property taxes between 2024 and 2026.
• Impacts to property tax revenue – Total property tax revenue expected to hover around the 20-year trend under each measure. Total statewide property tax revenue will likely hover around the 20-year trend through 2026 under alternative policies, while remaining well above a growth rate of population plus inflation. Actual tax growth will depend on property values and mill levies.
• Impact to school funding – Funding for education under constitutional requirement will remain unchanged under each measure. SB24-233 allows revenue to increase faster for school districts thereby increasing the local property tax revenue’s share of school funding. Initiatives 108 and 50 would increase the state share of school funding.
• Impact to state budget – The impact of Initiative 108’s local government backfill requirement on the state budget will depend on legal interpretation of text, and likely on further legislation. The latest fiscal summary from legislative council staff estimates the state budget obligation for non-school local districts to be between $0 and $1 billion.

 

Summary Impacts to Tax Bills, Revenue, State Budget and Growth Under Each Measure

 

Impact on Property Tax Bills

If Initiative 108 passes—

• The average homeowner will see over $510 in savings between 2024 and 2026. Based on average rates, a $560,000 home’s 2024 property tax bill could be $485 dollars higher because SB24-233's rate reductions will not take effect. However, over just the next two years the homeowner will save $996. Starting in 2027, that home’s tax bill will be approximately $480 lower each year than under SB24-233. If Initiative 50 also passes, the 2024 increase in property taxes will likely be much lower given the imposition of the revenue cap on 2024 taxes.

Figure 1

• For every $1,000,000 in value, a commercial or agricultural property owner will save $1,754 in property taxes between 2024 and 2026. The tax bill will be $1,647 higher than under SB24-233 for every $1,000,000 of value in 2024 but a total of $3,401 lower over the following two years. After 2026, the owner will save $850 per $1,000,000 of value each year.

If Initiative 50 passes—

• Assessment rates will be set by Initiative 108 if it also passes, otherwise they will be set by law in effect prior to SB24-233. Taxes for residential and non-residential property owners are only directly impacted in years when revenue exceeds the statewide 4% revenue growth limit. The decision over how to comply with the 4% cap rests with the legislature.

If both initiatives pass—

• Property tax rates will be set by Initiative 108 and total statewide property tax collections will be limited to 4% more than the previous year’s statewide property tax revenue. In years of faster revenue growth, effective tax rates could be lower. Though the current draft of the Blue Book analysis shows impacts of Initiative 50 starting in 2025 tax year, the measure specifies that it applies “if property tax revenue is projected to go up more than 4% over preceding year,” which likely means it applies to tax year 2024 forward. In that case, taxpayers could see lower taxes next year if both measures pass than if just 108 passes.

If neither initiative passes—

• Residential and select non-residential rates will be set by Senate Bill 24-233, and property tax bills will go up this year. In 2025, even if the value of a home does not increase, property tax bill will still increase under the law’s higher assessment rates. For a household with a home valued at $400,000 in the 2022 tax year whose value spiked to $560,000 in the 2023 reassessment, the effective property tax rate is set to increase from 5.14% under current rates to 5.71% by 2026. Even if the value of the home does not change in 2025, the household’s tax bill will increase by 11% ($318).

 

Impact on Revenue and State Budget

If Initiative 108 passes—

• The state budget will be responsible for backfilling “lost revenue as a result of this measure.” Because SB24-233's 2024 rate reductions are conditional on both Initiative 108 and 50 failing, revenue will spike again in 2024, then drop in 2025 under the lower rates imposed by Initiative 108. Estimates from the sponsors and from the state range from a backfill requirement of $200 million[iv] to a backfill of $1.7 billion[v] in statewide property tax in 2025. The gap stems from a difference in legal interpretations of the backfill language in 108, regarding how to measure revenue losses and assumptions about how much revenue will grow in the future. Property tax revenue grew by $2.4 billion in 2023—more than 19%—far outpacing the 20-year average of 5.24%. Total revenue increased from $12.8 billion to $15.2 billion in a single year. Even if property tax revenue only grows at 2% annually over the next two years, revenue could decline by $993 million under Initiative 108 and still be above the historic trend.

