EDITORIAL: Special legislative session on tax relief could sidestep budget crises

Few things making up Colorado state government are as complicated and obtuse as how the state levies property taxes.

Even those who are paid to understand the state’s Byzantine property-tax structure agree.

“Complicated!” is how the state Legislature’s two top economists described it in a recent state report on how the Colorado Legislature modified tax laws earlier this year with Senate Bill 233.

Gov. Jared Polis has wisely called a special session of the Colorado Legislature in a high-stakes effort to keep two ballot initiatives from making the state’s bewildering property tax problems even worse.

The current fix, SB 233, was rushed through the end of a hectic legislative session in May. It intended to address public angst over mushrooming property taxes for homeowners and commercial property owners alike.

Colorado’s latest property tax quagmire was spurred by spiraling property values, especially in urban and resort regions. The huge property value increases were destined to result in equally large — and unfair — property tax bills.

Because property taxes are affected by myriad laws and formulas — often competing or contradictory — creating a unified method of pushing back on essentially automatic property tax increases statewide is fraught with risk.

Another problem is created by different local governments receiving property taxes at different rates and under a variety of regulations. Legislative, state administrative and local governments all agree the fiscal risk to some governments is inevitable and in some cases serious when changing property tax laws.

In trying to navigate all those obstacles with SB 233, neither business and residential property owners nor local government leaders were pleased. The state saw a net increase of more than 20% in property tax revenues, even after SB 233 reductions, according to state officials.

More than a few Sentinel readers were among those shocked to see their $3,000 annual property tax bill rise by more than $500 a year. 

The result of all this was two ballot initiatives destined for the November Election. Both of the measures, Prop 50 and Prop 108, would reduce and then cap property taxes, for businesses and residents, considerably more than did SB 233.

At the same time, both measures could have a catastrophic effect on recipient governments, especially schools and higher education, state projections show.

The existing convoluted system, compounded by either of the ballot measures, creates extraordinary danger for the state.

Democrats and Polis have offered a counterproposal that would, in effect, slightly lower and cap property taxes beyond what they approved earlier this year, but that reduction and cap is considerably smaller than either of the ballot measures offer.

While the details have yet to be fully analyzed, the new Polis-Democrat proposal would be far less likely to critically impact schools and other governments. Given the certainty of negotiation between Democrats and Republicans, who suddenly have political leverage in this debate, it’s too early to make a recommendation.

Given the stakes, it was a smart move to push this into the legislative arena one more time. Republican-led counties, school districts and sheriff departments are at the same risk as others. And despite the efforts of SB 233, the reductions were too small not to lure voters toward approving one of the two ballot initiatives.

Lawmakers need to keep that in mind as they move through the special session, which Polis has called for Aug. 26.

Most voters are overwhelmed and even uninterested at this point in having to understand the mechanics of the state’s property-tax quagmire. They want shelter from higher property taxes, in the midst of still-painful inflation, and they want to ensure critical services like schools, roads and public safety don’t slide backward.

Pushing all this toward a workable compromise, Polis said he won’t sign into law whatever the special session produces unless backers of the two initiatives first pull them from the statewide ballot. 

If all this fails in the special session, persuading voters statewide to turn away big property-tax cuts, however self-defeating, will be a difficult endeavor.

A great deal depends on state lawmakers and Polis avoiding a standoff and delivering the goods in less than a week.