Gov. Jared Polis has called the state legislature into a special session aimed at building on recent property tax cuts and heading off a pair of ballot measures that opponents warn would be disastrous for government services, he announced Thursday.

State lawmakers are set to convene Aug. 26. They will need to meet for at least three days to pass any bills — and in the dog days of summer, with many soon leaving office, limiting the session’s length will surely be the goal.

As pressure has built for a special session, officials in recent days have outlined a potential $270 million in property tax cuts that they hope will head off Initiative 50, which has qualified for the ballot, and Initiative 108, which is under petition signature review.

Those measures are being run by the conservative advocacy group Advance Colorado. They would cut tax bills by billions of dollars and put a strict cap on property tax growth at the local level. The prospect has worried a wide range of advocacy groups and the mayors of the state’s three largest cities, who pushed this week for a special session.

The initiatives, if successful, could save property owners hundreds of dollars per year — at the cost of potentially billions of dollars from state services as the state backfills some of local entities’ and schools’ lost revenue. The alternative deal on the table for the special session, at bottom, would save about $100 a year for the owner of a $500,000 home with an average mill levy.

Polis said he would not sign any new legislation until the measures are formally pulled from the November ballot, as Advance Colorado’s leader has agreed to do.

“Whatever the level of risk is — whether it’s a 50/50 chance it passes, or a 30% chance it passes — (these initiatives) would result in immediately reestablishing the budget stabilization factor (for schools), defunding higher education, gutting local transportation funding and much more,” Polis said in an interview with The Denver Post on Thursday morning. “If we can find a way to provide a property tax cut that we can afford, (and) that protects funding for our schools and special districts, we should certainly take the opportunity to do that.”

In a statement, Senate President Steve Fenberg called the ballot measures “reckless and irresponsible” and said they “pose an existential threat to critical state and local services.” It was incumbent on the legislature to do what it could to stop them from going into effect, he said.

He and House Speaker Julie McCluskie, both Democrats, each said it was now up to elected leaders to “govern responsibly.”

Republican leadership in the House and the Senate said in separate statements that they looked forward to another opportunity to further lower property tax burdens in the state.

If passed, the initiatives filed by Advance Colorado would lower property tax rates across the state and strictly cap how much property tax revenue can grow in the future. Advocates argue those moves would stop runaway property tax bills if Colorado goes through another boom in home values.

Michael Fields, the president of the Advance Colorado Institute, has promised to pull the measures if lawmakers pass new reforms his group finds agreeable — but they would have to do it by the state’s Sept. 6 ballot-setting deadline.

In a news release Thursday, the group called the proposed agreement “a permanent solution to Colorado’s property tax crisis” and said it wouldn’t bring similar ballot measures in the future — as long as the government did not change the provisions.

“This property tax cut and cap agreement provides the permanent tax relief that Coloradans have been demanding and will prevent future spikes in property tax bills going forward,” Fields said in the release. “This is the result of two years of consistent pro-taxpayer advocacy to ensure that we can solve the current property tax crisis for the benefit of Colorado families and businesses.”

Seeking long-term solutions

The special session will be the second one Polis has called in the past 10 months to address property tax policy. Lawmakers passed relief for homeowners and renters in a four-day session last November.

In between, the legislature met for its regular 120-day session during the winter and spring, in which property tax negotiations also played a defining role and resulted in lawmakers in May passing Senate Bill 233, a $1.3 billion cut.

Lawmakers and advocates have searched for a long-term solution since voters in 2020 repealed the Gallagher Amendment, which held residential and non-residential taxes in a fixed ratio to benefit homeowners. Its repeal introduced new volatility for tax bills while benefiting some tax districts.

Many lawmakers thought they’d reached a solution with this year’s SB-233, which cut tax rates and capped how much tax collections could grow in subsequent years. In unveiling it at an early May press conference, Polis declared that “white smoke has emerged,” a reference to the Catholic tradition used to announce a new pope has been chosen.

But negotiations with Advance Colorado and the business-oriented group Colorado Concern, the initiatives’ backers, broke down, and they continued to press the ballot measures.

On Thursday, Polis described the Senate bill as coming “very close” to ending the property tax wars.

The Groundhog Day-like nature of the legislature’s property tax debates — coupled with simmering distrust from the spring negotiations — left many Democratic lawmakers frustrated as momentum built for a special session this week. They privately vented at the deal they thought had been struck several months ago. And they expressed resentment at feeling trapped between facing ballot measures that could crater the state’s budget and negotiating for further tax cuts with wealthy business groups.

“We do feel like someone is going back on a deal, and that, frankly, is not how we operate in this building,” said Rep. Cathy Kipp, a Fort Collins Democrat, during a meeting this week in the Capitol of a legislative commission on property tax policy. “I am less agreeable, personally — (though) I know different people in my caucus have different opinions — to letting this deal be continually revived to the detriment of our state and our citizens.”

Others, though, said the risks of the ballot measures were too great. Several referenced polling they’d seen that showed the measures didn’t have a strong chance of passing but weren’t assured of defeat, either.

New proposal’s details

On Monday, Mark Ferrandino, the governor’s budget director, outlined the proposed tax policy revisions to the commission, which comprises lawmakers, local elected officials and others close to the issue.

Ferrandino said the proposal would would reduce property tax collections statewide by about $270 million, versus the estimated drop of more than $2.1 billion under Initiative 108. Strong growth in property values would help offset the deficit for local taxing entities, he said.

The special session proposal would push down residential assessment rates, which determine how much of a property’s value is considered in tax calculations, by about three-tenths of a percentage point. The bill outline also calls for limiting the growth of property tax revenues to 10.5% every two years for taxing districts besides schools. The law passed in May had capped growth at 5.5% per year, or 11% per two-year cycle.

For school districts, the new proposed cap is 12% per two-year assessment cycle, or 6% per year, though districts would be allowed to grow faster if inflation and population growth reach certain levels.

The measure would take effect for property tax year 2025, which taxpayers generally would be billed for in 2026.

Advance Colorado’s Initiative 50, a constitutional amendment that requires 55% support to pass, would cap property tax revenue increases at 4%, including for local school districts. Initiative 108, a statutory measure that requires simple majority support, would lower the assessment rate for both residential properties and commercial properties.

Several lawmakers have said they want some guarantee that any new deal comes with more than a handshake promise that the ballot box would stop being a battleground for property tax policy. Polis said Thursday that he generally would be open to some kind of statutory language aimed at preventing future “divisive measures” on the ballot.

Ann Terry, executive director of the Colorado Special District Association, said she remained skeptical of the proposal for the special session and how elected officials will ensure the initiatives never make it to the ballot. Her organization’s membership includes hospital districts, fire districts, water and sewer utilities, and more — all of which rely on property taxes for funding.

“We think there needs to be details to the outlined framework,” Terry said. “This feels like death by a thousand cuts.”

Staff writer Seth Klamann contributed to this story.

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Originally Published: August 15, 2024 at 10:30 a.m.