Figure 2 If Initiative 50 passes—

• In years when revenue grows above the 4% annual limit, voters can approve the retention of the excess. If they do not, total statewide property tax revenues across all districts cannot exceed the previous year’s revenue plus 4%. The measure does not stipulate exactly how the state must comply with the cap. There is no required backfill from the state budget in the measure.

If both initiatives pass—

• Initiative 108 imposes a backfill requirement for the state to allocate revenue to local government for revenue losses. If both measures pass, any state budgetary impacts in the future would be at the discretion of the state legislature in years revenue exceeds the Initiative 50 cap.

If neither initiative passes—

• SB24-233 is projected to reduce property tax revenue by $1.04 billion in 2024 from the prior law baseline because rates were set to increase otherwise. It requires that $10.3 million be transferred to a new fund to cover limited drops in local government assessed value.

 

Impact on Annual Revenue Growth

Over each of the past 30-, 20-, and 10-year windows, the growth in property tax revenue has outpaced personal income growth, the rate of growth in population plus inflation, and the average weekly wage. Over the past 30 years, property tax revenue has grown 3 times faster than the average weekly wage. Figure 3   If Initiative 108 passes—

• If Initiative 108 passes but Initiative 50 does not, there will be no new explicit property tax growth limit, as the partial cap in SB24-233 will not go into effect.

If Initiative 50 passes—

• In years when property tax revenue is expected to increase above the 4% cap, the legislature would need to pass new legislation that would bring total revenue under the cap. If Initiative 50 is interpreted to impact the 2024 tax year, then it will likely have an immediate impact whether 108 passes or not.
• Because property values are assessed every two years, the growth in total property tax revenue fluctuates from year to year. Over the last 30 years, property tax revenue has only grown below Initiative 50’s 4% annual growth limit nine times. Notably, property tax revenue growth has averaged 5.24% annually over the last two decades.

If both initiatives pass—

• Future annual tax increases will be determined by property values and changes in mill levies, because assessment rates will remain constant under Initiative 108. Statewide revenue will be restricted by Initiative 50.

If neither initiative pass—

• SB24-233 will impose a new district-level revenue growth cap of 5.5% that compounds annually regardless of prior year revenue levels. It applies to local taxing authorities with the following revenue exclusions:
  • School districts
  • New construction
  • Oil and gas and producing mines
  • Home rule jurisdictions
  • Districts already subject to TABOR or prior statutory restrictions
  • Properties that change classification
  • Annexations
  • Formerly exempt properties
  • Corrections or refunds
  • Tax incremental financing
  • Bonds or other contractual obligations

 

Property Tax Basics

Property taxes serve as a major source of revenue for most local government entities. Article X of the Colorado Constitution and Title 39 of the Colorado Revised Statutes authorize taxes on residential property, commercial property, industrial property, agricultural property, and vacant land. Local taxing authorities, or districts, levy property taxes according to the following formula: Actual Value × Assessment Rate = Assessed Value Assessed Value × Mill Levy = Property Tax Actual value – A property’s actual value generally reflects its market value, though assessors use different methods to determine its actual value for tax purposes. Each county assessor’s office determines property values for tax purposes, excluding certain property classes such as oil and gas property. Assessment rate – The state establishes unique assessment rates for different property classes. The same state assessment rate applies to all properties of the same class across the entire state. Assessed value – The assessed value of a property equals the actual value times the applicable assessment rate for that class of property. Local taxing authorities tax properties on their assessed values. Mill Levy – Each local taxing authority—or district—across the state levies mills on properties within its jurisdiction. One mill represents one dollar of taxation for every 1,000 dollars of assessed value. A property levied at 50 mills must remit 50 dollars of tax for every 1,000 dollars of assessed value.

