Tag: Metropolitan Tax Districts

Preparing for the Biennial Property Tax Process

Nobody likes taxes, but our Colorado property tax system is, in my opinion, among the fairest in the nation, so as we brace ourselves for the “Notice of Valuation” we’ll receive from our county assessor next month, I thought it useful to describe how it works and why I believe it to be relatively fair.

A 2022 post on the website Investopedia.com ranked Colorado as having the 5th “best” (i.e., lowest) property tax in the nation, behind Hawaii, Alabama, Louisiana and Wyoming. It calculated that the state’s “effective property tax rate” was 0.51% of a home’s valuation. Hawaii was lowest at 0.31% and New Jersey was highest at 2.31%.

However, that statewide average does not include the impact of metropolitan tax districts, which can nearly double the tax rate on a given home.  (This is a huge scandal which is only recently beginning to get the attention of legislators, who could, if they wanted, rein in metro district abuses.)

Putting aside that scandal for a moment, let me describe how property taxes are calculated in Colorado, as mandated by Colorado’s constitution.

The essence of the system is to have the county assessor determine the fair market value — that is, what every property could have sold for based on what comparable homes sold for — on June 30th of every even numbered year. That means that the valuation you receive in the mail next month will be what the county assessor, guided by mass appraisal software, estimates your home might have sold for on June 30, 2022.

That’s an unfortunate date this time around, because June 2022 may well have marked the peak of the Covid-19 era run-up of home prices in Colorado and nationwide.

An important note: Although the valuation date is June 30th of last year, it applies to what your house looked like on January 1st of this tax year. That made a big difference for victims of the Marshall Fire, because their home was worth next to nothing on Jan. 1, 2022, so the tax bill they received this year which covered 2022 should have been based solely on land value, not a repeat of their 2021 tax bill. If the fire had not destroyed their home on Dec. 30, 2021, the valuation of it from June 30, 2020, would have applied to property taxes for both 2021 and 2022.

Getting back to the process, once the valuation on your home is finalized following any appeal you might make, your tax for this year and next will be determined by applying your home’s mill levy to the assessed valuation, which is now 6.765% of your home’s full valuation.

I’ll use an example a home with a full valuation of $1,000,000. First of all, that figure is reduced by $15,000 under a law passed last year, so the assessment rate is applied to $985,000. Applying the above assessment rate, it would have an assessed value of $66,635, so if your mill levy is 100, then your tax bill would be $6,663.50. (It’s called a mill levy from the Latin word for thousand, so the levy is applied to every thousand dollars of assessed value. Thus, 100 x 66.635 = $6,663.50.

Keep in mind when you appeal your valuation that every $10,000 in reduced full valuation is worth only $676.50 in reduced assessed valuation. At a mill levy of 100, a full value reduction of that amount reduces your tax bill by only $67.65. That may not be worth arguing for, but a reduction in full valuation of $100,000 would be worth $676.50. And if you’re in a metropolitan tax district with a high mill levy, it’s worth even more.

Expect more on this topic from me in the coming weeks.

Sales Taxes May Be Lower, but Property Taxes Are Usually Higher in Unincorporated Areas

It’s a common misconception that taxes are lower in unincorporated areas of each county, but that only applies to sales tax. I don’t know of any unincorporated area where property taxes are lower than they are in incorporated cities and towns.

Moreover, newer subdivisions in unincorporated areas typically have “metropolitan tax districts” that were created by the developer to pay for infrastructure — streets, gutters, sidewalks, water and sewer mains, etc. — which can make property taxes quite a bit higher than in the older areas of incorporated cities and towns.

Compare, for example, the mill levy for the City of Golden with the multiple mill levies in unincorporated areas of Jefferson County.

In Jeffco’s oldest incorporated city, Golden, the city’s mill levy is only 12.34 mills.  (The total mill levy for Golden is 85.389, the rest being for county government and for Jeffco Public Schools.)

In those homes which are not in the City of Golden but have Golden addresses, the mill levies to provide the same services (police, fire, parks, water and sewer infrastructure, etc.) are always higher. A good example is Mesa View Estates, the 1980s neighborhood behind the Jeffco Fairgrounds. Homes in that neighborhood have mill levies from four tax jurisdictions to provide the same services that are included in the City of Golden’s single mill levy.

Those four mill levies are: water & sanitation (6.786 mills); parks & recreation (6.829 mills); County sheriff (2.46 mills); and fire protection (13.196 mills). That’s a total of 29.271 mills, or over 2⅓ times what the City of Golden collects to provide the same services.

Thus, a $1 million home in the City of Golden would have an annual property tax bill of $5,934, whereas a $1 million home in Mesa View Estates would have an annual property tax bill of $7,042.

It’s even worse for homes in the Table Rock subdivision north of Golden but with Golden addresses. There the mill levy for police, fire, parks and water totals 18.447 (less than in Mesa View Estates), but there’s a levy of 31 mills by the Table Rock Metropolitan District, raising the annual property tax bill to $8,513.

There are many newer subdivisions with metropolitan tax districts which charge 50 or more mills, making the property tax bills that much higher. The most extreme example I have found is the Vauxmont Metropolitan Tax District serving Candelas in northern Arvada.  Its mill levy is 77.93, making the annual tax bill for a $1 million home $12,142. Again, compare that to the $5,934 tax bill for a $1 million home in the City of Golden.

Candelas, however, is in the City of Arvada, not unincorporated Jeffco.  Older sections of Arvada, such as Scenic Heights, do not have metropolitan tax districts, but they do have separate mill levies for fire protection and for parks and recreation districts. Similarly, Lakewood wasn’t incorporated until 1969, by which time there were multiple fire, water and parks districts already charging a mill levy. Still, the total mill levy in both Arvada and Lakewood — minus any metropolitan tax districts — is under 100 mills. Virtually all unincorporated areas of the county have total mill levies that are above 100.

