It’s official: Governor Jared Polis announced Thursday morning that he is calling the Colorado State Legislature into a special session in 11 days to pass an expanded property tax relief package and avoid a ballot debate on the issue.

The call came three days after Mark Ferrandino, director of the governor’s Office of State Planning and Budgeting, presented a proposal negotiated by state officials and the initiative’s proponents, Advance Colorado and Colorado Concern, to an influential commission. The bill would lower existing assessment rates on most types of property, set stricter caps on annual growth in statewide property tax revenues than lawmakers approved in a law signed in May and provide an additional $300 million in tax savings.

Polis and Democratic legislative leaders described the decision as one designed to protect the state from the possibility that “dangerous” Initiatives 50 and 108 could pass, requiring additional payments to local governments that would significantly reduce public spending. Meanwhile, election advocates and Republican legislative leaders praised the chance to provide Coloradans with even greater tax relief through the special session after the bipartisan tax cut passed just three months ago.

The session is scheduled to begin at 10 a.m. on August 26 and could last as little as three days.

How the special session came about

“The cost of inaction is too high. We refuse to gamble with our schools, our economy and our future,” the Democratic governor said in a press release. “The proposed ballot measures threaten to cut funding for K-12 and higher education, and Coloradans are counting on us to find a path that saves people money on property taxes while preserving these important institutions.”

Advance Colorado President Michael Fields and Colorado Concern President/CEO Dave Davia boasted that the upcoming special session will bring greater relief to Colorado residents and business owners at a time when they are burdened by property taxes. Even after passing a largely partisan relief package in a special session last fall, many Coloradans faced a 30% increase in property tax bills last year due to a rise in home prices.

“We applaud Governor Polis’ decision to call a special session to discuss property tax relief,” Davia said in a press release. “It’s time to make Colorado more affordable – and focusing on the issue of rising property taxes is a critical first step for homeowners and small businesses across our state.”

Polis’ order calling the special session limited the issues to be discussed there to those “affecting property taxes beginning with the property tax year beginning January 1, 2025.” But in the past, lawmakers have taken creative approaches to interpreting such a call, introducing bills that some observers considered irrelevant.

Competing efforts for tax relief

Initiative 50, which has already been approved for the ballot, would cap annual statewide increases in property tax revenue at 4% and would require a statewide vote if governments want to keep higher revenues. Initiative 108, which is currently reviewing submitted signatures, would cut the residential tax rate from 7.15% to 5.7% and the commercial and agricultural tax rate from 29% to 24% in 2025 and require the state to provide assistance to local governments that experience a revenue decline due to the measure.

Lawmakers feared that voters frustrated with recent tax laws would support the measures and drain billions of dollars from the state budget. So in the last three days of the 2024 session, they introduced and passed Senate Bill 233, which provides a $1.3 billion tax cut. It caps annual growth in statewide property tax revenue for local governments at 5.5% but exempts revenue that goes to school districts or is used to pay down bonds and other debt. It also cut business tax rates to 25% and residential tax rates to 6.95%, calculated after deducting 10% of home value, up to $70,000.

The new deal, as Ferrandino explained to the Property Tax Commission on Monday, would split the residential property tax rates. The portion dedicated to schools would be reduced to 7.05% and the portion dedicated to local governments to 6.25%. The rates would be reduced even further if growth in average property values ​​exceeds 5%. Growth in property tax revenue for schools would be capped at 6% annually and the cap for local governments would be reduced to 5.25% annually. However, larger tax increases would be possible in high-growth school districts and a lock-in effect during recessions would be avoided.

Special meeting to discuss business matters

Ferrandino estimated the proposal would reduce statewide property tax bills by an additional $255 million next year and $295 million in the 2026 property tax year compared to SB 233. Sen. Barbara Kirkmeyer, the Brighton Republican who co-sponsored SB 233, said the proposal would also leave in place the exceptions to the statewide cap on property tax revenues included in her bill, including exemptions for new construction and for property taxes set aside by local governments to pay off bonds and other debt.

These exemptions are seen as key factors by many business leaders critical of the potential impact of Initiatives 50 and 108. Bond lawyers and developers warned that the inflexible 4% cap on property tax revenue growth would leave many special districts, which build the bulk of new homes along the Front Range, unable to repay the promised debt, significantly slowing new construction development.

While Polis supports the idea of ​​a special session, some Democratic lawmakers are more cautious. They say they passed the property tax relief in May and feel like they are negotiating with terrorists who are holding the state hostage to their ballot initiatives. Democratic House Majority Leader Monica Duran, in a press release Thursday, pointed to the “wealthy special interests” that have pushed the ballot interests and said she was glad the session could protect school funding that would have been jeopardized by the measures.

“More work was needed”

But other House leaders, sensing pressure from voters for more tax relief, portrayed the upcoming special session as an opportunity to further reduce the tax burden.

“During this year’s legislative session, we succeeded in delivering to the people of Colorado the largest property tax cut in our state’s history,” said a statement from Senate Republican leadership. “As much as we are pleased with our monumental accomplishment, we have always stressed that more work is needed to provide relief to Colorado taxpayers.”

Fields and Davia promised in a statement that they will not introduce similar measures in the future. The Legislative Council passed the agreed compromise – as long as officials do not back down from the terms of the agreement in the coming year. Fields also called on local governments to provide additional tax relief to residents, as some have already done since the beginning of the year.