 

Summary of 3 Property Tax Measures Before Voters

Senate Bill 24-233

The Colorado General Assembly passed Senate Bill 233 on the final day of the 2024 legislative session. Although SB24-233, which was developed after recommendations by a task force created during last year’s special legislative session, followed in the footsteps of several property tax reforms passed by the legislature following the 2020 repeal of the Gallagher Amendment, it deviated from the trend of offering short-term relief—instead, it permanently lowered rates relative to prior law. SB24-233 changes several features of the property tax system starting in 2024, but will only take effect if both Initiative 108 and 50 fail:

• Assessment Rates – The measure splits the residential assessment rate into two: one for school districts and another for other entities. Authorities other than K–12 districts will collect residential taxes at reduced assessment rates while the rate for school districts will be allowed to increase back up to 7.15%. As a result, homeowners will pay more in property tax than under the 2023 rate but less than they would have under no legislative action. The assessment rate for schools may decrease in the future if the local share of school funding reaches 60% of the total.
• Revenue limit – The measure imposes a 5.5% annual revenue growth limit on most entities. The limit compounds at 5.5% annually from the 2023 level, rather than by having the baseline re-set annually. The limit would not apply to school districts or home-rule jurisdictions and several revenue sources: new construction, oil and gas and producing mines, properties that change classification, annexation, formerly exempt properties, corrections or refunds, tax incremental financing, bonds or other contractual obligations.
• Backfill – The measure is not expected to have much of an impact on year-over-year changes in assessed value and therefore only requires $10 million from General Fund be transferred to a new fund in anticipation of further backfill requirements.

Figure 4 – Assessment Rate Under SB24-233

SB24-233 Assessment Rates
Property Classes		2023	2024	2025	2026	2027
Residential	School districts	6.7% with a $55,000 value exemption	6.7% with a $55,000 value exemption	7.15%	7.15%	7.15%
	Non-school districts		6.7% with a $55,000 value exemption	6.40%	6.95% with a 10% value exemption up to $70,000	6.95% with a 10% value exemption up to $70,000
Non-residential (school district and non-school district)	Commercial and agricultural	27.9% with a $30,000 value exemption	27%	25%	25%	25%
	Other non-residential	29%	29%	29%	29%	29%
	Oil and Gas	87.50%	87.50%	87.50%	87.50%	87.50%

  CSI released a short analysis of SB24-233 just before its passage and found the following:[vi]

• Property taxes will continue to increase. Even if the value of a home does not increase in 2025, property tax bills will still increase given the growth in underlying rates. For a household with a home valued at $400,000 in 2022 that just saw a spike in its tax bill this year, the effective property tax rate is set to increase from 5.14% under current rates to 5.71% by 2026. Therefore, even if the value of the home does not change in 2025, its property tax bill will be 11% ($318) higher. A $700,000 home will face an 8% ($403) increase through 2026.
• This is not a long-term fix. True property tax reform should provide more predictability to homeowners. The proposed 5.5% cap has true limitations. If the state experiences another spike in home values, then Colorado is right back at the same place it was several years ago. The re-imposition of the 5.5% district revenue limit includes several carve outs including school districts (which represent over 50% of the tax base), home rule governments, and multiple other revenue sources including oil and gas operations and new construction. The 5.5% limit also grows annually following 2023, regardless of actual revenue performance.

Crucially, SB24-233 includes a provision that prevents it from being enacted if voters pass either Initiative 50 or Initiative 108.

 

