Proposition HH, mill levies and property taxes: Here’s what it all means for Summit County
If passed by voters this November, Proposition HH would be one of the largest tax policy changes in Colorado in years. And it would impact more than just property owners.
Summit County voters are set to weigh in on one of the largest tax policy questions facing Colorado in years.
Proposition HH was approved for the Nov. 7 ballot earlier this year by state democrats, who, alongside Gov. Jared Polis, have presented it as a remedy to rising property taxes over the next 10 years.
“I would call what we’ve seen in the state close to a crisis given how extraordinary some of these jumps are in property values,” said Colorado House Speaker Julie McCluskie, a top state Democrat whose district includes Summit County. “We really felt a call to action to provide relief.”
But a closer look at the ballot issue shows it would have sprawling impacts beyond tax relief that include raising the state’s spending limits, shrinking voter-mandated tax refunds and opening the door to expanding public school funding for the next decade — or longer.
It’s made for a complicated question voters must now mull amid a backdrop of rising costs of living and future economic uncertainty.
In Colorado’s High Country especially, record home values and the subsequent boost in property taxes could further hamper lower- to middle-income residents’ movement in the housing market. Those include senior residents on fixed incomes who may have purchased their home decades before home values skyrocketed.
“The saying — ‘You’re land rich and cash poor’ — I think applies to a lot of folks in Summit County, and that’s a difficult situation,” said Commissioner Tamara Pogue.
Yet Proposition HH’s pledge to reduce property taxes could come at other costs, mainly a reduction in tax refunds tied to the Taxpayer’s Bill of Rights, or TABOR, a 1992 voter-approved amendment to the state constitution that sets a limit on government spending in relation to inflation and population growth.
For Tom Castrigno, a 25-year Summit County resident and property owner, the proposal could lead to too many unintended consequences for him to support it.
“I would much rather get my TABOR refund and use that money directly,” he said. “I’m very concerned that this is laying some groundwork to slowly evade TABOR.”
How would Proposition HH work?
Property taxes are calculated using several factors.
It begins with a property’s assessed value, which is issued by a county assessor’s office every two years based on market data from the past five years. That figure is then multiplied by the current statewide assessment rate and by local mill levies, which are set by taxing entities such as school and fire districts.
This year, Summit County saw some of the steepest increases in assessed property values of anywhere in the state. According to a Colorado Department of Local Affairs database, residential property is up 63% on average compared to 2021.
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That could mean an increase of hundreds or even thousands of dollars in property taxes next year. Proposition HH seeks to blunt this increase in two ways.
One is through reducing the residential statewide assessment rate, which currently stands at 6.765%, to 6.7% through the 2032 tax year. If HH does not pass, the residential assessment rate is set to go up to 7.15% for the 2025 tax year.
The measure would also allow homeowners to exempt the first $50,000 of their home’s value from taxation this year. That would then drop to $40,000 in 2024 and through 2032. Second-home owners will only be eligible for the benefit through 2026. The proposal would also make reductions for commercial property owners.
A senior homestead exemption that allows longtime property owners who are 65 and older to exempt up to $100,000 of their home value from taxation would also become transferable under HH. This gives seniors the ability to move to a new home and still receive a tax break.
Proponents of HH said this is one of the most direct ways it will bring relief for vulnerable homeowners. McCluskie said for low- to mid-income seniors who may want to sell their home and downsize, without HH, “they would actually pay more in taxes if they did that.”
While these efforts would make for smaller property tax bills over the next decade, it would also mean a reduction in local revenue for public service entities.
In Summit County, roughly one-third of all collected property tax goes to the county government while another third goes to the Summit School District and the rest to other taxing authorities such as Summit Fire & EMS, the Red, White and Blue Fire District, water districts and town governments.
For some of these districts, property taxes account for nearly all of the revenue. For the school district, for example, property taxes account for 89.9% of total revenue while for Summit Fire and Red, White and Blue it accounts for roughly 87% and 80%, respectively.
To prevent any cuts to services caused by a loss in tax revenue, Proposition HH would raise the state’s spending cap under TABOR by 1% each year through 2032 and use the money to backfill those entities. According to an analysis by Colorado Public Radio, this could make for $167 million in additional state spending in 2024 and up to $2.2 billion in 2032.
