As home values ​​rise, Rocky Mountain states face ‘property tax mess’

Marleen Gamble already took out the mortgage on her townhouse in 2018 to keep up with the ever-increasing cost of her Social Security checks, which are her only source of income.

Then, this year, Ms. Gamble, a retired X-ray technician, faced a 20 percent jump in her property tax bill. With no other way to pay for it, she began emptying her home of 34 years in the Denver suburb of Littleton, one memory at a time. Her dining set, sold. Her jewelry, now someone else’s.

“Every little thing I have, anything I don’t use, I sell,” said Mrs. Gamble, 84, who asked officials in neighboring Douglas County on submitting an application for subsidized housing. “What I owe now is $962.62. I think I need to use two credit cards to do this. And I will have to pay interest on them.”

Rising property taxes have become a sudden new source of alarm for many people these days in Colorado and across the new states to the Rocky Mountain West.

As home values ​​have risen, fueled by a pandemic real estate boom that has turned large swaths of the Mountain Time Zone into magnets for hybrid work and recreation, so have property taxes. And while rates are still low compared to places like New Jersey, Vermont and Texas, The sticker shock in the mountain states was disturbingespecially for low-income families or people who own second homes.

State and local governments are scrambling to find remedies to provide some relief and predictability. But they also face the challenge of keeping up with the expanded services required as a result of so many newcomers, such as schools and local government operations, most of which are funded through property taxes.

In Montana, where is the residential property tax jumped 46 percent in some districts from 2022 to 2023, Gov. Greg Gianforte, a Republican, convened an emergency task force. One thing off the table: sales tax for Montana, which aims to stay one of only five states without one.

In Wyoming, legislators adopted several laws granting new modest exemptions and capping annual increases. A former Republican candidate for governor also stood up ballot initiative it would cut education and other government spending to cut property taxes by 50 percent.

And in Colorado, home Taxpayers’ Bill of Rightsor TABOR, which limits spending and new taxes and returns all excess revenue to taxpayers, voters said no in November to provide immediate relief by using future tax refunds. Governor Jared Polis, a Democrat, responded by convening special session of the state legislatureand a working group that will look for a more permanent solution.

“This was a phenomenon in Colorado, Montana, Utah, Arizona, the western states,” Polis said in an interview. “If the value of your house has gone up 40 percent, that might be a wonderful thing on the equity front, but that doesn’t mean you have 40 percent more money to pay taxes on. Your salary may have increased by 10 percent or 12 percent in just two years. That is the challenge we face.”

Colorado Property Taxes they are calculated by multiplying the value of the home (as determined by the elected county assessor) by the statewide assessment rate (as determined by the state). That figure is then multiplied by each city’s mill levy rate, which combines specific taxes set by local governments in charge of schools, fire, sewers, recreation and more.

Several factors contributed to the increase, said Adam H. Langley, associate director of tax policy at the Lincoln Institute for Land Policy, who conducted extensive research on property taxes.

One is timing: Property values ​​are assessed every two years, so the values ​​used to calculate taxes rely on what the property was worth in mid-2022, when property prices were at their peak and interest rates were low.

Another is the failure of many local governments in Colorado, unlike some in other states, to reduce levy rates.

Then there it was to be abolished in 2020 The Gallagher Amendment, which limited how much of the total state property tax homeowners had to pay. As home values ​​rose, amendment it caused repeated reductions in housing assessment rates, putting billions of dollars that would have gone to schools and services into the pockets of homeowners. And it reduced the tax base of areas that weren’t booming, like the rural eastern plains.

“Colorado is mired in a property tax mess with no easy way out,” Billy Hamilton, vice chancellor and chief financial officer of the Texas A&M University System, wrote recently. Tax Notes Countrynon-profit trade publication.

Still, Colorado homeowners pay less than many of their counterparts in other parts of the country. Before the latest increases, the median annual property tax bill for primary residences in Colorado in 2021 was $2,259, or 19 percent below the national median of $2,795, according to the data US Census Bureau.

