If you’re still staring at that unopened ballot on your kitchen table, you might open it to find a confusing question staring back at you.
That’s Proposition HH, the effort from Colorado Democrats to offer property tax relief ahead of an impending spike in the property tax bill you could pay next year due to Colorado’s expensive home prices.
But opponents point out that Prop HH could also shrink the tax refunds Coloradans receive under a policy called the Colorado Taxpayer’s Bill of Rights, or TABOR — more on that later — and they note much of the funding the state would keep under Prop HH would go toward education, not relief for homeowners.
Meanwhile, some local governments officials have taken public stances against HH, with some claiming it would force them to lose so much property tax revenue that they’d have to cut local government services.
Property taxes partly fund county governments, but they also fund fire districts, library districts and other local entities.
And even though some say Prop HH would threaten cuts to local services, opponents still say it’s not real tax relief.
So what would Prop HH actually do? What’s left when you cut through the rhetoric? Did you glance at Colorado’s “blue book” voter guide that you received in the mail, only to still be confused?
Here’s an explainer on how Prop HH works, a rundown of the issues surrounding the proposal and a look at the question of whether it would save Coloradans money.
Why property taxes are rising
Democrats say they rolled out Prop HH to blunt the impact of high property values on Coloradans’ property tax payments.
Driven by a costly real-estate market, home values — as calculated for property tax purposes — have spiked since the last time homeowners received notices of value two years ago. In Douglas County, for example, residential properties saw increases in value between 30% and 60%, with a median of 47%.
The high increase in property values means families’ property tax bills could jump up next year.
Colorado law requires county assessors to value properties every two years, according to Douglas County’s website. The property valuation that homeowners recently received is based on data as of June 2022, near the recent peak in the real-estate market.
So even though home prices have declined since then, property values reflect last year’s exceptional highs. And when property values increase, the tax bills property owners pay also go up — even if the tax rates themselves don’t change.
In other words, Prop HH isn’t what is threatening to raise your property tax bill.
Rather, it would pull levers that would result in a smaller increase in property taxes than Coloradans would see under current law.
What Coloradans pay in property taxes depends in part on property values — such as the value of a home — and the tax rates set by local government entities like counties and school districts. (Property tax rates are officially called “mill levies.”)
Another number called the “assessment rate” — set by state officials — is the third part of the equation that determines your property tax bill.
Among other actions, Prop HH would lower the assessment rate for residential property to reduce Coloradans’ property tax bills.
Basics on Prop HH
Here’s some of what else Prop HH would do to lower property taxes, according to the state’s “blue book” voter guide:
• Subtract a set amount from most properties’ values before applying the new assessment rates;
• Allow a senior aged 65 and older who has previously qualified for Colorado’s senior “homestead” taxexemption to receive the same property tax benefit in any home they purchase and live in as their primary residence, beginning in 2025;
• Establish a limit on local government property tax revenue growth, including methods to lower tax rates to comply with the limit or to waive the limit. (Officials in Douglas County have noted the limit would be optional because local officials can vote to opt out.)
Some local government officials have expressed concern about what Prop HH could do to their budgets.
To make up for the fact that local governments will see less of an increase in funding if Coloradans’ property tax bills grow by a lower number, Prop HH proposes to let the state keep more of the money it currently must refund Coloradans on different types of taxes — and use some of it to reimburse eligible local governments for lost property tax revenue.
That’s where TABOR comes in.
The Colorado Constitution includes a section, “The Taxpayer’s Bill of Rights,” that limits the amount of money that the state government can collect and spend or save each year. If money is collected above the limit, the excess must be refunded to taxpayers. This is called a TABOR refund.
(A note on how those TABOR refunds look: A portion of the money is refunded through property tax reductions, including those for seniors, along with veterans with a disability, and the remainder is distributed as a “tiered sales tax refund” using the state income tax return, according to the state blue book. For last year only, part of the TABOR refund was distributed to taxpayers through checks in the amount of $750 for a single filer and $1,500 for a joint filer, rather than through the tiered system.)
Where new money goes
So how does TABOR change if Prop HH passes?
Prop HH would create a new limit on the amount of money the state may keep — higher than the current cap that was established by a measure called Referendum C in 2005. Prop HH would allow the state to keep revenue up to the new cap, which would grow by population growth and inflation, plus 1 percentage point, each year.
How would the state’s newly kept revenue be spent? The money would go to the following purposes:
• Up to 20% to reimburse, or “backfill,” eligible local governments for lost property tax revenue.
• Up to $20 million each year for rental assistance. (Renters, unlike homeowners, do not directly benefit from property tax decreases. Prop HH would provide “additional funding for rental assistance to qualifying renters,” the blue book says.)
