Routt County fire protection districts, Colorado Mountain College seek relief from Gallagher Amendment
October 16, 2018
STEAMBOAT SPRINGS — Several Routt County fire protection districts and Colorado Mountain College are seeking a measure that would allow them to adjust their mill levy rates to accommodate for reductions in property tax revenues within their districts due to the Gallagher Amendment.
The college, along with Yampa, West Routt, Oak Creek and Steamboat Springs Area fire protection districts, have mill levy adjustment authority measures on the November ballot. The measure would not increase the dollar amount paid in residential property taxes but would allow the districts to maintain their current mill levy rates should residential assessment rates decrease.
These measures, if passed, are intended to mitigate the financial impact of the Gallagher Amendment and allow these organizations to continue to provide services at their current levels.
Gallagher, passed by voters in 1982, is an amendment to the Colorado Constitution that set a ratio for property taxes paid statewide. It mandates that commercial property owners pay 55 percent of property taxes in the state and residential property owners pay 45 percent.
The amendment set a fixed assessment rate of 29 percent for commercial property, while the residential property tax rate is regularly adjusted to maintain the 45 to 55 ratio. The measure was intended to combat rising residential property taxes, but it had unintended consequences.
As the state's population has grown, increased residential property values have outpaced growth in commercial property values. The rate that individual residential property owners pay has shrunk. As more people pay into that 45 percent of total property taxes, the percentage individual residential property owners pay has fallen, too.
When Gallagher was passed, residential properties were assessed at a rate of 30 percent. Today, that rate is 7.2 percent.
This rate is expected to decrease again to 6.85 percent when the rate is re-evaluated next year, according to the Colorado Legislature's Legislative Council Staff. Locally, this has reduced revenue for special districts whose budgets rely on property tax revenue.
"It's anticipated that in 2019, next year, based on the increases in property values along the Front Range, that our assessment rate will go down again, which will cost the district about $130,000, and that continues year after year," said Karl Gills, a member of Steamboat Springs Area Fire Protection District board. "The impact of Gallagher on us is truly a reduction in money we have to provide service to those in the district."
West Routt Fire Protection District Board President Ross Fralick said Gallagher has led to a 5 percent drop in revenue for the district every year for the past four years.
The mill levy adjustment measures would allow the districts to essentially freeze their residential assessment rate at the current 7.2 percent rate should the residential assessment rate continue to fall.
If the state reduces the mill rate next year, the special districts would then be allowed to increase their mill levy to the current 7.2 percent assessment rate. The measures are intended to capture revenue that would otherwise be lost as the districts anticipate the residential assessment rate will decrease again next year.
Should the Gallagher Amendment ever increase the residential assessment rate, the districts would be required to reduce their mill levies.
Ken Brenner, Routt County's representative on the Colorado Mountain College board of trustees, said the college lost $2.8 million in annual funding in the last Gallagher residential rate reduction, and he added that if the college's Gallagher measure, Referendum 7D, fails again, the college is projected to lose $4 million annually.
A similar measure was on the ballot in 2017 and gained approval from Routt and Pitkin county voters but did not pass in the other counties where the college levies property taxes.
"7D simply allows Colorado Mountain College's locally elected trustees to maintain our current level of revenue by adjusting the mill levy to maintain revenues that would otherwise be lost due to the statewide property tax assessment rate reduction mandated by Gallagher," he said.
The state legislature is considering some solutions to Gallagher’s unintended consequences. One passed beyond committee this week and would create regional residential assessment rates. This is intended to lessen the impact that increasing Front Range property values have on assessment rates statewide.