property taxes

If you haven’t read my explanation of the tax increase itself, read that first.  You need to understand the facts before you read anyone’s opinion.

As a Realtor and a homeowner in Colorado Springs I have a vested interest in this issue from multiple angles.  As a homeowner, I pay taxes and care about the long term value of my home.  As a Realtor, anything which affects property values, desirability of our city, city services and amenities,  or home affordability directly affects my livelihood.  In light of all of these considerations, I’ve decided to vote “No” on the upcoming ballot issue 2C.  Here are just a few of the reasons:

1. First, they are proposing a permanent tax increase for a temporary problem. Most everyone agrees that the primary source of this problem is the decreased sales tax revenue.  Once the economy begins to recover, sales tax revenues will rebound and the immediate problem will be over.  So even if we grant supporters of the tax increase their purported “need” for extra money in 2010, approving a tax increase now will only enable them to waste more money in the years ahead.  In fact, the tax will still be being phased in 5 years from now when this recession should be over.   The city is taking advantage of fear over the current situation to pad the city coffers in the future; this is wrong.

2. This proposed budget is classic scare tactics on the part of government; threaten to take away what people want most (in this case, emergency services, for one) unless we pony up and fund their inability to manage what they have. I’m a political junkie and this is straight out of political strategy 101 – the only way the citizenry will support higher taxes is if we scare them bad enough.  Perhaps we need to re-evaluate where to cut back; perhaps some ancillary service do need to be trimmed in the short term until the economy recovers, and maybe some could be trimmed permanently.  If we don’t pass this increase will they actually cut back fire protection?  Maybe, maybe not.  The point is that you can’t scare people by telling them you’re going to delay a road project for another year (for example).  You have to threaten them where it hurts to have a chance at getting some more of their hard earned cash.

3. We can’t make a blanket assertion that values will go down if taxes aren’t raised, but they will be more stable with the benefits from higher taxes. Property tax increases, by definition, suppress property values by affected home affordability.  I’ve seen $8/mo. affect someones ability to purchase a home.   I agree the tax increase would be of benefit to SOME homeowners who would be directly impacted by specific cutbacks, but a tax increase will be a detriment to MOST homeowners.  This isn’t the time to adversely affect home affordability.

4. For those families who already own a home, there are many people in our city right now who need every $10 or $20 they can find every month. They city just might end up closing that park across town, but what about their kid across the table.  When times are tough, sometime we have to cut back.  Individuals and families are already cutting back from what they would like to spend – why does the government think they are exempt from a little pain in the back pocket?

5. As if the strain on families wasn’t enough, what about the small businesses? Because of the way Colorado computes property taxes, this increase will hit commercial property 3 to 4 times harder than residential. (This goes for vacant land as well.)  Small businesses are already struggling as consumers pull back; this is the wrong time to squeeze them for more taxes.  All companies, large and small, will be force to pass along the tax to consumers as they do with any significant increase to their cost of doing business.  This pass through tax will compound the tax increase on homeowners, as well as affecting those who don’t own property.

And I could go on…  Please, carefully weigh your vote this November.  If you feel the need to vote for higher taxes, then by all means get out there and vote.  I commend you for exercising your rights as a citizen.   But consider the ramification of a vote in either direction on this issue.  I agree that our city is presently under some financial pressures, but I fail to see how this is entirely a negative reality.  It’s good for government to occasionally feel a little pinch or there would be no end to how quickly they could burn through our money!

NOTE: What follows is a factual explanation of the proposed tax increase.  I’ve posted my opinions on this tax increase in another post.

As most of you know by now, Colorado Springs will be voting on November 3 about a proposed property tax increase.  (The last to register is today, Monday, October 5 and the ballots will be mailed out around October 16.)

Many people are confused about just what this tax increase means, and given the apparently contradictory information that I keep hearing this is no surprise.  On the one hand, we hear that they are going to increases the city property tax by 3 times the current rate, and on the other hand they claim it will affect the average homeowner by “only” $200 a year.

It doesn’t even sound like we’re talking about the same tax increase here – so what is the deal?  First, let’s see the actual wording from the upcoming ballot – then I’ll explain some key points that will help us make sense of the issue.  Your ballot will read:

Shall City taxes be increased (final year $46,000,000) annually by increasing 2009 general property tax 6.00 mills, 1.00 additional mill per year for four years, constituting voter approved revenue change.

1. The Tax Increase is 10 Mills over 5 Years

The above ballot text essentially states that they will raise taxes by 10 mills over 5 years.  It is jump-started with a 6 mill increase right away, and followed by 4 years of 1 mill per year increases.

2. Market Value vs. Assessed Value

I’ll use an actual Colorado Springs home located near Tutt and Stetson Hills as an example for the sake of discussion; the county puts the market value of this home at $211,296 which is fairly typical for the area.  However, we must multiply this number by the assessment rate of 7.96% to reach the assessed value of $16,320.  This is the number we then use to calculate taxes.

3. The Mill Levy – The city property tax is just one portion of your overall tax bill

Next, we take the assessed value and multiply it by the total mill levy.  In this case, the mill levy is 0.066542 (or approximately 66 mills) which results in a current tax bill of $1085.96.  However, of this $1,085.96 only $80.69 actually goes to directly to the city.  The remainder in our example goes to El Paso county, a library district, a water district, school district 49, etc.  You can see a breakdown of the mill levy here:

4. The City Portion Would More Than Triple; Your Total Bill Will Not

Since the city only accounts for a portion of the total tax bill, the percentage increase on your total bill will tend to fall somewhere around 15% for most neighborhoods even though the cities portion will more than triple.  Using the same home as an example, the tax increase would change the cities portion from $80.69 (4.944 Mills) to $243.89 (14.944 Mills).   The total tax bill in our example would increase from $1,085.96 to $1,249.16.

5. Commercial Property Taxes are Affected More than Residential

Of significance, though mostly overlooked, is the affect this will have on commercial property taxes as well.  Because of how property taxes are assessed, commercial property taxes will be affected to a much greater extent than residential properties.  This is because while the assessment rate for residential is 7.96% the rate for commercial property is 29%.  This means the assessed value used for computing taxes is almost 4 times higher for a $200,000 commercial property vs. an identical value residential property.

What do you think?  Does the city really need more money?  Should they make do with what they have?  Will this tax make a tangible impact on quality of like in Colorado Springs for the better?  Or for the worse if it doesn’t pass?  The city makes their case for the tax hike here.  Many sites make a counter argument.  The opposing sides have corresponding Facebook fan pages “for” and “against” as well.  You can see the mill levy, market value, and assessed value for your property at the El Paso county assessors website.

I’ll share my personal thoughts in another post; for now, the above information is just the facts, and is true and accurate to the best of my knowledge.  Still have questions?  Leave a comment below and I’ll try to answer it.