• The remaining funds to reimburse school districts for reduced property tax revenue as a result of the measure, and for education-related programs.
Local governments concerned
Amid the whirlwind of proposed changes in Prop HH, some local governments raised concerns about the effects of the property tax revenue changes on their budgets.
West Metro Fire Rescue, an agency that serves parts of Jefferson County but also the Roxborough area, has been particularly vocal.
“We are seeing 30% (to) 40% increases in some of our major assets. A fire truck that I could have purchased a few years ago for $800,000 now (costs) $1.2 million,” Jeremy Metz, deputy chief of administration for West Metro Fire, said during a recent meeting at the Douglas County elected leaders’ headquarters in Castle Rock.
He added that the agency has not increased its mill levy since 2008 and has managed to get by so far but is “concerned about decreasing revenue.”
A resolution, or official statement, from Douglas County’s elected leaders went as far as to say that “Douglas County will have to cut services or increase its residents’ taxes.”
But Prop HH wouldn’t impose a budget crisis on the county. If Colorado voters pass Prop HH, Douglas County could go above the local revenue cap if it posts a public meeting date and allows for the public to comment before the county commissioners, or elected leaders, vote to exceed the cap.
Commissioner Lora Thomas has acknowledged that the county’s leaders could vote to opt out of the cap.
‘Bait-and-Switch’
Douglas County officials have also argued that Prop HH is not property tax relief but, rather, a deceptive effort to expand state spending.
“It is a bait-and-switch effort to get your TABOR refunds,” Douglas County Commissioner George Teal said in a county news release.
State Rep. Lisa Frizell, a Republican of Castle Rock, has said that state lawmakers could have passed property tax relief on their own without relying on Coloradans to vote on a ballot measure.
“We could have lowered the residential assessment rate in the legislature. The one (thing) we can’t do in the legislature is take your TABOR refunds. We can’t do that. And that’s why this is going to a vote (of the people),” Frizell said at a Douglas County town hall event earlier this year.
But merely lowering the assessment rate wouldn’t account for money local governments would lose out on in property tax revenue.
“We had to respond to this moment,” Democratic state Sen. Chris Hansen said, alluding to Colorado’s large jump in property values, in a Colorado Sun story. “But we wanted to do it in a way that’s not going to harm firefighters and schools and important local services.”
Eye on education
Douglas County’s official statement argues the true goal of Prop HH is to fund education by making changes to TABOR.
Prop HH would retain state revenue above the “Ref C” cap and credit most of that money to the State Education Fund, according to Legislative Council Staff, the nonpartisan research arm of the state legislature.
In general, the state legislature can appropriate money from the State Education Fund for the state’s share of funding for school districts. The money in that fund only gets spent on school funding, but it doesn’t have to be spent immediately, according to Legislative Council Staff.
Money in the State Education Fund can also be used for other education-related programs and services specified in the state Constitution and statute, in addition to the state share of school finance, according to the staff.
Speaking about the property tax revenue “backfill,” the staff said that the amounts required to make up school district losses make up more than 50% of the Prop HH retention, at least in the near future.
Because Prop HH would add revenue to the State Education Fund, the state legislature could decide to spend money on school districts beyond the funding that is required merely to backfill property tax revenue that is lost due to Prop HH, according to the staff.
Colorado Community Media spoke with staff about whether the state could take money that would have otherwise gone to education and, in light of increased funding under Prop HH, spend that money on other things. In other words, for example, if the state was going to spend $4 billion to fund K-12 education, and now it has $1 billion more to spend under Prop HH, will that result in $5 billion to spend on education, or will it result in that $1 billion being spent on education but freeing up another $1 billion to spend on something else?
It’s a hairy question, but the blue book seems to weigh in, saying: “The new education funding cannot replace current General Fund spending for public school finance.”
Will it save you money?
The big question for homeowners is: Will Prop HH end up saving them money when looking at both the property tax savings and TABOR refund losses?
It’s difficult to tell, and even the nonpartisan legislative staff doesn’t have a crystal ball.
An analysis by the Colorado Fiscal Institute, an organization that supports Prop HH, says: “Netting the property tax savings with expected reductions to state refunds over the whole decade, Proposition HH will result in $2,682 net savings.”
An analysis of Prop HH by the conservative-leaning Common Sense Institute says that over the next decade, homeowners could save about $4,600, but they may lose about $5,100 in TABOR refunds, for the average joint filers.
The blue book itself provides some estimates of property tax reductions and changes to TABOR refunds in the near future, but past that, the Legislative Council Staff hasn’t ventured into guessing.
“LCS hasn’t produced HH estimates beyond (fiscal year) 2024-25. Our forecast doesn’t go out beyond that year,” staff said in an email. “Anything further into the future will depend on economic conditions.”