America's Property Tax Advisor

Colorado - Concerns over Gallagher Amendment


The Colorado General Assembly is back in session and one topic up for debate is how to deal with the loss of tax revenue brought about by the Gallagher Amendment.


Projections submitted to the Joint Budget Committee anticipate a 15% statewide cut to property taxes in 2019, as a direct result of the amendment.


Advocacy and business groups are working to get legislation passed asking voters to amend or repeal Gallagher.




When Colorado voters approved the Gallagher Amendment in 1982, the goal was to protect homeowners from skyrocketing property taxes. Gallagher divides the state’s total property tax burden between residential and nonresidential property, requiring that 45% of the total amount of state property tax come from residential property and 55% come from commercial/ industrial property.


The assessment ratio for commercial/ industrial property is fixed at 29% and the residential ratio adjusts as needed to hold the 45/55 split constant.


Residential Rates Keep Falling


Since Gallagher’s adoption, the residential assessment ratio has fallen from 21% to 7.2%. The residential rate is expected to drop to 6.11% next year. That would represent a 23% cut to the residential assessment ratio in a three-year period.


The on-going residential ratio reductions have left businesses paying four times the property tax rate of homeowners. Furthermore, when communities raise mill levies to make up for the falling residential rate, each new hike falls much harder on businesses.


Complications with TABOR


The problems with Gallagher are complicated by the Taxpayer’s Bill of Rights (TABOR), which requires voter approval to raise taxes.


“When Gallagher first came into effect, we didn’t have TABOR,” Rick Jones, director of policy and research for the Bell Policy Center told the Denver Post. “So local governments and school districts could adjust their mill levies relatively easily to make up for the assessment rate. TABOR makes it much more difficult to adjust those mill levies.”


Since Gallagher was enacted, the residential assessment ratio has steadily dropped or remained unchanged at times that it should have increased, even when statewide residential values have fallen short of the 45% required residential burden under Gallagher. It would take an unpopular statewide vote to increase the residential ratio, which officials say it would be perceived by voters as a tax hike, and most likely voted down.


Repeal Will Be a Long Shot


Lawmakers admit that the outright repeal of the Gallagher Amendment will be a hard sell in the General Assembly. It was tried in 2003, when the residential rate was 7.96%, and it failed.


Some legislators hope there will be a bill in the 2018 session asking voters to amend the constitution but concede that it may take more time to educate voters on this complicated issue. Others worry that it could take a crisis to spur action on the Gallagher Amendment, and by then it may be too late.