Colorado Democrats seek to deliver same property tax relief as Prop HH without touching TABOR refunds

Special session beginning Friday likely to be a pressure cooker as lawmakers work to find consensus on complex policies before Thanksgiving

Colorado Democrats’ primary idea for reducing homeowners’ property taxes due next year is nearly identical to what Proposition HH proposed, but it would only last a year and uses a different mechanism for replacing lost revenue for local districts.

During a special legislative session that begins Friday, lawmakers will also debate bills aimed at providing financial relief for renters, making all refunds issued under the state’s Taxpayer’s Bill of Rights the same amount for everyone and expanding the state’s earned income tax credit.

The special session will last at least three days and is likely to be a pressure cooker as lawmakers work to find consensus on complex tax policies before Thanksgiving. Republicans have pitched their own ideas for dealing with skyrocketing property taxes, including additional cuts to the state income tax, but Democrats have said that plan is unworkable.

Gov. Jared Polis called for the special session Nov. 9, just two days after he and other Democrats’ initial plan, Proposition HH, was voted down by Colorado voters by 18 points.

Property taxes and TABOR refunds

Senate President Steve Fenberg, in a press conference Thursday, said Democrats’ primary bill would allow homeowners to deduct $50,000 of their home’s value from property taxes, up from the already-existing $15,000 deduction. It would also cut the state’s assessment rate for residential properties, which is used to calculate property taxes, to 6.7% from 6.765%.

“If we do nothing, thousands of Colorado families, especially those on fixed incomes, would be at risk of being unable to stay in their homes,” Fenberg said. 

Unlike Proposition HH, the bill wouldn’t offer any tax relief for commercial properties. 

That bill proposes backfilling the revenue from property taxes — which is collected by counties and used for local services like schools and fire districts — with $200 million from the general fund. The vast majority of that money, $135 million, would go toward school funding.

Another bill that’s expected to be introduced would make TABOR refunds from this fiscal year the same amount for each person, as opposed to the default mechanism, which doles out refunds based on how much someone earns. The flattened approach would give lower income Coloradans larger refunds.

Sen. Dylan Roberts, D-Frisco, said he supports that idea. 

“We have lower income individuals and working class people in our communities that will be able to use that increased benefit to pay for rent and increased costs,” said Roberts, who represents Clear Creek, Eagle, Garfield, Gilpin, Grand, Jackson, Moffat, Rio Blanco, Routt, and Summit counties. 

Relief for renters

Another bill, sponsored by Reps. Mandy Lindsay, D-Aurora, and Leslie Herod, D-Denver, would dedicate $30 million in general fund dollars to an emergency rental assistance grant program for people who have a household income of 80% or less of the area median income and are at risk of eviction.

House Speaker Julie McCluskie, D-Dillon, is a cosponsor on the bill and said when she talked to the governor about the special session, she mentioned her interest in addressing relief for renters.

“I was really pleased to see in the governor’s call, the opportunity for us to broaden the scope of support,” she said. “Property taxes are soaring but we want to make sure that all Coloradans at this moment get some support.” 

People are deemed as being at risk of eviction when they have received a notice for being late on rent and the Division of Housing, under the Colorado Department of Local Affairs, has deemed them at risk of imminent eviction. 

The Division of Housing would partner with nonprofits to award the grants.

Grant recipients would be allowed to use the funding on rent, utility bills, late fees, court costs and other costs that would prevent them from being evicted. They could also use it for a deposit or other move-in expenses as part of relocation. All of the funds would have to be used by July 2024. 

Democrats also want to expand the state’s already-existing Earned Income Tax Credit. 

While both Democrats and Republicans agree the surge in property taxes need to be addressed, they differ on ways to do it and how to replace that revenue for the local districts that typically use it, such as schools and fire districts. 

The Republicans’ plan includes reducing the state’s assessment rate for residential properties to 6.5% from 6.765% and nonresidential to 25% from 27.9%. It would also create $80,000 for residential property value reductions and $60,000 for commercial properties. It suggests backfilling the revenue for local districts by using $617.5 million from the state’s reserves and general fund.

Another Republican bill would reduce the state’s income tax rate to 4% from 4.4%. 

“We have gone to great lengths to get local government associations and other stakeholders involved in the process while remaining focused on delivering real property tax relief,” said House Minority Leader Mike Lynch in a written statement. “We have shared our plan with the Democrats and hope they are sincere in bridging the divide and bringing real property tax relief to the people of Colorado.”

Democrats have said they’re not interested in using the state’s reserves for backfill. 

“We have found the Republican proposal to not be serious,” Hansen said. “That is not workable, we have danger of a recession — that would be pretty fiscally irresponsible.” 

Sen. Roberts said he hopes for bipartisan agreement during the special session.

“I think this is a problem for our state and one that we can work together to figure out or at least alleviate for the time being,” he said. “I hope this doesn’t turn into a partisan struggle.”

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