Tag: Property Taxes

Follow-up on Last Week’s Post About Property Tax and Sales Tax

I did a lot of research for last week’s column about property taxes in incorporated vs. unincorporated areas, but I should have done more research about sales taxes.

Instead of researching sales taxes in various counties, including Jefferson, I simply said that “I don’t know of” any county-wide sales taxes.  Oops!

I am well aware of the 1/2 percent Jefferson County sales tax which has funded our wonderfully extensive open space parks.

A couple readers did some research for me, and I got the following list of sales taxes in other counties. I’m not including Denver and Broomfield counties because those are city sales taxes and there are no unincorporated areas (that I know of) in those two city/counties.

Reader Gary Justus wrote that all metro counties except one have a county-wide sales tax, according to https://colorado.ttr.services:

  • Jefferson County – 0.50%
  • Adams County – 0.75%.
  • Douglas County – 1.00%
  • Arapahoe County – 0.25%
  • Boulder County – 0.985%
  • Clear Creek County – 2.65%
  • Elbert County – 1.00%
  • Gilpin County (none)

Most counties beyond the metro area do, in fact, have sales taxes, some of them substantial, such at Pitkin County (3.6%), San Juan County (6.5%), and Jackson & Lake Counties (4% each).

Colorado Department of Revenue Publication 1002 spells out the sales taxes which it collects for local jurisdictions. Some, like Golden, aren’t listed, because they collect their own sales taxes.

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.

Property Tax Increases for 2023 / 2024 Will Be Limited by TABOR in Some Jurisdictions  

A couple weeks ago in this column, I warned homeowners that the current rise in home values means a proportionate increase in property valuations as of June 30, 2022, and therefore a likely rise in property taxes for 2023 and 2024.

I wrote that because of a typical 30% increase in what your home could have sold for on June 30, 2022, versus June 30, 2020, your property taxes could increase by 30%, but that didn’t take into account the effect of the Taxpayer Bill of Rights, or TABOR, which restricts how much revenue each tax jurisdiction can keep to population growth plus the increase in the cost of living.

Under TABOR, if a taxing jurisdiction collects more than that formula allows, it must refund the excess to the taxpayers.

However, many (but not all) jurisdictions obtained voter approval to keep any excess revenue. The term for this common ballot measure is “de-Brucing,” after Douglas Bruce, the author of TABOR.

All but two counties passed such ballot measures and won’t have to refund their excess revenues to taxpayers — or, more commonly, reduce their mill levies so they only collect the allowed amount of revenue. Jefferson County is one of those counties that has not de-Bruced, so Jeffco will likely reduce its mill levy for 2023 and 2024 to limit their property tax revenue despite the increase in valuations.

In any county, however, the biggest mill levy is that of the school district, and, again, most school districts, including Jeffco’s, have   de-Bruced and can enjoy the coming windfall in revenue by not reducing their mill levies.

Any given property’s mill levy is the sum of individual mill levies from multiple taxing jurisdictions. You can see all those mill levies by looking for your property on the country assessor’s website. For example, in Jeffco, you’d go to http://propertysearch.jeffco.us. In other counties, just Google the county’s name + “assessor.”

For any given address, you’re likely to find between 5 and 15 different jurisdictions with individual mill levies. In unincorporated areas of Jefferson County, for example, you’ll find separate mill levies for the county, for Jeffco schools, for the country sheriff (“law enforcement”), for your local water district, local park district, local fire district, RTD, storm water and flood control district, etc. 

As an aside, a lot of people think that “unincorporated” translates to lower property taxes, but the opposite is true. Consider the following: the West Metro Fire District, serving much of Lakewood, collects about 13.2 mills from property owners in its taxing district — and that’s just for fire protection. Meanwhile, the City of Golden’s current mill levy is less than that (12.34 mills) and includes all municipal services — fire, police, parks and recreation, and more. Golden may have higher real estate prices, but our real estate is taxed at a lower rate than in most other areas.

