If the Gallagher Amendment is not repealed in the Nov. 3 election, the Highlands Ranch Metro District could lose $2.4 million in revenue and pause all future projects, including the long-awaited senior center, according to an analysis from the district.
The Gallagher Amendment, passed by Colorado voters in 1982, requires 55% of the state’s property tax to come from commercial properties and 45% to come from residential properties. The amendment also freezes commercial properties’ assessment rate at 29% and requires that the residential properties' assessment rate, used to calculate property tax, floats to maintain the 55 to 45 ratio.
Now, Amendment B, which appears on Colorado voters’ ballots for the upcoming election, is asking voters if they want to remove that rule.
In part, that’s because at the time Gallagher passed, property values were reflected with 55% coming from non-residential properties and 45% coming from homes and now, 38 years later, residential properties represent about 80% of the state’s value. That gap, which has continued to widen over the years, causes downward pressure on the residential property tax rate and when this interacts with TABOR, or the Taxpayer's Bill of Rights, state and local governments aren’t able to increase taxes without voter approval.
This process causes a ratcheting-down effect to how much residential property owners pay in taxes and how much governments can expect in revenue.
State projections show that this year, residential property values are up 10%, while commercial values are down 20%. Based on this projection, the state’s new residential property rate would drop from 7.15% to 5.88%, causing the $2.4 million decrease in revenue for Highlands Ranch.
“That’s a pretty significant change for us,” said Stephanie Stanley, the metro district's finance director.
Homeowners whose property value doesn't increase could end up paying a lot less in taxes but businesses could “see a significant increase in their property tax obligation,” she said.
In a Sept. 29 meeting where Stanley presented this information to the HRMD Board of Directors, the board discussed formally supporting the repeal of Gallagher but ultimately decided not to take action. One director, Andy Jones, said he was concerned the repeal of Gallagher could eventually result in the repeal of TABOR, a move he said he opposes.
“In this state, where TABOR has had a bull's-eye on it for at least the last five to 10 years, I don’t have any faith that TABOR won’t be repealed in some way shape or form in the very near future, so I’m not comfortable with this,” Jones said.
If Gallagher isn’t repealed, the metro district has prepared a plan to make up for the losses. Some of those steps include pulling money from their fund balance to make up the difference, no longer attempting to pay off the metro district’s debt early and pausing all future projects, including a senior center.
“It’s important to us — staff as well as the board — not to reduce our level of service,” Stanley said. “So that is our top priority.”
The district would also consider eventually asking the residents to increase the mill levy in about six or seven years, Stanley said.
If Gallagher is removed, it would freeze the residential assessment rate at 7.15%. Voters would still need to approve any tax increase.
“If it passes, it would help preserve the current level of funding for local governments,” Stanley said.
South Metro Fire Rescue, which serves Highlands Ranch, approved a resolution formally endorsing the measure to remove Gallagher in a Sept. 14 meeting. South Metro projects it would see an 18% decrease in revenue if the amendment is not repealed.
“The projected reductions in the residential assessment rate, coupled with projected decreases in non-residential property values, result in unsustainable losses in revenue that may necessitate cuts to spending on essential emergency and life safety services,” according to the South Metro resolution.
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