Grand County and its towns are looking at ballot measures that would keep residential property assessment rates at their current level through a Gallagher stabilization ballot question.

While there will be a statewide ballot question asking voters whether they want to repeal the Gallagher Amendment, governments in Grand are looking to keep taxes on residential properties stable if it doesn’t pass. Such a measure has become common for special districts like school or fire districts, but it’s less typical to see it for towns or counties.

To understand a stabilization measure, it’s important to understand the constitutional amendments that influence taxing in Colorado.

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The Gallagher Amendment to the state constitution was enacted in 1982 as a way to balance tax revenue. It made residential property assessment rates 45% of the state property tax base, while non-residential properties contribute the other 55%.

The non-residential property assessment rate is fixed at 29%, so the state adjusts residential property assessment rates every two years to maintain that ratio. When Gallagher was enacted, local governments were able to make up for residential cuts due to a growing market by “floating” their mill levies.

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When the Taxpayer’s Bill of Rights, known as TABOR, was adopted 10 years later, governments were required to go to the ballot if they wanted to increase taxes. The residential assessment rate was initially set at 21% of a home’s value and has decreased to 7.15%, with local ballot measures unable to keep up with the drop.

With county and town governments facing a budget crisis due to the COVID-19 pandemic, a Gallagher stabilization measure would be one way to keep revenue that could be lost next year.

The issue many taxing authorities have with the Gallagher Amendment lies in its reliance on non-residential property taxes. The residential assessment rate is set on a statewide basis, so the values of properties in Front Range cities are included in a calculation that applies across the state.

For rural communities like Grand County, where the majority of property is residential and values don’t go up as quickly, the falling assessment rates mean property tax revenue has been consistently decreasing.

According to the Grand County Assessor’s Office, there is $7.2 billion worth of actual residential property in the county. However, with the state’s current 7.15% residential assessment rate, only $517.8 million of that is taxable.

On the other hand, there is $361.1 million of actual commercial property in Grand, of which $194.7 million is taxable.

The State Property Tax Administrator estimated the residential assessment rate for 2021 would be 5.88%, an 18% decrease from the current rate. With current county estimates, that would bring down taxable residential property in Grand to $426 million.

There is also a concern that this lower rate, which would be in place for two years, might precede a downturn in the residential real estate market. This would compound a lower assessment rate with lower property values, further harming revenues.

A county stabilization ballot question along with a possible townwide question for residents in Grand would add to an already loaded November ballot. The towns have until Aug. 25 to sign an intergovernmental agreement with the county on this measure, with ballot certification Sept. 4.

The Grand County and Fraser boards have instructed staff to work on a possible ballot question, while Granby and Kremmling have had brief discussions with no concrete direction. Ideally, the county and any town’s stabilization questions would be worded almost identically.

If the statewide question to repeal Gallagher passed, the county and town ballot measures would be negated as they are tied to that amendment. However, some officials, including Colorado Sen. Bob Rankin of Carbondale, don’t think it will pass.

One of the main problems with a repeal is the how assessment rates would be set going forward, which Grand County Attorney Christopher Leahy asked about during Rankin’s legislative update to the county on Tuesday.

County commissioners could potentially set it regionally, but there has been some pushback, according to Rankin. The state legislation could also set it with a different calculation not tied to the constitution, but how exactly that might look hasn’t been determined.

“In defense of the repeal, it puts (the assessment rate) back in the hands of legislators at the county and state level instead of being a constitutionally based formula, which doesn’t work well for anybody,” Rankin added.

Rankin went on to explain his doubts about the measure passing because of Gallagher’s impact on mostly rural communities that often struggle to garner enough votes to pass statewide measures.

That’s why a stabilization measure for the county or a town would act as a “backup” to maintain property revenues.

What the county’s potential ballot measure would aim to do is keep the assessment rate at the current 7.15% by adjusting mill levies. While not technically a tax increase, the measure would stop the residential property assessment rate from decreasing with the predicted 2021 adjustment.