#Summit County #Colorado
 |
| Summit Daily |
If you own numerous residential properties in Summit just to list them as short-term rentals, and have been paying the residential property tax rate on all of them, the good times of lower taxes might be at an end. The county is considering a new property assessment policy that will require owners of multiple residential properties to pay commercial rates on nearly all the homes they are using purely for profit.
Outgoing county assessor Beverly Breakstone floated the idea during the county commissioner's work session early this week. Breakstone said that residential property values in the county are as healthy as they've ever been. In most places outside of Colorado, higher residential property values would normally mean more property tax revenue for government to provide services.
However, due to the Gallagher Amendment to the Colorado constitution, the government is actually hurt by rapidly accelerating residential property values. Gallagher requires the state to maintain a certain ratio between residential and commercial property tax revenue. If residential property value starts rising faster statewide than commercial value, a mechanism kicks in to maintain the ratio by lowering the rate at which residential property can be taxed.
The net result of the Gallagher Amendment since it was passed in 1982 is for assessment rates on residential property to plummet by two-thirds as residential values have skyrocketed with a growing population. That has significantly hurt the local government and school district's ability to collect tax revenue as costs for government services continue to rise.
Breakstone said that the shortfall in revenue is especially bad in Summit, where property values have been accelerating at a geometric rate over the decades while the assessment rate continues to drop, resulting in millions in lost revenue.
Compounding the revenue problem, as well as the housing shortage, is the fact that wealthier people have been buying up residential properties for the sole purpose of renting them out for profit, but only pay the lower residential assessment rate. Breakstone said that it had been irking her for years.
"When your average single family home is priced at $700,000, it presents challenges for people who work here and need a place to live," Breakstone said. "That encourages more second-homeowners with a lot of money to come and invest in property, but who don't actually live here. I personally take offense with people who come to stay here at one home once every three years, while renting them out for income the rest of the time. If you're running a commercial enterprise, you should pay the commercial rate."
Breakstone said there are some actors who are particularly egregious in exploiting residential assessment rates.
"There are a lot of people who buy 10 condos, or five single-family homes, and list them all on BRBO," Breakstone said. "But they're only paying the residential rate."
As one of her final acts as county assessor, she would provide incoming assessor Frank Celico a list of property owners who have been taking advantage of the tax rate. She said she would put it up to Celico to decide whether he'd want to start cracking down on these unfair actors.
While the specifics of how enforcement would work were not quite clear, the basic idea is to find out which property owners have multiple residential units and cross-reference them to short-term rental sites to see if they are just being used as rental properties.
If it does seem a property owner is using homes solely as piggy banks, the county will then send the owner of the properties a notice requiring them to designate one of their properties as their "second home," which would be taxed with the residential assessment rate, while charging the commercial assessment rate on all other properties.
This policy might go a long way to recouping revenue that is lost to owners unfairly exploiting the residential assessment rate, as well as providing less incentive to people with deep pockets to snap up residential properties just to make money off them, perhaps stabilizing the eye-popping rent costs in the county.
Contrary to the idea that the county is trying to unfairly raise taxes on some, Breakstone said the policy would actually strengthen the notion of fair taxation for all, and apply the same rules to everyone across the board.
"When you're in the taxation business, the core values to maintain are to be fair and equitable to all," Breakstone said. "If you can't be fair or equitable, you lose trust in the entire notion of taxation. It isn't fair or equitable for people with many short-term rental properties to pay a residential tax rate when it's a commercial enterprise."
