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Legislative Committee forwards three measures to 'fix' Gallagher Amendment inequalities

Bill to hike Airbnb property taxes tabled
Posted at 7:20 PM, Oct 03, 2018
and last updated 2018-10-03 21:20:34-04

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DENVER -- Colorado residents who rent out their homes to keep up with the rising cost of living can breathe a sigh of relief.

A proposal to quadruple property taxes on Airbnb's has been tabled, for now.

An interim legislative committee, tasked with studying property tax issues and the impact of the Gallagher Amendment, had briefly considered a proposal to treat short-term rentals like commercial property and to make owners pay a higher tax rate for the days the property is rented out.

Rep. Daneya Esgar, D-Pueblo, chairs the Alternatives to the Gallagher Amendment Interim Study Committee.

She said it’s a good conversation to have, but expressed concern about letting the proposal move forward if there wasn’t going to be an immediate impact.

Committee members did approve a trio of bills designed to help communities and special districts negatively impacted by the Gallagher Amendment.

“Right now, Gallagher is a one size fits all,” Esgar said. “One bill would divide the state up into regions.”

Esgar said the trio of bills will be forwarded to the entire legislature for the 2019 session, among them:

  • A proposal to ask voters to repeal the Gallagher Amendment
  • A proposal to replace Gallagher with a property tax split based on regions, not statewide
  • A proposal to temporarily provide ‘backfill’ funding for libraries and fire districts from the General Fund

Gallagher Amendment

Gallagher was added to Colorado’s Constitution in 1982.

“The Gallagher Amendment was put in to stave off a property tax revolution,” said former state Senator Dennis Gallagher, for whom the amendment was named, “like what was coming in California.”

“It did that,” he added. “It preserved a residential (tax) rate that keeps people in their homes.”

Gallagher capped the residential portion of Colorado’s total property tax revenue at 45 percent.  The remaining 55 percent is split up among commercial, industrial, farm and ranch property.

Big Changes

In 1992, voters approved the TABOR Amendment, which requires that any new tax increase be approved by voters.

That has made it more difficult for some communities and special districts to provide full services.

That pressure is compounded by rapidly rising property values, and the sheer number of homes being built in metro Denver.

Because home values are not rising proportionately in rural areas, rural fire and library districts are seeing their share of the property tax pie diminish.

“We’re dealing with the effects of growth,” said Elizabeth Fire Chief T.J. Steck. “But our tax revenue to provide services is not growing at the same rate.”

Steck said the Elizabeth Fire Protection District has seen a 25 percent increase in calls for service over the last two years.  

Last year, he told Denver7 that the district took a $190,000 hit, “which was the equivalent of two full-time firefighters.”

He said he’s glad the legislature is trying to tackle the property tax issue, but adds that more needs to be done.

“It’s wonderful to think somehow that we’re going to fix this,” he said. “What I worry about right now is that some of these are just band aids. The backfill for fire districts is a one-time backfill. What happens in 2022? What happens in 2024 when the residential rate continues to drop?”

Business Impact

Senator Lois Court, D-Denver, said the biggest problem in her district is the impact of Gallagher on small businesses.

“The little, locally-owned coffee shop down the street from me…is paying proportionately about four times more for their little coffee shop in property taxes than I’m paying on my home,” Court said. “I just don’t think that’s fair.”

Voters Must Weigh-in First

“Nothing really meaningful can happen unless the voters choose to repeal the Gallagher Amendment,” said Committee Vice Chair, Sen. Jim Smallwood, R-Douglas County. “If that happens, I think some of the interesting things we saw, maybe parceling up the state, and realizing that there is a difference between our urban areas and our rural areas. Should they all be treated the same?”

Smallwood said the committee was not authorized to implement any final alternatives, “but to bring forth a menu of what we feel are possibilities that will be attractive to the entire legislature.”

Gallagher Feedback

Gallagher said the proposals put forth by the committee are a good starting point.

He said he’s intrigued by the idea of dividing the state into regions to more equitably manage the 45/55 percent residential/non-residential property tax cap.

“That’s a creative approach,” he said. “I look forward to the dialogue on that.”