Denver’s mill levy of 74.618 mills is even lower than Golden’s, although there are some metropolitan tax districts within Denver, such as Westerly Creek in Central Park (formerly Stapleton), which charges 60.867 additional mills.

As a side note, I sit on the Rules & Regulations Committee of our MLS and have suggested, without success so far, that listings in REcolorado include the mill levy instead of, or in addition to, the dollar amount of property taxes.

Sales taxes can only be levied by incorporated cities and towns and by state-constituted districts such as RTD and SCFD. I’m not aware of any county-level sales taxes. If you buy a truck or car worth, say, $100,000, you could easily save $3,000 in sales tax by registering it in an unincorporated area of the county, but that may not be enough to compensate for the additional property taxes you will be paying.

By the way, property tax is also levied as “ownership” tax on that $100,000 truck or car.

How Are Property Taxes Calculated in Colorado?

Property taxes are charged through a mill levy. Each “mill” (from the Latin word for thousand) is a tax of one dollar for each thousand dollars of your home’s assessed valuation.

In Colorado, the assessed value of residential real estate is currently calculated at 6.95% of the home’s full valuation. Thus, if the county assessor determines that your home is worth $1 million, its assessed valuation would be $69,500, and the mill levy for each taxing jurisdiction would be applied to that lower value, A mill levy of 100 mills would thus produce a property tax bill of $6,950 (which is 100 x 69.5)

The Colorado constitution requires county assessors to determine what each property could have sold for on June 30th of each even-numbered year (2020, 2022, 2024, etc.) and apply mill levies to 6.95% of that full valuation for the following two tax years.

Denver Post Series Uncovers the Corruption of Tax Districts Created by Developers

Four years ago, on Dec. 17, 2015, I devoted this weekly column to explaining why property tax rates vary so much around the metro area, mostly due to the creation by developers of “metropolitan  tax districts” to reimburse themselves for the cost of building the infrastructure for their subdivisions. A follow-up column on July 21, 2016, went into greater detail, giving examples of such tax districts created for Stapleton and Green Valley Ranch in Denver and Solterra and Candelas in Jefferson County. For example, in Candelas, adjacent to Rocky Flats, homeowners are paying a 70-mill tax levy on top of Arvada’s mill levy until the tax district infrastructure bonds are paid off. For a home valued at $500,000, that would be an additional property tax burden of nearly $3,000 per year, which would only increase based on rising property values for 30 years following construction. Below is an excerpt from that column, which quoted mill levies in effect that year:

You can read both columns at JimSmithColumns.com, where all my prior columns are archived – or simply click on the links provided above.

It was clear to me back then that homeowners would not recognize the special tax burden they would be facing as they purchased homes, since disclosure of that tax burden is buried in the flurry of documents buyers have to sign at closing.

Now, with more and more owners of homes in such subdivisions realizing what they got themselves into and how unfair it is, it was inevitable that some investigative reporter would dig into this topic in a way that I could not as a full-time Realtor. 

Earlier this month, investigative reporter David Migoya’s multi-part series on this important topic was published in the Denver Post following eight months of research. Perhaps you read that series.

Migoya provides an excellent summary of what these districts are: “Metro districts are taxing authorities created by subdivision developers, with the consent of the local government, for the sole purpose of selling government-like bonds to finance their projects. Repayment of the bonds is tied to future property taxes assessed to the homes that will eventually be built.”

Among the things I learned from Migoya’s multi-part series that I did not know or realize when I wrote about metropolitan tax districts in 2015 and 2016 was that this device of creating special tax districts for infrastructure investments began to be utilized because 1992’s Taxpayer Bill of Rights (TABOR) made it harder for cities or the county to invest in the infrastructure of new subdivisions, even though these subdivisions would ultimately pay for themselves through new property taxes. (I’m not fully convinced of that argument, since many newer subdivisions, including mine, were built without such tax districts.)

Migoya’s series went further to describe the scheming which kept property owners from being able to control the tax districts once the subdivisions were fully built out.

If you are in one of those newer subdivisions, you probably are subject to such a mill levy. If you didn’t read the series when it was published in the main section of this newspaper, I suggest you Google “Denver Post metropolitan tax districts” and read the full series. It should make your blood boil.

One could apply “scandalous” to how these tax districts were created and are run to profit developers at the expense of unwitting future homeowners, but the fact is that what the developers have done is legal, manipulating laws passed by the General Assembly and signed into law by previous Governors.

As Migoya explained so well in his opening installment on Dec. 5th, “Colorado law permits developers to elect themselves to serve on a district’s board of directors, then use that position to approve tens of millions of dollars in public financing for their businesses, and leverage the property taxes on homes they haven’t yet built. No regulations stop these developer-controlled boards from approving arrangements that are financially advantageous to their business, allowing them to finance overly ambitious plans without fear of liability, knowing future homeowners ultimately shoulder the burden.”

Surely the upcoming legislative session will feature hearings and legislation to address the worst abuses of this tax district tool, but the damage may be irreversible in the state’s 1,800 such existing tax districts, since they were created pursuant to existing laws.

Depending on how aware buyers and their agents become of these oversized tax burdens, the resale value of homes in those subdivisions should reflect the fact that they have a far greater tax burden than comparable homes in areas without such a developer-created tax district.  You can count on Golden Real Estate’s brokers being knowledgeable in this area.

The Value of Local Journalism

I have been concerned that the reduction in the reporting staff at the Denver Post would make investigate series like the one above a thing of the past. The “Afghanistan Papers” series by the Washington Post is another example. Subscribers make the investment in such journalism possible, so thank you for subscribing to the Denver Post.

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