State board blocks Douglas County’s creative attempt to provide property tax relief to its homeowners

A state panel Monday unanimously blocked a creative attempt by elected officials in conservative Douglas County to offer a $28 million property tax break to homeowners by making an across-the-board reduction in previously determined home values. 

The State Board of Equalization, which is controlled by Democrats, voted 5-0 after hours of testimony and debate to reverse the decision by the Douglas County Commission to reduce the county’s valuations of single-family homes, townhomes and condominiums by 4%. 

Members of the board said the reduction was unwarranted and expressed anxiety about how approving the change could set a precedent followed in other parts of the state. They also worried about how the decision could pose a drag on state finances by requiring that more money be routed to the county’s schools.

There are some 300 local districts in Douglas County whose revenues would have been affected by the change.

“What is the ripple effect? What is the consequence?” asked state Sen. Chris Hansen, a Denver Democrat who sits on the State Board of Equalization. “Well, the answer is it would immediately have an impact on the amount of state backfill that would be needed for the Douglas County schools.”

Property valuations, which are done every two years in Colorado, are one of the key factors in determining how much a homeowner pays in property taxes. A lower property valuation means a lower property tax bill.

Douglas County’s three commissioners were acting as the county’s board of equalization when they made the reduction to property values that were previously determined by the county’s assessor. 

The county board of equalization is supposed to correct errors in property valuations. But the commissioners said they also acted in the name of tax relief after home values rose by an average of 48% in 2022, causing a similar increase in tax bills owed in the 2023 and 2024 tax years.

“We absolutely did it on behalf of tax relief,” Douglas County Commissioner George Teal, a Republican, told The Colorado Sun in October.

Teal declined to comment Monday afternoon, saying Douglas County’s commissioners planned to talk about the decision at a news conference on Tuesday.

In a written statement released Monday evening, the commissioners vowed to appeal.

At the time the reduction was made, the county commissioners were also fighting Proposition HH, the 10-year property tax relief and state spending plan on the November ballot that was soundly rejected by voters. One of the commissioners’ complaints was that the relief offered through the ballot measure didn’t go far enough.

Douglas County Assessor Toby Damisch, a Republican who was one of the architects of the plan, told The Sun in October that while he was happy to offer relief to homeowners, the 4% reduction was also based on market conditions. He said on June 30, 2022, when the valuations were dated, the housing market was shifting rapidly in Douglas County as mortgage interest rates increased and inflation pinched Coloradans’ budgets.

“The market was changing as of the appraisal date,” Damisch said. “That gave us the space to dive into this more and (ask) could we justify a different answer for these residential properties? And the answer is ‘yes.’”

Damisch said his office determined that residential property values could have been between 2% and 8% lower than what it initially calculated. 

“There’s no error that was made,” he said. “It doesn’t mean that we can’t look at it and say ‘there’s something that we can do better.’”

Damisch defended the reduction to the State Board of Equalization on Monday, detailing his office’s work and repeatedly telling the panel that the relief Douglas County was trying to offer was based on math and not politics.

“We actually have an appraisal problem here that we’re trying to solve,” he said. “I can write a 60 page paper — a 600 page paper — and provide you reams of data about this.”

Assessed property values must be within 5% of the properties’ market value to comply with state law. 

Any county board of equalization change is reviewed by the State Board of Equalization.

Fire districts told the State Board of Equalization on Monday that they opposed the change, warning that the reduction could hurt their ability to provide service. 

“Fire chiefs and firefighters, both career and volunteer, are also homeowners and taxpayers and we certainly understand the need for property tax relief,” said Kristy Olme, president of the Colorado State Fire Chiefs. “But there must be a fair and proportional distribution of taxes and the decision by the Douglas County (commissioners) has a direct, immediate and disproportional negative impact on the revenues and operations of the 13 county fire districts.”

Bernie Buescher, a Democrat and former Colorado Secretary of State who sits on the State Board of Equalization, said that local districts can use milll levy rates to determine residents’ property tax bills. Property values aren’t supposed to be adjusted for that purpose.

“I’m very concerned about what Douglas County has done,” he said before voting to block the relief.

It’s unclear if Douglas County has a mechanism through which to challenge the ruling. A lawsuit is possible.

The State Board of Equalization’s decision comes as Coloradans’ property tax bills for the 2023 tax year, owed next year, are expected to rise sharply because of how home values rose during the pandemic. Proposition HH aimed to blunt that increase, but it was rejected by voters. 

The legislature, during a special lawmaking term that wrapped up before Thanksgiving, passed a temporary relief measure for the 2023 tax year only that will save the average homeowner a little more than $200. The change is for one year only, however.

The Democratic majority in the legislature formed a task force charged with finding a long-term solution to rising property tax bills. A report from the panel is due in March.