Durango Fire Protection District is a 325-square mile district including the city of Durango and the counties of La Plata and San Juan.
The counties fund the district with property taxes. The city funds their share of operations through the general fund. This year’s reduction in the residential assessment rate (RAR) led to the district’s board of directors asking the voters for a 2.5 increase in the mill levy.
How did the district get here?Every two years statewide, all property is valued by county assessors. Then the values are communicated to the Property Tax Administrator, where the commercial and residential values are combined. This number is used by the State Board of Equalization (BOE) to recommend what the RAR will be for the next two years. In November 2016, the initial recommendation was to assess residential property at 6.56 percent. The reduction in RAR was a 18 percent decrease in local assessment values. How was that possible?
Gallagher and TABORThe district got here through the intersection of two amendments in the Colorado Constitution approved by voters. The Gallagher Amendment, enacted in 1982, limits growth in statewide RAR. The Taxpayer Bill of Rights (TABOR), enacted in 1992, limits growth in overall government spending. TABOR requires taxpayers to vote on any tax increase.
The Gallagher Amendment brought consistency to methods of valuation and a two-year re-evaluation process. It also established commercial property to be assessed at 29 percent of market value while the residential property assessment would float. Statewide total commercial property would contribute 55 percent of the property tax revenue while residential properties comprised the balance. Taxpayers loved the amendment and passed it 65 to 35 percent.
Post 1982, taxation limitation and anti-growth advocates continued to push for limited government. In 1992, Colorado voters passed TABOR. TABOR’s language specifically requires the RAR be increased only through a statewide vote.
The RAR has decreased from 21 percent of market value in 1983 to 7.96 percent of market value in 2003. More recently statewide, Colorado has experienced an incredible residential property boom. However, the residential value increase is not equally distributed across the state.
2017 was a year when the legislature adjusted the RAR for the next two years. While the BOE’s initial recommendation was to lower the rate to 6.56 percent, the final 2017-18 rate was set at 7.2 percent.
An example of RAR over timeGallagher has successfully kept residential property tax bills lower than the statewide increase in residential values. As an example depicted in Table I, assume a home purchased in 1982 had a market value of $71,000. As of June 30, 2016, the value of the property was $375,000. The property has increased in market value 528 percent while the amount subject to property taxation has increased 180 percent for 2018. The district’s mill levy is applied to the RAR.
What does the RAR reduction mean for DFPD?The 10 percent reduction in the RAR for 2017-18 was larger than anticipated by many districts. The Front Range residential growth continues and probably will lead to another RAR reduction in 2020. The district board and staff have reviewed the current budget and the communities’ desired level of service. They found a hole that could not be filled without asking for a mill levy increase.
The last few months our country has experienced three hurricanes in the Southeast and massive wildfires in the Northwest and California, with California’s wine country experiencing unprecedented damage to its communities. One of the hallmarks of a well-prepared fire district is the amount of time that goes into training for emergencies. Supporting the district’s mill levy increase request will ensure that quality training and community emergency preparedness will continue.
Pam Feely, CPA, MBA is president of West Metro Fire Protection District’s Board of Directors and past chairwoman of Colorado’s Fire and Police Pension Association. She is the author of A Candidate’s Guide to Campaign Finance in Colorado. A third-generation Coloradan, she lives in Lakewood and can be reached at email@example.com.