Bonds

Colorado Gov. Jared Polis on Thursday called a special legislative session for Aug. 26 on further property tax cuts to circumvent proposed ballot initiatives that could negatively impact public financing and education and local government funding in the state.

The Democratic governor said “the cost of inaction is too high” and pledged he won’t sign into law any legislation from the session until Initiatives 50 and 108 are pulled from the ballot by their proponents. 

“We refuse to gamble with our schools, our economy, our future,” Polis said in a statement. “Proposed ballot measures threaten to gut funding for K-12 and higher education, and Coloradans are counting on us to find a path forward that saves people money on property taxes while preserving these critical institutions.”

“Proposed ballot measures threaten to gut funding for K-12 and higher education, and Coloradans are counting on us to find a path forward that saves people money on property taxes while preserving these critical institutions,” Colorado Gov. Jared Polis said in his announcement of an Aug. 26 special legislative session.

Bloomberg News

Initiative 50, a proposed constitutional amendment on the Nov. 5 ballot, would put a 4% cap on total statewide property tax revenue growth that could only be lifted with voter approval. Initiative 108, which is awaiting certification for the ballot, would lower assessment rates used to calculate property taxes to 5.7% for residential properties and 24% for nonresidential properties with the exception of mines and oil and gas properties.

The governor’s statement pointed to an agreed upon framework that builds on Senate Bill 233, which became law earlier this year, by further reducing assessment rates and adjusting property tax revenue growth caps for local governments and school districts, giving property owners an additional estimated $270 million in savings on their 2025 tax bill.

Colorado bond market professionals raised alarms about Initiative 50’s lack of critical details on how it would be implemented if passed by voters. They also warned the measure would raise issuer borrowing costs and spark litigation, particularly against metropolitan districts, which finance public infrastructure for housing developments through property taxes levied on the new tracts. 

The current version of legislation works for metropolitan district issuers, according to Zach Bishop, head of Piper Sandler’s special district group public finance investment banking. 

“The latest draft of the framework that we have seen retains the elements of Senate Bill 233 that protected local government and metro district debt, including protections for existing debt, the exclusion of new development from the growth limit, the elimination of the ratchet-down effect, and more,” he said in an email.

An initial framework was presented to the state’s Commission on Property Tax on Monday. 

At the meeting, Commission Chair State Sen. Chris Hansen, D-Denver, said that in exchange for an additional tax measure, initiative proponents Colorado Concern and Advance Colorado were willing to remove the measures from the ballot and forgo bringing similar ballot proposals for at least 10 years. 

In a statement Thursday, the two groups said their deal with Polis and legislative leaders is contingent on state officials adhering to provisions of the agreement in the years ahead.

Combined with SB 233, the proposed legislation, which includes a property tax revenue cap of 5.25% for local governments and the greater of 6% or the inflation growth percentage cap for school districts, would result in nearly $1.6 billion in annual tax savings, according to the statement.

Ann Terry, CEO of the Special District Association of Colorado, expressed skepticism about the governor’s and legislative leadership’s explanation of how a promise to remove the initiatives from the ballot will be ensured. 

“However, we will be vigilant in protecting all of our special districts,” she added.

Amid a surge in home values, state lawmakers have been trying to rein in property taxes in the absence of a mechanism to keep them in check. The state’s 1982 Gallagher Amendment, which strived to protect homeowners from rising tax bills, was repealed by voters in 2020.

SB 233, which the Democratic-controlled legislature passed in May, limits annual property tax revenue growth to 5.5% starting in fiscal 2026, along with changes to certain assessment rates through fiscal 2027. 

Business group Colorado Concern contended the two ballot initiatives were needed “because lawmakers have failed to take the state’s property tax inflation seriously.”  

Articles You May Like

ValueAct takes a stake in Sanwa. How the activist can make a good company into a great one
Susan Reed joins Crews & Associates as managing director
China stocks just had their best day in 16 years, sending related U.S. ETFs soaring
UK house sales rise since the Covid-19 boom as lower mortgage rates spur activity
Non-doms in London ask: ‘Should I stay or should I go?’