The Current Surge in Sold Prices of Homes Will Cause a Jump in 2023-2024 Property Taxes  

In Colorado, property taxes are based on a calculation of what each property might have sold for on June 30th of the prior even-numbered year.

That means the property taxes for 2023 and 2024 will be based on what your home could have sold for on June 30, 2022. Given the crazy surge in home prices, you could see a 30% or higher jump in your property’s assessed valuation and therefore a 30% or higher jump in your property taxes for the next two years. 

The chart below shows the likely impact of the current run-up in median prices compared to the median prices in prior Junes of even-numbered years, based on data from REcolorado. Although your home’s valuation will be based on the sales of comparable homes near yours leading up to June 30, 2022, the fact that the median sold price of residential properties metro-wide will have increased by over 30% from June 30, 2020, suggests that your home’s valuation and therefore your taxes could rise by 30 percent or more.

I’ve estimated (conservatively) that the median sold price in June will be $570,000 because the median sold price was already $540,000 in February. That is already a 27.7% increase over June 2020.

That, however, is an average for the entire Denver metro area, defined for these purposes as within 25 miles of the state capitol.  There are locales within the metro area where the increase in values over the last two years have approached 35% or more. Here is how that metro-wide 27.7% average increase of Feb. 2022 over June 2020 breaks down by county:

Denver County—19.5%

Jefferson County—30.1%

Douglas County—31.9%

Adams County—28.6%

Arapahoe County—27.1%

Boulder County—40.7%

Gilpin County—42.4%

The appreciation also varies greatly by city addresses:

Golden addresses—15.9%

Littleton addresses—26.0%

Arvada addresses—33.0%

Broomfield—27.2%

Centennial—36.9%

Aurora—30.5%

Highlands Ranch—31.8%

Castle Rock—36.5%

So, keep an eye on what homes like yours are selling for this April, May and June of this year to get a sense of what the county assessor’s valuation of your home will look like when you get that notification in May 2023.

About 50 readers are receiving “neighborhood alerts” from me.  These are email alerts regarding all MLS listings within your particular neighborhood. Usually, the alerts cover a certain subdivision or ZIP code, but they could be structured to include only listings which are comparable to your own home. For example, if you have a 1970s ranch home, I could set up an alert that only includes ranch-style homes built between 1960 and 1990 within a half mile or mile of your home. This will give you the best indication of how the value of your own home may be calculated by your county assessor. Feel free to email me at my address below to request such an alert or to modify the alert I am already sending you.

Here’s Some Guidance on Appealing the County Assessor’s Valuation of Your Home

Normally, I’d advise you to make your appeal in person, but this year the Jeffco Assessor is using Covid-19 as a reason to deny in-person appeals, and the online method being offered at his website, http://assessor.jeffco.us, is not as intuitive or helpful as it was two years ago.

This year, instead of sending a full-size letter to each property owner, the Jeffco assessor sent a fold-over postcard which only asks you to provide your own dollar valuation of your home and state a reason. The full-size letter of prior years had a place to enter up to three qualified comparable properties sold during the 24 months prior to June 30 of last year which justify your lower valuation of your property. That letter-size form can be downloaded and printed from the assessor’s website. I’ve posted a link for both the Jeffco and Denver appeal forms at www.JimSmithColumns.com.

Both counties allow for online appeals, but the online forms do not have a place to enter the “Qualified Sales” on which your appeal is based, which is surprising and disappointing. However, you can print out the letter-size Jeffco form with those three comps and attach it as a scanned document to your online filing. The Denver form can be completed online, so you don’t have to print it out and scan it.

You can find those qualified comps (defined as homes similar to yours sold in the 24 months between 7/1/2018 and 6/30/2020) by clicking on the “Sales” tab on the web page for your own home on the assessor’s website.  Good luck!

This Week Homeowners Received Updated Valuations From the County Assessor

Taxes in Colorado can’t be raised without a vote of the people, so why do your property taxes go up every other year? The answer is simple — while the rate of taxation (the “mill levy”) can’t be increased without a vote of the people, the valuation of your home does go up based on the market, thereby raising your property taxes.

