Potential Colorado Property Tax Cap in the Spotlight

Colorado voters may face a property tax-related question in the upcoming year, with a conservative coalition submitting approximately 225,000 voter signatures in support of Initiative #50. If at least 125,000 of these signatures are validated, the measure will go to a statewide vote in the next November election. This initiative proposes placing a cap on the increase in total property tax payments in the state within a single year.

The proposed cap would trigger when property tax revenues are expected to grow more than 4 percent annually for the entire state. This growth rate can occur due to increasing property values, new construction, or local voter-approved tax hikes for services like schools and public safety.

However, critics argue that the cap could lead to complications, as property tax rates vary across cities and counties. When property tax collections exceed the 4 percent threshold, both state and local governments will need to make changes, although the initiative does not specify the exact adjustments required. These changes could include tax refunds by local governments or discounts approved by the legislature.

Advance Colorado Action, the group behind the campaign, likens this cap to the Taxpayer's Bill of Rights (TABOR), which imposes similar limits. The initiative does permit the state government to request a statewide vote to override the cap, allowing property tax revenues to grow without restrictions.

Opponents of the measure caution that a strict cap could restrict local governments' ability to meet demands for school funding and essential services, particularly during periods of high inflation.

Property tax revenues have seen an average annual growth of 6.5 percent since 2000. Although existing laws like TABOR already limit property tax revenue growth, many cities and counties have chosen to override these limits. Initiative #50 aims to reinstate some of these revenue limits and replace local decisions with statewide determinations regarding property tax increases.

Before Initiative #50 reaches the ballot, there is another property tax-related vote in 2023 called Prop. HH. This measure, backed by key Democrats, would reduce property tax rates to slow tax bill increases. However, it would also reduce TABOR refunds, redirecting the funds to stabilize and grow the state budget for schools.