Proposition 120: Property tax assessment rate reduction, explained

Proposition 120 is a law change to reduce property tax rates across the state. But, how broad the cut would be will likely have to be settled in court, should the measure pass.

The group that put Proposition 120 on the ballot wants to reduce the tax rate by 9 percent for most properties. For homes, that would mean decreasing the tax rate from 7.15 percent to 6.5 percent. For commercial properties, the drop would be from 29 percent to 26.4 percent.

In years when the state brings in enough money to trigger taxpayer refunds, Proposition 120 would also allow lawmakers to hold onto an extra $25 million, as long as the money is spent on property tax exemptions for seniors and veterans with service-related disabilities.

Proponents argue Colorado’s property values have risen so sharply in recent years that many owners are struggling to pay their tax bills. In areas where homeowners have seen the biggest jumps in value, they might still end up paying more in taxes, but not as much more. In parts of the state with less growth, the measure would result in owners getting a tax cut.

“Just because your house goes up in value, doesn't mean that you have more money in your pocket to pay for the higher property taxes,” said Michael Fields, whose group, Colorado Rising Action, put Proposition 120 on the ballot. “We're worried about seniors, people on fixed income, people that might have seen their house double in five or six years. How do they pay for those increased taxes?”

Overall, the estimated impact of the rate cut would be around $1 billion less in property taxes collected statewide. Those funds go primarily to local school districts, as well as fire departments, libraries, water and sewer districts and other county-level services.

The state is required to backfill the reduction in school funding, but the other things that rely on property taxes could have to cut services.

The big wrinkle with Proposition 120 is that state lawmakers this spring re-wrote the property tax code in a way that significantly reduces its scope. Under the state’s new, more granular property tax law, Proposition 120 would apply only to multi-family properties and lodgings, like hotels and bed-and-breakfasts.

The new tax law does offer some relief to rising property values; it includes a two-year temporary rate reduction. It also allows homeowners who experience a rapid increase in home value to defer their increased taxes until they sell their homes.

Democratic state Sen. Chris Hansen, who co-sponsored the law, called it a “targeted and responsible” way to address property taxes, as opposed to a permanent across-the-board cut, which he warned, “would have significantly undermined services as the economy is trying to recover.”

Because the law passed after Proposition 120’s language had been approved by the state, it was too late for the proposition’s backers to adjust. Fields said that should Proposition 120 pass, his group intends to go to court and argue the legislature broke the rules with this maneuver.

If voters approve this proposition, it will likely be up to the court to decide whether it will have a $1 billion impact on the state or a fraction of that.