Unlike many states (for example, California), Colorado’s constitution requires that property taxes be based on the full valuation of the property. It is not based on what you paid for your house, but on what it might have sold for on June 30 of every even numbered year based on the actual sales of comparable homes in your neighborhood, with “neighborhood” defined by type of home, not just locale. One example in Golden is “high end townhomes” and skips around a wide swath of north and south Golden proper.

While the full valuation of your home for next year’s tax bill may be based on what it would have sold for on June 30th of last year, that valuation is based on what your home was like on January 1st of this year. So, if you made a major improvement since last June that was completed by January 1st and that was permitted (the only way the assessor knows about it), your valuation would be based on what your improved home would have sold for last June!

Fortunately, since the valuation of your home is based on what it would have sold for on June 30th of last year, that valuation does not reflect the extreme bidding up of home prices we have seen since last June.

The mill levy for your home is not applied to that full valuation but to 7.15% of it. That’s called the “assessed valuation.” As a quick and easy example, if your home is worth $1,000,000, the assessed valuation is $71,500, and if your mill levy is 100 mills, your tax for 2021 and 2022 for that million dollar home would be $7,150. (“Mill” is from the Latin word for thousand, so the mill levy is applied to each thousand dollars of assessed valuation. Thus, 71.5 thousand dollars multiplied by 100 mills = $7,150.)

TABOR, Douglas Bruce’s 1996 “Taxpayer Bill of Rights,” limits how much money any taxing jurisdiction can retain based on population growth plus inflation. Unless a taxing jurisdiction has “de-Bruced,” that jurisdiction must refund the excess to its taxpayers. The preferred method, however, is to lower the mill levy so that less money is collected in the first place. In some cases, the yearly decline in mill levies due to increased property values has resulted in little or no increase in the property tax bill.

Overall, county assessors have determined that home valuations increased by ½ percent per month over the 24-month assessment cycle from July 2018 to June 2020, so if your home’s 2021 valuation has increased by a lot more than 12% over its 2019 valuation, and there have been no permitted improvements or additions to your property during that two-year period, then you may have a basis for appealing your new valuation.

In my own case, the valuation increase over that period was 34.2%, so I will be appealing my new valuation, since I have made no capital improvements to my home since 2018. I won my appeal two years ago, so my 2018 valuation is acceptable to me. If you didn’t appeal in 2019, or if your appeal wasn’t successful, you may want to appeal even if your 2020 valuation’s increase is close to that 12% average valuation increase.

Any appeal must cite qualified comparable sales which you’ll only find by clicking on the “Sales” tab on the assessor’s web page for your home. Any other comps will be rejected, so don’t ask me or your own agent to find any for you. Remember to “age” the sold prices by 1/2 percent for each month that a given comp’s sale occurred prior to June 2020.

Higher Home Values Mean Higher Property Taxes

This amazing seller’s market is raising everyone’s real estate values, which is bound to be reflected in higher property taxes.

Early next month all property owners in the state will receive a notice from their county assessor assigning a new “full valuation” on which 2021 and 2022 property taxes will be based.

The good news is that the valuation will be as of June 30, 2020, avoiding the worst of the increases which we have see since then.

Look for another blog post in early May in which I will instruct you on how to tell whether your home’s valuation is too high and how to appeal it.

Incorporated or Unincorporated? What’s the Difference?

It’s a common misconception that property taxes are lower in unincorporated areas than they are in an incorporated city or town.

Sales taxes are lower in unincorporated areas, since most cities have their own sales tax. If you register a new car in one of those cities with a sales tax, you’ll pay thousands that you wouldn’t pay registering it in an unincorporated area.

