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Property taxes: how they're calculated and why what you'll owe is unknown

Posted at 9:07 PM, May 25, 2023

COLORADO — Property taxes in Colorado have dominated headlines on and off for the last month and it's to be expected with many property owners receiving their Notice of Valuation (NOV).

For many people across the state, on average their home values have increased 40%. News5 has heard from several property owners in El Paso County who say their home's value went up more than double that at 80%.

Here's what's contributing to the increase, and some helpful words and phrases to know in navigating the process.

First things first: the NOV is likely not an accurate picture of how much you'll owe in property taxes, for a few reasons.

How your property taxes are calculated

FSG Property Tax.jpeg
Colorado Property Tax Formula.

The formula used to calculate how much you owe in property taxes includes a few variables.

  1. The Actual Value: This is the value determined by the County Assessor.
  2. Assessment Rate: This rate is set by the state (it's the same for everyone in Colorado, depending on the type of property) and used to calculate the "assessed value." The rate for most businesses is 27.9% and currently, the rate for most homeowners is 6.76% (this is something that could change).
    In 2021, state lawmakers added more classifications for different assessment rates beyond "residential" and "non-residential."
  3. Local Mill Levy: This is determined by the tax districts where you live which include county, city, school districts, and other services like the library district, water conservation, or any other taxing district.

What's TABOR got to do with this?

TABOR explained in 90 seconds

The Taxpayers Bill of Rights (TABOR) was created in 1992 when Colorado voters approved the plan. It requires a few things, most notably all tax increases have to go to voters to be approved.

It also limits how much money the government can collect each year by setting a cap, anything above the cap gets refunded back to taxpayers. The cap is set at a rate of inflation plus population each year. Meaning if the population grows by 5% and inflation grows by 5% the revenue cap will increase by 10%.

With this cap, taxing districts adjust the mill levy in the fall to align with TABOR limits. The mill levy is then used in the second part of the equation to calculate your property taxes.

The unknowns of your property taxes

There are a few factors that will impact your 2023 property taxes and it's contingent on a question likely appearing on your November 2023 ballot.

What we know: A reduction is happening for your assessed value. Mill levies could be going down based on TABOR restrictions.
What we don't know: How big of a reduction will be coming.

In 2022, state lawmakers passed a property tax relief package that said assessed values would be reduced by about $15,000 for residential properties.

A question will now be on the ballot in November, which could create a reduction of $40,000 for assessed values and reduce the assessment rate from 6.76% in 2023 to 6.7% for 2023 and 2024 tax years. A lawsuit has been filed over the constitutionality of the ballot question. Opponents argue it violates the "single subject" rule.

What's this Gallagher Amendment people keep mentioning?

Gallagher Amendment

In 1982, Colorado voters passed the "Gallagher Amendment" with the goal of splitting up the state's property tax base on a 55/45 split. Commercial properties held 55 percent and homeowners made up 45 percent.

The split was maintained by lowering the residential assessment rate over the years, which is used to calculate property taxes.

In 2020, Colorado voters decided to repeal the amendment. In doing so, it froze the residential assessment rate at 7.15%. Currently, the rate is at 6.76% for 2023.

How successful are appeals?

In El Paso County, on average the "adjustment rate" or the number of appeals that can get changed is typically a little more than 50%. El Paso County Assessor Mark Flutcher said as of Thursday the county had received more than 11,500 appeals for home values this year.

Flutcher said it's a record, at least since he's worked for the office in 90s. He said it's possible a higher number was set in the 1980s.

RELATED: The Appeal Process

Some realtors are stepping up to try and help homeowners appeal their property valuation notice. Virnisha Pastore, who works as a realtor at Cutting Edge Realtors in Colorado Springs put out a call on social media to help out people looking to appeal.

She's seen hundreds of requests for help. As of Thursday, she had helped 193 homeowners file appeals.

"The stories behind it are heartbreaking," Pastore said, "They’re seniors, they’re teachers that are giving everything they have right back to the students, they’re people on fixed incomes, disabled veterans. Those that can’t afford a 50-60% increase on their taxes."

Pastore feels there are issues with the system in place to appraise property values, showing a discrepancy between the data she's looking at and what the assessor claims.

"The people that are in Colorado can’t afford to live in Colorado," Pastore said.

One of the issues she pointed out was an issue with the property assessors "comper tool." In several cases, she estimates about 15-20% of the people she's helped, the property does not show up on the county's comper tool.

El Paso County Assessor Mark Flutcher said this is common for the system, especially for rural properties.

Why have home values gone up so much?

There are a few reasons for this. For one, the period used for determining the assessed value of your home is done at the end of June 2022 and the 18 months before that. At that time, the housing market in El Paso County was extremely competitive.

"That's when houses would go on the market for an hour and have multiple bids," Flutcher said, "all that competition between buyers really sent prices soaring."

Counties are audited by the state Board of Equalization every year to ensure those property values are fair assessments. If the state determines it's incorrect, the state will come and reassess properties on its own, at a cost to the county.

The state allows for a margin of those prices at 95% to 105% of the home sale value. Some cushion was put into the recent assessments to allow for that margin.

"The wiggle room the audit allows, we shot for the bottom," Flutcher said.

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