Proposition HH - Reduce Property Taxes and Retain State Revenue

Property taxes typically rise and fall with home values, but in Colorado the Gallagher Amendment put an artificial limit on property taxes. Voters repealed Gallagher in 2020 (Amendment B), ending the requirement that the legislature “periodically change the residential assessment rate in order to maintain the statewide proportion of residential property as compared to all other taxable property valued for property tax purchases.” As a result, we are now seeing a big increase in our property taxes.

Local governments (e.g., city, county, and school districts) – not the state – collect property taxes. Meanwhile, the state has been collecting more in taxes than the voter-approved limit, so TABOR requires the government to refund the “surplus” money.

Prop HH is a vehicle for reducing property taxes below what the taxes would be without Prop HH (though taxes will still be higher) and backfilling local budgets with money from the state’s surplus.

Prop HH also asks voters to increase the voter-approved state revenue limit above the 1992 TABOR and 2005 Ref C caps by one percentage point per year through state budget year 2031-32, meaning the state can keep more “surplus” revenue and the likelihood of taxpayers getting future refunds will decrease over time. Prop HH would let the state retain all surplus revenue through the 2031-32 budget year so voters would not get any state refund during that time. Many cities, including Boulder, have done this permanently; it’s often referred to as de-Brucing.

The state legislature may choose to continue increasing the voter-approved revenue limit by 1% each year beyond the 2031-32 budget year as long as the property tax relief in Prop HH is maintained.

The impact of the property tax help varies considerably, depending on the value of a person’s home, whether the property is a first or second home, whether a person is a renter or property owner, and whether a person aged 65 or older who qualifies for the senior exemption wants to purchase a new home.

School districts would be the primary recipient of any retained state surplus money. The allocation is
*up to 20% to backfill eligible, non-school district, local governments -- Prop HH is expected to decrease overall revenue to local governments
*up to $20 million for rental assistance
*remainder for school districts and education programs

Prop HH limits annual property tax revenue growth for local districts to the rate of inflation, except that this limit does not apply to school districts and any voter-approved taxes. Local governments can override the tax limit by the district’s governing board conducting a public hearing and signing off on the increase.

Recommendation: TAX

Like so many other ballot measures about taxes, if CO had not passed TABOR, then you would not be seeing this ballot measure. This measure is an attempt to work around the constitutional constraints of TABOR.

Prop HH is framed as a statutory change so the legislature can make some tweaks to the measure if it passes and needs a course correction, though TABOR forbids the legislature from mandating any tax increases or increased revenue retention not specifically in Prop HH.

The 1 percentage point increase per year in the voter-approved limit of state tax collection is a main anti-TABOR aspect of this measure.

If the state’s economy tanks and there is no surplus state money, then local and state government budgets will be on their own and forced to make painful cuts. Not surprisingly, Colorado Counties, Inc, and the CO Municipal League are opposed to Prop HH, while Great Education Colorado and the CO Education Association are supporters.

Website for the Yes side
https://www.yesonhh.org/

Website for the No side
https://rejecthh.com/


Approved Ballot Language
Proposition HH (STATUTORY)

Shall the state reduce property taxes for homes and businesses, including expanding property tax relief for seniors, and backfill counties, water districts, fire districts, ambulance and hospital districts, and other local governments and fund school districts by using a portion of the state surplus up to the proposition HH cap as defined in this measure?

YES/FOR ___
NO/AGAINST ___

SB23-303 to refer Proposition HH to the voters
https://leg.colorado.gov/sites/default/files/2023a_303_signed.pdf