Among the places now absorbing the biggest increases are mountain towns on the Western Slope, where workers and real estate investors have driven job growth and higher taxable income.

This exacerbated the lack of affordable housing, especially for white-collar workers and public servants, including significant numbers of Latinos who moved away from Aspen along Highway 82 to Glenwood Springs and beyond.

“Billionaires are pushing millionaires into the valley,” said Brittany Hailey, who lives in Carbondale, near Aspen, and manages vacation properties in the area. She previously worked for Sen. John Hickenlooper, a Democrat, when he was governor.

In Pitkin County, Aspen’s home, property taxes are up 27 percent this year, said Jon Peacock, county manager. “It could put some people at risk of not being able to stay in the community,” he said, particularly retirees on fixed incomes.

To alleviate the crisis, the county is introducing a rebate program that would give rebates of up to $2,000 to qualified single households earning up to $72,900 and couples earning $98,600.

Ms. Haley and her husband, Michael Haley, may have qualified for the program when they moved to the West Slope 10 years ago. She worked at a local wellness company, he was the third employee at an early-stage tech startup, and they were struggling to pay the bills.

Now they have two houses and rent one to seasonal visitors. Ms. Hailey’s business, Boutique Mountain Homes, has been so successful that her husband is now chief financial officer.

Although their property taxes have jumped an average of more than 36 percent this year, Ms. Hailey, 37, says sometimes taxes need to be raised to maintain important services, such as popular bus system. In fact, she was involved in successful Carbondale Initiative 2022 add a 6 percent lodging tax on short-term rentals to create an affordable housing stock.

But like many people who own second homes, she is opposed account that would classify houses that are rented for more than 90 days a year as commercial real estate. Commercial tax rates are four times larger rather than residential.

“The advocates feel that it may reduce the number of second homes or penalize people who have more than one home,” she said. “They’re trying to find a scapegoat.”

Mike DeGuire, a retired school principal who owns another home in Silverthorne, closer to Denver, also criticizes the bill as flawed and unfair. But as a a longtime advocate of educationhe believes that the entire tax structure should be revised to strengthen the state chronically underfunded schools.

His frustrations are echoed in Denver, where many parents see it as inappropriate for property taxes to escalate while teacher layoffs also loom. Students even organized walks.

“Maybe we’re not thinking the way we should be about property taxes,” Mr. DeGuire said. “It’s almost a psychological thing – people are used to getting a refund and they’re used to not having their taxes so high, so we’re in a real bind.”

The idea of ​​paying more taxes found little support in fast-growing Douglas County, a conservative area between Denver and Colorado Springs.

New developments are popping up regularly, and potential home buyers are sometimes offering $100,000 or more in cash above list prices. Now, one in five Douglas homeowners face property tax increases of 40 percent or more, according to the data Common Sense Institutea free enterprise research organization.

Douglas County officials have proposed lowering assessments on all single-family homes by $4 million, which would save the typical homeowner $223. But the state board rejected it, and the district has since sued the board.

“The citizens of Douglas County are living on this roller coaster, not knowing what their property taxes are,” he said State Representative Lisa FrizellRepublican and former county assessor.

Ms. Frizzell is a member of the bipartisan tax commission chaired by Governor Polis. Among his recommendations allow the state to intervene if property taxes exceed a certain amount, separating school funding from other resources and reducing commercial rates.

Parliament has until May 8, when the session is adjourned, to codify all proposals into laws.

One Colorado phrase that kept being invoked at last month’s meeting was “de-bruising,” which allows local governments to ask voters to waive TABOR spending limits. It was named after former state representative Douglas Bruce, an anti-tax activist who wrote TABOR in the early 1990s, taking inspiration from Proposition 13 in his native California.

“When they say they’re going to de-Bruce, it’s an insult to voters – it doesn’t hurt my feelings,” said Mr Bruce, who later spent in prison for tax evasion and related issues and is now he’s running for Congress. “That’s like saying they want to throw me out of the constitution.”

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