Initiative 50

The text of Initiative 50 is just one page long and adds just eight lines to the Colorado Constitution. First, it amends (1)(a) of Section 3 of Article X by adding the following line, “IF THE TOTAL OF STATEWIDE PROPERTY TAX REVENUE IS PROJECTED TO GO UP MORE THAN 4% OVER THE PRECEDING YEAR, VOTER APPROVAL IS NEEDED FOR GOVERNMENT TO RETAIN THE ADDITIONAL REVENUE.” It also adds (1)(e) to the same section, which governs the process of initiating a statewide ballot measure for voter approval to retain excess revenue. “FOR VOTER APPROVAL OF A PROPERTY TAX REVENUE INCREASE, ANY REFERRED MEASURE MUST BE A STAND-ALONE SUBJECT.  THE BALLOT TITLE SHALL READ: “SHALL PROPERTY TAX REVENUE BE INCREASED BY [TOTAL PROJECTED INCREASE OVER THE PRECEDING YEAR] ALLOWING GOVERNMENT TO RETAIN AND SPEND PROPERTY TAX REVENUE ABOVE THE 4% ANNUAL LIMIT ON PROPERTY TAX INCREASES FOR [DATES X TO X]?” Though the changes are short, the impacts would be far-reaching. The revenue cap would apply to the aggregate growth in property tax revenue across all local government property taxing authorities. Property tax revenue is collected and spent locally, but the presumption is that the state legislature would be responsible for enforcing adhering to the law by either devising manners to keep revenue under the 4% growth limit or referring and passing measures that allow for revenue retention above the cap. Initiative 50 does not dictate how the state must comply with its rules. Adjusting assessment rates, the main tool that the state has at its disposal, would be one option. The state could, however, explore alternative ways to limit revenue growth, whether by exercising authority it already possesses or granting itself new authority through legislation.

 

Initiative 108

Initiative 108 is just over a page long and includes two main provisions:

• Lower state assessment rates on residential and certain non-residential property classes starting in the 2025 tax year.
• Revenue backfills for local governments.

Starting in tax year 2025, Initiative 108 sets the assessment rate for residential property at 5.7% and the rate for all non-residential property, excluding producing mines and lands and leaseholds producing oil and gas, to 24%. Figure 5 – Assessment rates under Initiative 108

Initiative 108 Assessment Rates
Property Classes	2024	2025	2026 and future
Residential	7.06% (Leg Council Estimate)	5.70%	5.70%
Other non-residential excluding oil and gas (hotels/motels, vacant land, industrial, state-owned)	29%	24%	24%
Oil and gas production	87.50%	87.50%	87.50%

 

 

Interaction between Measures Contingent on What Passes in November

Senate Bill 24-233 was passed into law during the 2024 state legislative session, including the following provision at the end: This act shall not take effect if either or both of the following occur:  (a) An initiative that reduces valuations for assessment is approved by the people at the general election held on November 5, 2024;  (b) An initiative that requires voter approval for retaining property tax revenue that exceeds a limit is approved by the people at the general election held on November 5, 2024. The first draft of this year’s Blue Book ballot analysis includes an image that outlines scenarios for how policy will play out under different vote outcomes. Figure 6 – 1^st Draft of Blue Book Image on Policy Interactions Source: LCS 1^st Draft of Blue Book Analysis

 

Tax, Revenue and Budget Impact Comparisons

The impacts on both individual properties and districts under any path forward will depend on several variables. Both Initiative 50 and Initiative 108 include text that will elicit competing legal interpretations. There are also external factors that are more difficult to predict. How these play out will impact taxpayers, local governments and the state budget. Alternative Legal Interpretations for How Initiative 108 Would Impact Taxes and Revenue

• Concerning the Definition of “Lost Revenue” – Initiative 108 includes language that states the following: The state general fund shall “REIMBURSE LOCAL DISTRICTS FOR LOST REVENUE AS A RESULT OF THE PASSAGE OF THIS MEASURE.” The initial fiscal estimate of the measure, produced in January ahead of the title board meetings, interpreted this to mean that the state must backfill revenue to local governments based upon what they would have collected under current law. Under this interpretation, in 2025, the difference between the revenue hypothetically collected under current law’s 7.15% assessment rate and that collected under 108’s 5.7% rate would be considered a loss. The 1^st draft of the Blue Book analysis, released in July, alludes to an alternative interpretation. Though details will presumably be coming with the second draft, this interpretation may align with proponents’ claim that “lost revenue as a result of this measure” strictly means year-over-year district revenue reductions between 2024 and 2025 tax years.
• Concerning Initiative 108’s Base Tax Year – Like the phrase “lost revenue,” the state’s interpretation of “as a result of the passage of this measure” may also come into question. Because the legislature chose to condition SB24-233's 2024 assessment rate reductions on Initiative 108’s failure, residential taxes will increase next year if 108 passes even though property values will remain the same. Only in 2025, when the lower assessment rates of Initiative 108 go into effect, would there be a revenue reduction. If the legislature interprets districts’ revenue losses as measured against the policy that would have been in place if Initiative 108 didn’t pass, then it would need to set backfills against rates under SB24-233. If the state does not interpret the measure in this way, then it would measure 2025’s reductions against a 2024 revenue figure inflated by the expiration of temporary tax rate reductions.