That money would come from revenue that would otherwise be refunded to taxpayers through the state’s Colorado Cash Back program, colloquially known as “TABOR checks.”
While all Colorado taxpayers would receive the same refund amount next year, about $830, if HH passes, those amounts would decrease as the state’s spending limit continues to grow. In years where the state economy is performing poorly, TABOR refunds may not come at all, though that has and will continue to be the case regardless of HH.
A calculator created by the state’s Legislative Council Staff, which is tasked with providing nonpartisan policy insights, shows savings from property tax relief will outweigh losses from refund reductions, at least for next year. For example, a homeowner whose property is valued at $800,000 and whose income is $110,800, which is considered the area median income, would see a $48 dollar decrease in their TABOR refund but $258 in savings on their property taxes in 2024 under HH.
That is only a rough estimate, however, and it does not project savings and reductions past 2024. With HH allowing annual spending to increase year over year, some analyses suggest TABOR refund amounts could reduce more beyond that.
Still, McCluskie said the trade-off is a way to ensure relief for property owners while not punishing entities like public schools, which are chronically underfunded in Colorado compared to other states. If HH passes, it could be a turning point for the issue because while the state’s spending grows, it could lead to more K-12 funding beyond just a backfill.
“Because the TABOR cap has been so restrictive for so long, we have not been able to fund our schools at the levels they should be,” McCluskie said, adding that the 1% annual increase is designed to always ensure that schools are backfilled. If there is leftover funding, then it is dedicated to go toward public schools.
What else is being done to bring relief?
Regardless of whether Proposition HH passes or not, the state legislature recently handed local taxing entities another tool to reduce bills for property owners next year.
Senate Bill 23-108, which went into effect on Aug. 7, grants local governments, school districts and others the ability to temporarily lower their mill levy rate before restoring those at a later point without voter approval.
A mill is a $1 payment on every $1,000 of assessed value, which generates revenue for local governments, school, and fire and water districts, among other entities. Some rates are set by the state while others are voter-approved such as Summit County’s Strong Future Fund, which pays for child care, behavioral health, fire mitigation, recycling and public infrastructure programs around the county.
Of the entities with the largest mill rates in the county, only the county government and Colorado Mountain College have announced plans to lower mill levies in a bid to bring relief to property owners.
The county is planning to include a 4.4% average mill reduction in its 2024 budget which, according to officials, would translate to roughly $22 less in property taxes next year. The biggest cut is in the Strong Future Fund, which could see an 8% reduction in its mill levy, according to finance director David Reynolds.
But without mill reductions from other taxing districts, officials said homeowners will not see as much relief.
“I hope that all of the rest of the taxing entities are thinking about it because that is how we’ll see the greatest impact to the residents of Summit County,” said Pogue, the county commissioner.
But a need for increased services, uncertain economic forecasts and other funding constraints have left these groups uncomfortable with a mill reduction.
At Red, White and Blue Fire District, “We have steadily been approaching expenditures outpacing revenue,” stated co-interim fire chief Drew Hoehn in an email response to questions from the Summit Daily.
Hoehn added the seemingly ever-changing landscape of tax policy in Colorado, of which Proposition HH is one of the latest and largest, has created “instability and unpredictability of future” revenue assessments and “compels us to save for the constant ebb and flow of legislative-driven hardship.”
Summit Fire & EMS cited similar reasons in its decision to not reduce its mill. The district will also need to budget for “extensive capital-improvement needs for existing facilities and apparatus to keep up with maintenance needs and ensure that they last well into the future,” stated spokesperson Steve Lipsher in an email.
At Summit School District, massive increases in property tax revenue will be offset by a loss in state spending, according to Chief Financial Officer Kara Drake. Regarding the state’s funding formula, when property taxes jump, the state pulls back its funding.
For the 2023-24 school year, property tax revenue for the district’s general fund jumped to $45.1 million, up from just over $33 million the year before. At the same time, state revenue for the fund decreased from $10.6 million to $2.8 million.
“Our focus is on maintaining and improving the quality of education provided to our students and ensuring that we continue investing in their future,” Drake wrote. “Every dollar invested in public education is an investment in our collective future, contributing to the resilience of our community.”