Property taxes are another matter. Take the City of Golden, for example. The mill levy for the city is 12.34 mills. Here’s the full mill levy for such a home:

If you have a Golden address but are not within the city itself, you have separate mill levies for county law enforcement, fire protection and quite possibly for water and park districts that can total far more than Golden’s mill levy, which includes all those services. If you’re in a newer subdivision, you could have an additional big mill levy for a “metropolitan tax district” which was created by the developer to pay for infrastructure. Here’s the mill levy for a home in Table Rock, that subdivision on the north slope of North Table Mountain, which does have a metro tax district:

Taxation of Residential vs. Non-Residential Property In Colorado Is a Growing Problem

How real estate is taxed varies greatly from state to state. Here in Colorado, we are blessed with very low property taxes compared to many other states. According to USA Today, Colorado has the 7th lowest property tax rates in the country, although that is a statewide average. The median-value home in Colorado has a property tax bill of just over $2,000 per year, whereas the median-value home in New Jersey, the highest taxed state, has an average property tax bill of over $7,200. In suburban New Jersey, property tax bills over $20,000 per year are not uncommon because of the higher values, not just due to higher local tax rates.

In Colorado, property taxes are very much a local affair. Recently there was a hullabaloo over Metropolitan Tax Districts, in which mill levies can double the property tax in newer subdivisions. You can read my Dec. 26  column on that topic at JimSmithColumns.com.

This week, however, I’m going to address a different property tax problem that is getting worse every year and has little prospect of being solved politically.

The problem is the growing differential in property tax rates for residential vs. commercial and other non-residential real estate, such as vacant land. First you need to understand that property taxes are levied against the “assessed” value of real estate, which is a small percentage of its  actual value. While the assessment rate for residential property — currently 7.15% — keeps going down, the assessment rate for non-residential property is fixed by the state constitution at 29%. That means that the property tax on residential real estate is 1/4 the property tax on non-residential real estate of the same value.

Rita and I own two pieces of real estate—our south Golden home and the Golden Real Estate office building. The county assessor values our home at twice the value of the office building, but the property tax for our home is one-half the property tax for the office building.

Vacant land is considered non-residential, so it, too, has an assessment rate of 29%.  As I’ve written before, this puts enormous pressure on the owners of vacant land to develop it, which is upsetting if, like me, you value keeping vacant land undeveloped.

To understand how unfair the taxation of vacant land can be, consider a 20-acre parcel in Jefferson County that is currently listed for sale. The county’s current valuation of the parcel for tax purposes is $275,554, so its assessed valuation is 29% of that, or $81,071.  If the buyer of this land builds a high-end home on it, the valuation might increase, for argument’s sake, to $700,000, but its assessed valuation would be only 7.15% of that value, or $50,050. Thus, the property tax bill would drop by nearly 40%, even though the value of the parcel has nearly tripled!  The current owner is paying over $7,000 per year for his land to sit vacant.

As I’ll explain below, the assessment rate for residential property keeps falling.  Last year it was 7.2% and two years before that it was 7.96%.  Prior to 1982, property of all types had an assessment rate of 30%, but the Gallagher Amendment changed the non-residential rate to 29% and the residential rate to 21%.  Most significantly, the amendment also dictated that the residential assessment rate should be adjusted to retain that year’s 45:55 ratio of residential to non-residential statewide property tax revenue in subsequent years.

As a result of that provision, since total residential valuations have grown much faster than non-residential valuations statewide, the 21% assessment rate of residential property has kept falling and will continue to fall.  And this is likely never to change, since owners of residential property are the voters, and it’s unlikely that homeowners would ever vote to increase their residential property taxes in order to soften the property tax burden of businesses. 

Bottom line, residential real estate will continue to bear an ever smaller property tax burden compared to non-residential real estate, and owners of vacant land will feel more and more pressure to develop their vacant land or sell it to developers. The only alternative is to put livestock on the land or to farm it so they enjoy the even lower agricultural property tax rate, but the rules for qualifying for the agricultural rate are fairly strict and are aggressively audited, I would expect, since the cost to counties in lower tax revenue for agriculturally zoned property is pretty substantial.

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.

By the way, please note that our “Real Estate Today” column in the Denver Post also needs your support. It is our primary marketing tool. You can assure this column’s continuation by coming to us with your real estate needs and recommending us to others. Thank you!