Colorado Property Assessment Ratio – SB-293 and Prop 120

Even though the property assessment ratio in Colorado is already among the lowest in the nation, there are proposals in place that could drop them even lower for some people.

That is exactly what Proposition 120 might do if it is approved by voters. Specifically, this proposition applies to those who live in multi-family housing. In some states, real property is assessed by 100% of its market value. However, in Colorado, certain property types are evaluated by different assessment ratios. Right now, property assessments on multi-family housing and lodging sit at 7.15 percent. However, this bill drops that number down to 6.5 percent. The tax rate on lodging properties would also drop from 29 percent to 26.4 percent.

In the last 2021 Legislature session, Colorado passed SB-293 which is designed to temporarily cut down its property assessment ratio and curb the impact of Proposition 120.  So, how exactly does this bill impact those who live in Colorado?

The Debate: For and Against

There is a significant debate surrounding the measure right now. Those in favor of the measure say that reducing property assessment ratios for multi-family housing could lead to lower rent while encouraging investment in more housing in the state. This could help ease the housing shortage, further reducing rent. In addition, reducing property taxes on lodging managers may allow those businesses to hire more employees.

On the other hand, those against this bill argue that slashing property taxes is only going to harm local government funding, as revenue might drop. This could harm fire departments and school systems that directly rely on property tax revenue to stay operational. Some people also say that the extra money is only going to go into the pockets of those who own these buildings.

Senate Bill 293 Changed Proposition 120

Some people are a bit surprised that the bill does not apply to all types of residential and commercial property. Recently, Senate Bill 293 created multiple categories of commercial and residential property to limit the impacts of the proposition. The new bill will only apply to multifamily properties. Single-family homes will only see a reduction to 6.95 percent. In addition, the bill does not apply to oil and gas or mining companies at all.

Furthermore, the proposition is only going to apply in 2022 and 2023. After 2023, local government officials will have to decide if they want the bill to become permanent or revert to property tax rates as they were in 2021. Property taxes are collected in arrears, so property taxes for 2022 and 2023 will be collected in 2023 and 2024.

What Will the Impact Be on Tax Revenue?

A lot of residents and business owners are curious about the impact of the bill on tax revenues. Some people believe that property tax revenue for local governments will be reduced by approximately 10 percent due to the bill; however, the true impact will not be felt until the government sees how businesses respond. Some companies might respond by building more housing in Colorado, which could generate more revenue.

Overall, there may be a hit to the education system in Colorado. Property taxes fund schools, but every district is slightly different in terms of the property taxes it generates from lodging and multifamily housing. Some districts have more multi-family housing than others.

Right now, there is still a significant amount of debate surrounding the new proposition. It will be interesting to see how voters respond when they go to the polls.