The district, per its own policy, must also maintain a reserve balance of at least 7% of revenue for “unforeseen events.” And it continues to feel the squeeze of the area’s high cost of living, which led board members to approve a raise in teacher and staff pay for this school year.
Those high costs have only been exacerbated by inflation, which, though cooling, has eaten away at much of the revenue gains local taxing entities would have otherwise seen heading into 2024. Summit County government, for example, continues to see its expenses exceed its revenues, a trend that began during the COVID-19 pandemic.
“As we’ve seen inflation increase, we’ve had to take the pencil out and try and find ways to make sure that we provide services and that the county budget balances,” Pogue said.
Voters weigh in
Castrigno, the 25-year Summit County homeowner, said he paid under $200,000 in 1998 for his three-bed, two-bath townhouse outside Frisco. Today, similar properties to his are valued at over $800,000.
Castrigno believes his property tax bill could increase by as much as 30% next year. But voting for Proposition HH is not the right solution to bringing down costs, he said. Property valuations and the subsequent rise in taxes is a matter of local concern, said Castrigno, which is why he doesn’t understand the state’s intervention.
“If the problem is that market values escalated dramatically and suddenly, then that’s where we need to look,” he said, adding, “that should be local government taking those steps, directly.”
Reducing mill levies will not yield nearly as much relief as decreasing assessed values would, which is why Castrigno said the county’s commissioners, who also act as review board for assessment disputes, should have kept assessments closer to pre-pandemic levels.
Such a tactic was used in Douglas County outside Denver, where commissioners reduced property values by 4% across the board, creating what they said was $28 million in shared relief. However, the approach has not been replicated in any other Colorado county, and state officials must review the decision and could ultimately reverse it.
HH, on the other hand, comes with too many trade-offs for property tax relief, Castrigno said. Along with his concern over a reduction in TABOR refunds, Castrigno said he dislikes the power HH would give to state lawmakers to extend the policy. Lawmakers could extend the state spending increases beyond the 10-year mark without voter approval.
He also sees little relief for renters who he said are likely to bear the brunt of property tax increases. Castrigno himself rents one of his bedrooms and has raised monthly rent from $865 to $895 — a $30 increase that he said was a direct result of property taxes, homeowners’ insurance and HOA fees all going up.
While Castrigno said he is taking on some of those costs as well, not every landlord may be willing to do so.
“Most property owners aren’t going to go through that mental exercise,” he said. “They’re going to look at those numbers and say, ‘Yep, my costs are going up. I’m going to pass that along to the tenant,’ and they will say the market supports it.”
Jeanne Oltman, a 21-year Summit Cove resident and retiree, lives on a fixed income of Social Security and a pension she receives from her decades as a teacher in Wisconsin. She shared many of the same concerns on Proposition HH and said TABOR refunds have been a crucial leg of financial stability.
Oltman believes, based on her home’s assessed valuation, that her property taxes will go from $3,000 to $5,000 next year. And even though HH would limit that hike, Oltman said taxes will still increase year over year as the area’s home values climb and said that, with less TABOR refunds, the proposal amounts to a “bait and switch.”
While she hopes her son can inherit her home, Oltman said she has seriously begun to think about selling it and moving somewhere where home values and the subsequent taxes are lower.
“I’m not to that point yet,” she said. “But you’re between a rock and a hard place.”
State Sen. Dylan Roberts, who represents 10 counties including Summit, said HH has built-in mechanisms to alleviate some of those concerns. For renters, it would add up to $20 million every year to the state’s rental assistance fund. And by limiting the property taxes homeowners pay next year, Roberts said he hopes that would translate to less of a rent hike on tenants.
“It’s certainly not a guarantee, I understand, but there is hopefully that incentive,” he said.
While TABOR refunds are never a guarantee, Roberts said HH would insulate property owners and local districts like schools even in bad economic years.
And it could make for the “single-largest increase and investment in K-12” in decades, Roberts said, meaning there may be “a lot of political will on both sides of the aisle to keep that going, with the caveat that it is still providing property tax relief.”
“When I talk to folks, I ask them to consider the alternative if HH doesn’t pass,” he said.
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