External Assumptions That Will Impact Revenue Growth

• Assessed value growth – Should the backfill requirement in the measure be interpreted to mean that the state must pay local government districts that experienced year-over-year revenue declines as a result of Initiative 108, the state’s backfilling obligations will depend heavily on how much property values grow in 2025. If property values increase more, then the rate cuts under Initiative 108 will be less likely to cause year-over-year revenue declines; if they rise only slightly, then districts will be more likely to experience year-over-year declines.
• Mill levy changes – Colorado’s total residential assessed value increased by 27.6% in 2023, but property tax revenue increased by only 19.5%. This is because some districts chose to lower mill levies while others had to given their levy “floats” to generate sufficient revenue to make bond payments. In 2025, the same phenomenon will occur in reverse if Initiative 108 passes—because it will force assessed values down, it will trigger automatic mill increases in districts with floating levies. Some districts that chose to lower their mill levy last year will also have “credit” to increase their mill levy in future years without triggering TABOR, granted through 2023 legislation.

 

Impact on Residential and Non-residential Property Taxes

The impacts of alternative policies on individual property owners are shown in Figures 7 through 11. Figure 7 shows present and future assessment rates under different measures. As discussed earlier, SB24-233 will only go into effect if both Initiative 108 and 50 fail. The first row, “2023 rate if frozen in future years,” is strictly for the sake of comparison, as there is currently no policy proposal that would freeze 2023 rates.

Figure 7 - Residential Assessment Rate Comparisons Under Alternative Policies

Residential Assessment Rate
Policy alternatives		2023	2024	2025	2026
2023 rate if frozen in future years		6.7% with a $55,000 value exemption	6.7% with a $55,000 value exemption	6.7% with a $55,000 value exemption	6.7% with a $55,000 value exemption
Law prior to SB24-233			7.06%*	7.15%	7.15%
SB24-233	School districts		6.7% with a $55,000 value exemption	7.15%	7.15% with a 10% value exemption up to $70,000
	Non-school districts		6.7% with a $55,000 value exemption	6.40%	6.95% with a 10% value exemption up to $70,000
Initiative 108			7.06%*	5.70%	5.70%
Initiative 50			If 50 and 108 pass, rates will be the same as under 108. If 50 passes and 108 fails, rates will be law prior to SB24-233

*Initial estimate from LCS, based on requirements of 2022 legislation How much any individual homeowner will pay in taxes in the future will depend on several factors beyond the results of the November election. These include the growth in his/her home’s value during future reassessment periods and local mill levy changes. Figure 8 through 11 show two future scenarios for residential property taxes under constant mill levies. In Scenario 1, the home’s value does not change in 2025; in Scenario 2, the home’s value grows by 5%. Property taxes are shown for 2022 property values of $400,000, $500,000 and $700,000 that grew 40% in 2023. Figure 8 shows property tax payments for the $400,000 home whose value grew by 40% between 2022 and 2023 to $560,000. Figure 8

 

