Property tax expense is a big factor in both home ownership and commercial property ownership. Amendment B could set property tax structures for at least Colorado’s near-term future.

In Brief: Passing Amendment B would repeal a section of the Colorado Constitution known as the “Gallagher Amendment.” Gallagher, in short, set a ratio between how much of Colorado’s total property tax collection must come from residential property and how much must come from non-residential property. The ratio is typically about 45% residential and 55% non-residential. Gallagher’s formula also determines property tax assessment rates, which determine the actual property tax bill for residential and non-residential property owners. Passing Amendment B would in practice keep property tax assessment rates the same as they are today.

Amendment B is a Constitutional amendment, but it would only take a simple majority for the measure to pass since Amendment B is a repeal.

Why or Why Not?: Voters approved Gallagher in 1982, during a residential property value boom, and the measure went into the Colorado Constitution. Since then, Gallagher and other fiscal measures in the Constitution such as TABOR and Amendment 23 have been under some level of scrutiny for their effects on the state’s levels of service and fiscal structure.

Gallagher’s impacts are not one-dimensional. In practice, it works to keep residential property tax assessment rates “relatively low” (I’m using this phrase for simplicity), which is beneficial for homeowners. However, these rates apply throughout Colorado, and relatively low residential property tax revenues in certain counties or special districts – often but not always in rural areas – may mean it’s more difficult to adequately fund public services.

Also, relatively low property tax collections in certain school districts mean the State of Colorado is forced to “backfill” school finance funding to keep per-pupil funding for all state school districts on a more level playing field.

And keeping residential rates low inevitably means non-residential property tax bills will remain “relatively high,” (again, simplicity) potentially putting a burden on small businesses in particular. Today, the nonresidential assessment rate of 29% is more than four times larger than the residential rate of 7.15%.

The state legislature actually formed an “Alternatives to the Gallagher Amendment Interim Study Committee” in 2018, and recommended committee bills included one that would repeal Gallagher. In 2020, Senate Concurrent Resolution 20-001 was passed with strong bipartisan support, putting what became Amendment B on the ballot.

For a few key statistical/legal points about Amendment B:

  • Today’s residential property tax assessment rate is 7.15%, and passing Amendment B would keep it there, but it would be expected to drop to 5.88% in the coming year if B fails.
  • According to Gallagher himself (Dennis Gallagher) in a recent op-ed submitted to the Denver Post, residential property tax owners across Colorado will pay “an additional  $203,781,937 in property tax increases in the first year after repeal.”
  • According to the Colorado Association of School Boards, without Amendment B the state’s school districts would see in 2021-22 “a projected $490 million drop in all district revenues, which will likely force an increase in the Budget Stabilization Factor” (once known as the Negative Factor, which allowed schools to be funded at lower levels than called for under the constitutional Amendment 23.)
  • Today’s non-residential rate is 29%, which is currently in the Constitution, and passing Amendment B would keep it from increasing.
  • If Amendment B passes, the state legislature would have the authority to decrease the above rates, but could not increase them without a vote of the people, even to raise them back to former rates.

Amendment B Pro:

  • https://yesonamendmentb.com/
  • Repealing Gallagher would help limit property tax increases on businesses, protect public services in rural counties and districts, and limit the amount of money the State of Colorado must spend to support underfunded school districts.
  • Having fiscal requirements in the Constitution doesn’t always work well since economic conditions change, but provisions in the Constitution don’t change without a vote of the people. Amendment B would remove one such section from the Constitution, potentially providing greater fiscal flexibility.
  • It could be argued that rural counties or districts could increase mill levies to make up for property tax revenue shortfalls, but voters would need to pass ballot measures under TABOR and passage is by no means guaranteed.

Amendment B Con:
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  • https://keeptaxeslowco.com/
  • Repealing Gallagher would eliminate an expected reduction in residential assessment rates – and whether people consider this a tax increase or not, residential property owners will pay more if Amendment B passes in the coming year than if it fails.
  • Taking Gallagher out of the Constitution could mean lobbyists would lobby for property tax changes benefiting their clients, and there’s no telling whether this approach could also lead to unintended consequences.

Richard’s Take: Vote YES. The Gallagher formula as a whole is now 38 years old, and while it’s not all bad, Coloradans have seen some of the reasons why it no longer works perfectly for the state. In particular, the formula is harming rural services, state expense when it comes to school finance, and small businesses facing high property tax rates. Still, this might not be an easy vote for some, particularly in this case for individual homeowners who might prefer residential property tax assessment rates to continue falling. But all in all Amendment B has a lot of good features that will contribute to more sensible fiscal structures in a number of areas in the long run.

Side note – I worked for state Sen. Rollie Heath last decade, and he proposed a resolution (SCR 10-001) that would have created a state Fiscal Policy Constitutional Commission. The commission would have studied and gathered input on the major parts of Colorado’s constitutional fiscal components – especially Gallagher, TABOR, and Amendment 23 – and would have been empowered to offer voters comprehensive proposals. The resolution did not pass, and it’s difficult to say whether the legislature would ever approve such a proposal, but I still think Colorado would do better by looking holistically at the entire fiscal structure as opposed to piece-by-piece fiscal measures.