Friday, January 27, 2017

Summit County property tax revenue could flatten out due to residential rate cut

#Summit County #Colorado

Summit Daily News Link

A projected drop in residential property taxes in Colorado could leave commercial property owners to cover the difference.
The assessment rate for residential properties in Colorado has stayed at 7.96 percent for nearly 14 years. But the Department of Local Affairs recently released a study that projects the rate will drop to 6.56 percent. The new rate would go into effect for 2018.
The tax cut comes from a measure in Colorado’s constitution known as the Gallagher amendment.
In the ’70s, Colorado saw continuous increases to property taxes. The amendment was passed in 1982 to combat rising taxes, and stipulates that residential properties only make up 45 percent of the state’s overall assessed value. Commercial value makes up the remaining 55 percent. The report from Local Affairs adds that in 1958 the residential rate was at 29 percent, but had quickly risen up to 44 percent by 1982. If home values begin to rise over commercial, the ratio needs to be adjusted to ensure homeowners are not covering more than 45 percent, causing a tax cut.
Once tax rates drop, getting them back up again is more complicated. Through Colorado’s Tax Payers Bill of Rights, rates cannot be raised without voter approval. In the 34 years since Gallagher was put into place, the assessment rate for commercial property stayed at 29 percent. Residential rates on the other hand have dropped from 21 percent to their recent rate of 7.96 percent, according to the report from Local Affairs.
“It’s very difficult to look at an amendment and just kind of think about its long-term impact,” said Beverly Breakstone, the Summit County assessor.
Breakstone said that the drop could mean that any taxes not covered by residential property owners get pushed to the commercial taxpayers, primarily business owners and people who own vacant land.
“It’s a very meaningful thing here,” she said. “It’s an inequity in the tax system.”
However, Bill Wallace, the public trustee and treasurer for Summit, said that the new rate would not have a strong impact on the county and that it’s meant to help equalize tax payments between commercial and residential property owners.
In Summit County, 13 percent of the total property value falls under commercial. Breakstone said that under the projected tax rates, that small group will be covering 38 percent of the property tax. The change also hurts the county’s revenue for the coming years.
‘The fact that the overall assessment ratio is dropping, coupled with the fact that commercial properties in Summit County are also going up considerably, we are going to come out probably pretty close to flat in terms of what our 2016-2017 property tax collections are, compared to what our 2018-2019 property tax collections will be,” said Scott Vargo, the county manager.
Vargo added that before the rate dropped, the county had projected a 5 percent increase in revenue from property taxes. He estimated that for the county about 30 percent of its revenue comes from property taxes.
But Summit is lucky because the high demand for housing and commercial property helps to offset the Gallagher amendment. In Vargo’s eyes, having flat revenues is better than losing it, which could be the case for counties that aren’t seeing growth in residential and commercial properties.
“It changes some of our longer term planning,” he said. “We’re not looking at it seeing a situation where we’re going to have to make significant cuts, which is fantastic news for us.”