Figure 9

Residential Property Tax Scenarios by Tax Year
40% Growth in 2023 and No Growth in 2025
	2022	2023	2024	2025	2026	5-year Total
Home Value	$700,000	$980,000	$980,000	$980,000	$980,000
Home Value Growth Rate		40%	0%	0%	0%
Law Prior to SB24-233	$4,137	$5,270	$5,884	$5,958	$5,958	$27,208
SB24-233 Tax	$4,137	$5,270	$5,270	$5,652	$5,673	$26,002
Initiative 108 Tax	$4,137	$5,270	$5,883	$4,750	$4,750	$24,790
If 2023 Rates Held Constant	$4,137	$5,270	$5,270	$5,270	$5,270	$25,217
	2022	2023	2024	2025	2026	5-year Total
Home Value	$500,000	$700,000	$700,000	$700,000	$700,000
Home Value Growth Rate		40%	0%	0%	0%
Law Prior to SB24-233	$2,955	$3,675	$4,203	$4,256	$4,256	$19,345
SB24-233 Tax	$2,955	$3,675	$3,675	$4,037	$3,994	$18,336
Initiative 108 Tax	$2,955	$3,675	$4,202	$3,393	$3,393	$17,618
If 2023 Rates Held Constant	$2,955	$3,675	$3,675	$3,675	$3,675	$17,654
	2022	2023	2024	2025	2026	5-year Total
Home Value	$400,000	$560,000	$560,000	$560,000	$560,000
Home Value Growth Rate		40%	0%	0%	0%
Law Prior to SB24-233	$2,364	$2,877	$3,362	$3,405	$3,405	$15,413
SB24-233 Tax	$2,364	$2,877	$2,877	$3,229	$3,196	$14,543
Initiative 108 Tax	$2,364	$2,877	$3,362	$2,714	$2,714	$14,032
If 2023 Rates Held Constant	$2,364	$2,877	$2,877	$2,877	$2,877	$13,872

Figure 10 shows property tax payments for the same $560,000 home if its value grows by another 5% in 2025. Figure 10

 

Figure 11

Residential Property Tax Scenarios by Tax Year
40% Growth in 2023 and 5% in 2025
	2022	2023	2024	2025	2026	5-year Total
Home Value	$700,000	$980,000	$980,000	$1,029,000	$1,029,000
Home Value Growth Rate		40%	0%	5%	0%
Law Prior to SB24-233	$4,137	$5,270	$5,884	$6,256	$6,256	$27,804
SB24-233 Tax	$4,137	$5,270	$5,270	$5,934	$5,967	$26,578
Initiative 108 Tax	$4,137	$5,270	$5,883	$4,987	$4,987	$25,265
If 2023 Rates Held Constant	$4,137	$5,270	$5,270	$5,549	$5,549	$25,775
	2022	2023	2024	2025	2026	5-year Total
Home Value	$500,000	$700,000	$700,000	$735,000	$735,000
Home Value Growth Rate		40%	0%	5%	0%
Law Prior to SB24-233	$2,955	$3,675	$4,203	$4,469	$4,469	$19,770
SB24-233 Tax	$2,955	$3,675	$3,675	$4,239	$4,204	$18,747
Initiative 108 Tax	$2,955	$3,675	$4,202	$3,562	$3,562	$17,957
If 2023 Rates Held Constant	$2,955	$3,675	$3,675	$3,874	$3,874	$18,053
	2022	2023	2024	2025	2026	5-year Total
Home Value	$400,000	$560,000	$560,000	$588,000	$588,000
Home Value Growth Rate		40%	0%	5%	0%
Law Prior to SB24-233	$2,364	$2,877	$3,362	$3,575	$3,575	$15,753
SB24-233 Tax	$2,364	$2,877	$2,877	$3,391	$3,355	$14,864
Initiative 108 Tax	$2,364	$2,877	$3,362	$2,850	$2,850	$14,303
If 2023 Rates Held Constant	$2,364	$2,877	$2,877	$3,037	$3,037	$14,191

  Figure 12

Commercial Property Tax Scenarios
$1,000,000 Commercial Property, 85.034 mills
	2024	2025	2026	Three-year Sum
Law Prior to SB24-233	$24,660	$24,660	$24,660	$73,980
SB24-233 Tax	$23,013	$22,959	$21,259	$67,230
Initiative 108 Tax	$24,660	$20,408	$20,408	$65,476

 

State Fiscal Impacts In the years following the repeal of the Gallagher Amendment, statewide assessment rate reductions have been accompanied by requirements to transfer state tax revenue to local governments who experience revenue reductions. These backfill provisions vary between measures but have set a strong precedent for the use of state funds to reimburse local governments’ losses. Initiative 108 includes a similar provision, explained in an earlier section. The funding of K–12 public schools is a joint commitment of both the state’s general fund and local property tax revenue. Levels of school funding are subject to constitutional requirements. In the process of calculating those amounts each year, the state determines its contribution level based on the availability of local funds from property tax revenue. Under this formula, the state’s funding obligation adjusts so that schools do not lose revenue when property taxes fall. Consequently, the state’s role in school financing is very closely tied to the issue of property tax revenue growth.

