In magnifying tax complications, Amendment 73 could hurt special districts

Ken Brownlee
Ken Brownlee

I recently debated the Moffat School District superintendent on Amendment 73 at an event sponsored by the League of Women Voters. I’m an education advocate. I have three master’s degrees from three separate institutions. I’m also the Colorado Assessors Association education chairman. When elected in 2014, my first question to my deputy was, “What’s our education budget.?”

Whether or not K-12 schools are in need of additional money is not my issue. But I fear Amendment 73 is at best a poorly written bad idea and at worst significantly damaging to all other special districts — such as fire districts, as the Denver Post discussed in recent editorials.

Amendment 73 takes a complicated property tax system and magnifies the complications. In fact, it so complicates the calculations it’ll take two years for the impact to be fully effected. Proponents of Amendment 73 cite a legal opinion stating it has no impact on any other special districts. Neither the property tax administrator, who’s responsible for interpreting such legislation, nor her attorney in the attorney general’s office shares this opinion.

Ironically, a critical reading of their legal opinion catalogs this complication and supports the view it will impact special districts. It just takes two years to be in effect. The proponents’ legal opinion states “current law determines the residential assessment rate.” The problem is current law calls for statewide total residential assessment value to be 45 percent of total statewide property value, and Amendment 73 will increase the assessment rate for the schools. That’s where the impact happens.

Amendment 73 was designed to raise $1.6 billion annually for Colorado Schools, and it does this primarily through a tiered increase in income tax. The amendment complicates a current flat tax by adding 4 tiers beginning at $150,000. There’s no requirement to adjust these income levels for inflation and will inevitably result in bracket creep.

The highest bracket represents a 78 percent increase, although it’s described in the ballot language as a 3.62 percent increase. Corporate income tax would increase 30 percent. The ballot says it’s an increase of 1.37 percent. Possibly the strongest argument for the need for this funding is the math errors in the language itself.

A bit of background.

The Gallagher Amendment to the Colorado Constituted was passed in 1982, and one of its tenets was to relieve the property tax burden of residential property owners and set as a target that residential property assessed value would be 45 percent of the total statewide taxable property.

When combined with TABOR, residential property value is no more than 45 percent of the total property value statewide. Since property taxes are determined as the product of actual value times assessment rate times mill levy, the Gallagher Amendment meets this goal by floating the residential assessment rate (RAR). This is the 45/55 split. Residential property values have risen much faster than other property values and, thus, the RAR has continued to come down, driven there largely by property values along the Front Range.

When Gallagher was passed, the RAR was 21 percent and the non-residential rate was 29 percent. Two years ago the RAR was 7.96 percent. Last year it was 7.2 percent. Next year it’s predicted to go to 6.11 percent. The ballot language states that for school districts, the residential assessment rate will be reduced from
7.2 percent to 7 percent. The problem with this statement is no one familiar with property assessment expects the RAR to be above 7 percent, so it will be an increase, not a decrease. There are other, similar misleading errors that make the proposal ripe for legal complaint.

Amendment 73 would freeze the RAR for schools only at 7 percent and drop the non-residential rate to 24 percent. Since roughly half of property taxes go to school funding (in Mesa County it’s 56 percent), this effectively raises the RAR for half of all special districts so that under current law if total residential property value is targeted at 45 percent the other half must decrease enough to average 45 percent. Lowering the
non-residential rate puts additional downward pressure on the RAR. All other districts get less so schools get more. I don’t believe the authors intended to do this, but such is the problem with competing constitutional amendments made without sufficient thought.

The ballot contains no language modifying the total assessment rate or stabilizing the non-school districts waiving or suspending the 45/55 split. That’s why I say at best it’s a poorly written proposal and at worst it does major damage to all other special districts. Vote no on this amendment.