Special session ends with tax cuts and concerns about vested interests

A special session of the state Legislature on property taxes adjourned Thursday after nearly four days, ending a threat of legislative initiatives that could have devastated state and local budgets while rejecting progressive measures despite concerns that special interests would use the initiatives to influence the legislative process.

Lawmakers passed a major piece of legislation this week that lowers property assessment rates and limits how much taxes local governments can collect, the latest milestone in Colorado’s years-long “property tax war.”

“Today is a significant moment in that journey,” Sen. Chris Hansen, the bill’s sponsor, said on the Senate floor. “We’ve untied that knot. We’ve done it in a bipartisan way. We’ve put our education system on a sustainable path.”

That law, or knot that has been untied, is House Bill 1001, an extension of the tax cuts signed into law in May that prevented taxes from rising too much while also avoiding or making up for losses in local funding, especially for schools.

“I can tell my 94-year-old friend, my neighbor, that she can still stay in her home,” said Hansen’s co-sponsor, Sen. Barbara Kirkmeyer, R-Brighton. “That we’ll give her an additional property tax break, that I can guarantee her a property tax break next year and an additional one every year after that.”

The bill was also part of a previously agreed-upon deal between Gov. Jared Polis, legislative leaders and conservative political organizations to remove two initiatives from the November ballot that would have decimated funding for schools and other local services. In Colorado, property tax revenues fund higher education, public schools, fire departments and other local services.

The bill is expected to cut property taxes for the average homeowner by $62 in 2025 compared with current law, according to an analysis by the Colorado Fiscal Institute. That amount will rise to $179 in 2026. Lawmakers’ estimates were slightly higher. The Colorado Fiscal Institute also found that most of the tax cuts in the bill would benefit nonresidential and commercial properties.

These changes would also result in hundreds of millions of dollars in lost property tax revenue for governments and school districts and burden the state budget with most of the surplus. However, they would not require nearly as large a state surplus as the property tax ballot initiatives and would preserve the historic recent change to the public school funding formula.

Property Tax Wars

The long-running debate over property taxes heated up in 2023, when assessment rates signaled an alarming increase in property taxes due to rising property values. Since then, lawmakers have proposed a series of solutions.

Proposal HH, the initial property tax relief plan from Democrats and Gov. Polis, was voted down last November, prompting a previous special session on the issue last fall to find short-term solutions. Then, lawmakers passed a bipartisan property tax relief bill this spring as a long-term solution.

Some conservative interests, however, were still unhappy with the policy and wanted to see more aggressive tax cuts. The business group Colorado Concern and the political nonprofit Advance Colorado placed Initiatives 50 and 108 on the November ballot, which lawmakers said would upend the state’s property tax system by deeply cutting taxes without making up for the loss of local funding.

Gov. Polis called a special session this week to avoid any possibility that the initiatives would pass. His office and key lawmakers, including Sen. Kirkmeyer, negotiated with Colorado Concern and Advance Colorado ahead of the special session, and the groups agreed to take their initiatives off the ballot in exchange for additional property tax cuts, which legislators passed Thursday morning. Polis said he would not sign the bill until the ballot measures were officially withdrawn.

Lawmakers largely supported the tax cut measure, despite hesitations from some. Republicans ultimately voted for it but also said more could be done to cut taxes even further.

“We would always look for additional, maybe broader property tax cuts,” said House Minority Leader Rose Pugliese, R-Colorado Springs. “But I think we ended up in a good compromise position and were able to get additional relief for Coloradans.”

Other lawmakers viewed the special session as an example of private interests, such as Colorado Concern and Advance Colorado, using ballot measures to influence the lawmaking process. Jennifer Bacon, an assistant majority leader in the House of Representatives and a Denver Democrat, said Gov. Polis and special interests are not responsible for making laws.

“I don’t work for anyone who isn’t on this floor, or even, dare I say, behind glass,” Bacon said, referring to the governor’s office on the floor below and the lobbyists who watch the House proceedings through the lobby windows. “Our job is to make laws.”

Bacon and others who were not involved in the pre-session negotiations said they felt pressured to vote on a deal they did not agree to. Democrats have grown increasingly concerned in recent months about special interests using ballot measures to influence legislation.

Rejected funds

A number of measures were also defeated during the special session, in part to preserve House Bill 1001 and an agreement to withdraw Initiatives 50 and 108.

A particularly controversial measure by two Democrats, including House Bill 1001 sponsor Sen. Hansen, would give local governments and their voters control over property taxes through an amendment to the state constitution. The proposed amendment would block state property tax votes or legislation to avoid future state-level property tax impasses that negatively impact local funding.

“Why does it make sense for voters in Douglas County to influence the San Luis Valley, and voters in Denver to influence the farming communities on the eastern plains?” said Rep. Mike Weissman, a Democrat from Aurora. “We don’t have to do that. We can put control of local property taxes where they belong, in the hands of local communities across our state.”

Republicans called the amendment an “obstruction” and a violation of the referendum initiative process, an important part of Colorado’s democracy. Although it passed the House, it was quickly defeated in the first round of Senate committee hearings Wednesday.

The rejected measures also included several bills backed by progressives, including one bill that would have blocked some property tax cuts from applying to second, third or subsequent homes. The sponsor, Democratic Rep. Javier Mabrey, told KUNC that the tax revenue is needed for rental assistance programs and affordable housing development.

“I tried to make sure it was aimed at people who were actually having trouble maintaining their homes, not at wealthy out-of-state investors who have maybe five, six homes here in Colorado,” Mabrey said.

Mabrey also said he is considering reintroducing the measure during the regular session this spring. The committees have blocked two other progressive measures that would have cut taxes on homes valued at less than about $550,000 while raising taxes on higher-value homes. They could also be brought back into play during the regular session.

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