The recent special session of the Colorado Legislature concluded with the passing of House Bill 1001, aimed at addressing property tax cut initiatives that were creating concerns in the state’s municipal bond market. This bill was a result of a negotiated deal with the backers of Initiatives 50 and 108, who agreed to withdraw their measures from the November 5 ballot and not pursue similar ones in the future, provided that the state government follows the terms of the agreement.
Initiative 50, in particular, had caused alarm among professionals in the Colorado bond market. This proposed constitutional amendment sought to impose a 4% cap on statewide property tax revenue growth, which could only be lifted with voter approval. However, the lack of specific details on the implementation of this cap and the potential consequences of its passage had raised concerns about increased borrowing costs for issuers and possible litigation, especially against metropolitan districts that rely on property taxes for funding public infrastructure projects.
Zach Bishop, a representative from Piper Sandler’s special district group public finance investment banking, expressed cautious optimism about HB 1001, acknowledging its goal of reducing property taxes for residents while safeguarding the financial stability of special districts. Ann Terry, the CEO of the Special District Association of Colorado, emphasized that while it was too early to determine the full impact of the bill, some districts could face financial challenges as a result of the proposed tax cuts.
During the special session, several bills were introduced, including a constitutional amendment to ensure local control over property tax changes. However, only HB 1001 and HB 1003, which focuses on personal property tax exemptions for agriculture, received final approval. HB 1001 builds upon previous legislation (Senate Bill 233) by expanding property tax cuts for 2024 and 2025, adjusting revenue growth limits for school districts and local governments, and reducing property assessment rates. The bill aims to lower property taxes by an additional $255 million in 2025, increasing to $295 million in 2026, with the state stepping in to offset some of the lost local revenue.
In light of escalating home values, Colorado lawmakers have been grappling with ways to control property taxes, particularly after the repeal of the state’s Gallagher Amendment in 2020. This amendment, enacted in 1982, was intended to protect homeowners from skyrocketing tax bills but was abolished by voters last year, prompting the need for alternative measures to ensure fair and equitable taxation.
The passage of HB 1001 marks a significant step towards stabilizing property taxes in Colorado while balancing the needs of homeowners, businesses, and special districts. However, the long-term impact of these legislative changes remains to be seen, and ongoing monitoring will be crucial to assess their effectiveness in promoting financial sustainability and housing affordability across the state.