 

Statewide Revenue Impacts

There is currently a wide range of estimates for how property tax revenue will change under pending and proposed measures. This section summarizes those estimates, which CSI will examine more thoroughly when the Legislative Council Staff release an updated fiscal impact statements. The initial fiscal note attached to Initiative 108, issued in January 2024, indicated that 108 would cause property tax revenue to be $3 billion lower in 2025 than under prior law. This estimate was derived under the assumption that “revenue losses” means differences between what districts would receive under Initiative 108 and what districts would have received under prior law in the same year. As discussed earlier, this assumption presumes districts are owed some amount even if that law changes. The fiscal note estimated that the cost to the state could be $2.25 billion if the state is only required to reimburse schools through state program funding only and not mill levy overrides. Since the release of the first fiscal analysis, the campaign behind initiative 108 has released an analysis indicating the backfill requirement would be just $200 million.[vii] This is based on the assumption that “revenue losses” applies to year-over-year changes and also includes higher revenue growth expectations. The Governor’s Office of State Planning and Budgeting has issued a presentation that paints a picture of where revenue cuts would need to come from.[viii] The presentation cites the January fiscal note, but the Office stated verbal estimates that the state’s backfill obligation would be lower if interpreted to mean year-over-year change. The 2^nd draft of the Blue Book analysis included an updated summary fiscal impact statement. The 2^nd draft preserved the assumption that the manner in which to measure the backfill requirement would be to measure revenue in tax year 2025 under Initiative 108 against revenue in tax year 2025 under SB24-233, contrary to written intent of the measures proponents. The revised revenue estimate is a reduction of $2.4 billion down from $3 billion in initial estimates. The estimate now assumes that the state will save $390 million on school funding in FY25, due to higher property taxes, and then spend an additional $630 million on schools in FY26. It estimates the initial year cost to backfill non-school local governments to be between $0 and $1.07 billion. The difference is due to the fact that the state now assumes that the portion of statute within 108 requiring a backfill, is written in a section of law set to expire next July based on prior legislation. The legislature would need to repeal the expiration or determine different backfill language in new legislation. As shown in Figure 13, statewide property tax revenue could remain flat for two more years and still be above trend following the 2023 spike. Even if property tax revenue only grows at 2% annually over the next two years, revenue could decline by $993 million under Initiative 108 and still be above the historic trend line. Figure 13

 

Historic Comparisons of Growth Limit

Figure 14 shows how the 4% growth limit compares to historic annual property tax growth rates. Since 1994, there have been 9 years in which property tax revenue grew by less than 4%. Figure 14 Colorado’s property tax revenue, which has significantly outpaced an annual growth rate of 4%, has also outpaced several important economic indicators.

• Over the past 30 years, property tax revenue has grown 2.85 times faster than the average weekly wage and 1.9 times faster than the rate of population growth plus inflation.
• Over the past 20 years, property tax revenue has grown 2.4 times faster than the average weekly wage and 1.9 times faster than population plus inflation.
• Over the past decade it has grown at more than double the rate of population growth plus inflation and 1.33 times faster than total personal income.

