Stanley

Don’t be frightened, but you’re voting on whether to give a tax break to the Stanley Hotel, or not!

Proposition 120 is a ballot measure that could seem relatively simple on the surface, but it’s got a heck of a backstory that might live on after the election.

What Proposition 120 Would Do

Proposition 120, if passed, would reduce state property tax assessment rates for “multifamily properties” from the current 7.15% to 6.5%, and lodging properties from the current 29% to 26.4% beginning in 2022. “Multifamily properties” would include properties with more than one housing unit such as duplexes, triplexes, or properties with four or more units, but would not include condominiums. “Lodging properties” would mean hotels, motels, and bed and breakfasts.

The ballot measure does not include a sunset date on the new tax assessment rates, if 120 passes.

Below, here’s a chart from the State of Colorado Blue Book of what would happen to assessment rates through the year 2024, either with or without Proposition 120 passing.

Again according to the Blue Book, passing 120 would be estimated to decrease property tax revenues to local governments by $45.9 million in 2022 and $50.3 million in 2023. Property taxes in Colorado most significantly provide revenue for school districts, county governments, and special districts like fire protection districts. If 120 passes, these revenue decreases might become even larger in raw dollars, but this would depend on the difference between new rates that might take effect under current law if 120 fails, and the rates that would be set under 120.

The state runs a “homestead property tax exemption” program that can provide property tax relief for seniors. Proposition 120 also allows the state to withhold $25 million in total revenue beyond its constitutional spending cap yearly for the next five years, as long as it’s spent to provide homestead exemptions.

Here’s Where It Get Interesting: Proponents of Proposition 120 hoped to pass a much more significant tax-cutting measure through what was once known as Initiative 27, and they got their ballot title approved on April 21, 2021. This measure would have reduced property tax revenue by roughly a billion dollars annually.

But the Colorado General Assembly, knowing this initiative would have cost local governments more serious money, and knowing that the state might need to provide funding (“backfill”) to school districts to maintain per-pupil funding, passed Senate Bill 21-293, which was signed into law on June 23, 2021.

This Senate bill created temporary property tax cuts, which are expected to reduce property tax revenues by about $193 million in 2022 and $209 million for 2023 – and for local perspective Boulder County revenues would be decreased by $18.6 million in 2022. The temporary property tax cuts from SB-293 were set by “subclasses” of types of properties, so for example assessment rates for multifamily properties were reduced from 7.15% to 6.8%, and all other residential properties were reduced from 7.15% to 6.95%.

Long story short – proponents of Initiative 27 were not pleased, since the state bill seemed to undercut their proposed initiative. A recent Colorado Sun story included a statement from proponent Michael Fields of Colorado Rising Action that legal action “seeking to invalidate Senate Bill 293” could be forthcoming if 120 passes. So, there’s that.

Also, voters should be aware that the ballot title that they’ll see on the 2021 ballot for Proposition 120 will say the measure would reduce “property tax revenue by an estimated $1.03 billion in 2023,” which as it stands today is not what would happen. The ballot title was approved before SB-293 passed, but passing Proposition 120 would only decrease property taxes by the $45.9 million in 2022 and $50.3 million in 2023 mentioned earlier in this piece. Future legal action may or may not change the actual effective impact of running the initiative, but I’m going to leave any opinion on this issue up to the lawyers!

Who’s Behind It?

The proponents of Initiative 27 were Michael Fields, Executive Director of Colorado Rising Action and former Colorado director of Americans For Prosperity, and Suzanne Taheri, former Deputy Secretary of State under Scott Gessler. The Proposition 120 registered committee is called “Cut Property Taxes.” As of early October the organization Unite for Colorado had donated most of the campaign’s funding at $875,000, with the Apartment Association of Metro Denver in for $50,000.

PRO ON PROP 120:

  • Tax cuts would allow the property owners able to get cuts under Proposition 120 to keep some money, and either spend it elsewhere in the economy, or find other uses.
  • Economic times have been hard, particularly in the lodging industry due to COVID-19, and a tax cut would be a nice break for people or businesses that were hard-hit.
  • Some proponents say the state shouldn’t have passed SB 293 after the title for Initiative 27 was set, and should have let the voters decide on the initiative and its original intent.

CON ON PROP 120:

  • The property tax cuts would probably require cuts in services, which could negatively impact counties or districts that rely more heavily on these property tax revenues.
  • Proposition 120 has no sunset date, so it could impact local services at some level far into the future.
  • The potential losses in local government revenue from Proposition 120 could be larger starting in 2024, if SB 293 remains in effect and assessment rates increase as currently planned.

ON THE WEB:

Richard’s Take

Vote NO. This measure would reduce the ability of local governments or districts to provide services – probably in relatively minor amounts in 2022 and 2023, but possibly larger amounts in 2024 and beyond. It’s also important to remember that though 120 is a statewide measure, there are counties or districts that rely on property taxes more heavily than others, and those are the places that will more seriously feel the impacts of threats to service level funding.

I wrote in my voter guide from last year that voters need to be wary about ballot initiatives coming from the likes of Americans For Prosperity or the Independence Institute, because they will keep running ballot measures to shrink the size of government as long as they have reasonable chances of success. And they will have that reasonable chance of success with 120, since tax-cutting ballot measures tend to have some measure of popularity – in some cases, regardless of the consequences. With measures like 120, people literally get to vote to reduce their own expenses, whether they use the services that might be curtailed or not.

That tax cuts can help the people receiving them is not lost on me, and in theory people receiving tax cuts should be able to spend the money elsewhere in our economy, or save/invest for the future. There are actually quite a few government actions in the works right now that reduce government revenues by some amount, and some of them truly benefit people or businesses in need of help. But when it comes to Proposition 120, I don’t see the benefits outweighing the longer term impacts to public services, so I’ll be voting no and I hope readers join me.