Figure 15

 

Projections for 4% Growth Cap

The 4% growth cap offered under Initiative 50 presents a range of potential impacts depending on both revenue growth and future policy changes. Here are major large points of uncertainty inherent in the policy: Firstly, property tax revenue projections are subject to a large amount of uncertainty given economic trends, housing market trends, and other factors such as oil and gas production. Secondly, voters have ultimate approval regarding whether to retain revenue in excess of 4% or not. Since the creation of both the Gallager Amendment and TABOR, voters have allowed local governments to retain revenue above their spending limits many times. Under Initiative 50, however, voter approval would have to occur at the statewide level rather than locally. Thirdly, a new revenue growth cap will likely precipitate a lot of future legislative action. Legislators may, for example, try to repeal Colorado’s two-year property tax assessment cycle. The current system causes property tax revenue to grow faster in years with reassessments than in intervening years; this creates a two-year pattern of fluctuation that’s represented in Figure 15. Revenue growth in years with reassessments generally surpasses 4%, but growth in non-reassessment years often does not. It is plausible that there would be calls to change the assessment process to something that produces smoother revenue growth. Initiative 50 itself would not implement any such reform. The latest projections from the Colorado Legislative Council Staff estimate that property tax revenue growth will not exceed the 4% limit in either 2025 or 2026, the first two tax years following Initiative 50’s implementation.[ix] It is likely, however, that annual growth will surpass 4% in future years.

 

Bottom Line

Following the repeal of the Gallagher Amendment in 2020, Colorado’s property tax system has needed reforms that adequately protect taxpayers and support local governments. In 2023, even after several years of temporary changes, Colorado taxpayers were still left with the largest annual growth in property taxes since 1975. The choice before voters this fall boils down to two questions: to what extent should Colorado limit the growth in property taxes, and to what extent should the state subsidize local property tax revenues? Initiative 108 offers substantial rate reductions starting in 2025. The measure would likely reduce tax bills, but not below where they were prior to the recent spike. It would lower property tax bills over the long term by a larger amount than the legislature’s alternative solution in SB24-233. It increases the state’s share of the K-12 funding commitment and requires it to make a large payment to local governments. The scale of the backfill payments will depend on property value growth and final interpretations of the text of the measure. Initiative 50 offers an annual revenue cap that falls below historic growth trends. If passed, it would generate additional state policy debates over how to comply with cutting revenue over the cap and whether to ask voters for permission to retain it. Should neither of the measures on the ballot pass, SB24-233 would take effect. Though tax bills would still increase against what people are paying today, they would be lower than under prior law. While it establishes a local revenue growth limit of 5.5%, it exempts more than half of all property tax revenue from the limit, and consistently grows annually rather than benchmarking against actual revenue performance. Consequently, the legislature’s long-term solution would leave Colorado taxpayers with tax bills far above what they would have been under the Gallagher Amendment and a lack of adequate protections against surging property taxes in future years. All paths lead to higher tax bills than what property owners experienced in 2022, though Initiative 108 could lower them relative to what homeowners paid this year. All options before voters would reduce property tax burdens relative to current law. Initiative 108 would result in the lowest tax burden for taxpayers over the next few years. Initiative 50 would provide the greatest protection against rising property taxes over the long term. Ultimately, the parameters for the future of Colorado’s property tax system will be decided by voters this November.

 

[i] https://commonsenseinstituteco.org/economic-impact-of-increased-property-taxes/

[ii] https://commonsenseinstituteco.org/tabor-refunds-at-risk/

[iii] https://commonsenseinstituteco.org/property-taxes-on-the-rise-despite-state-and-local-relief/

[iv] https://www.coloradoconcern.com/research-reports/dont-believe-the-doomsday-scenarios-on-colorado-property-tax-reform-ballot-measures-will-ensure-stable-long-term-growth-in-local-revenues-while-protecting-taxpayers f

[v] https://mcusercontent.com/cdfe1a91fbddfb4e377564335/files/8ef0449a-77d1-2d21-e43c-c9944a98f23f/2023_2024_108v2.pdf

[vi] https://commonsenseinstituteco.org/does-sb24-233-provide-taxpayer-relief-and-predictability/

[vii] https://www.coloradoconcern.com/research-reports/dont-believe-the-doomsday-scenarios-on-colorado-property-tax-reform-ballot-measures-will-ensure-stable-long-term-growth-in-local-revenues-while-protecting-taxpayers

[viii] June 14 meeting. https://leg.colorado.gov/content/jcopt2024acommsched

[ix] https://leg.colorado.gov/sites/default/files/images/dec2023forecastforposting.pdf#page=61