Colorado Legislative Council Staff

STATE and LOCAL

REVISED CONDITIONAL FISCAL NOTE

(replaces Revised Fiscal Note dated February 20, 1998)

TABOR Refund Impact

State General Fund Revenue and Expenditure Impact

Local Revenue and Expenditure Impact

Drafting Number:

Prime Sponsor(s):

LLS 98-22

Rep. George

Sen. Bishop

Date:

Bill Status:

Fiscal Analyst:

March 27, 1998

Senate 2nd Reading

Harry Zeid (866-4753)

TITLE: CONCERNING PROPERTY TAXATION, AND, IN CONNECTION THEREWITH, SPECIFYING THE VALUATION FOR ASSESSMENT PERCENTAGES FOR CERTAIN CLASSIFICATIONS OF PROPERTY, ESTABLISHING A HOMESTEAD EXEMPTION FOR A PORTION OF THE ACTUAL VALUE OF OWNER-OCCUPIED RESIDENTIAL PROPERTY USED AS A PRIMARY RESIDENCE, CREATING A STATE INCOME TAX CREDIT TO PROVIDE PROPERTY TAX RELIEF FOR RENTERS OF PRIMARY RESIDENCES, AND, FOR THE PURPOSE OF PROVIDING RELIEF FROM PROPERTY TAXES, DEDICATING A PORTION OF STATE INCOME TAX REVENUES TO REPLACE TAX REVENUE LOSSES OF GOVERNMENTS DUE TO SUCH PROPERTY TAX RELIEF AND EXCLUDING SUCH REVENUES FROM ANY CONSTITUTIONAL OR STATUTORY LIMITATION ON REVENUES, APPROPRIATIONS, OR SPENDING.

Summary of Legislation

STATE FISCAL IMPACT SUMMARY	FY 1998/99	FY 1999/00	FY 2000/01
State Revenues General Fund: Itemized Deduction Income Tax Increase Renters’ Credit Income Tax Decrease		$2,100,000 (31,118,000)	$4,200,000 (31,694,000)
State Expenditures General Fund: Transfer to Public School Finance Fund Non-School Property Tax Backfill Dept. of Revenue - Administration		$143,928,000 8,777,000 96,006	$112,109,000 8,809,000 96,006
FTE Position Change	None	1.9 FTE	1.9 FTE
Local Government Impact — Total property taxes, would decrease by $152.7 million in FY 1999-00 and by $119.6 million in FY 2000-01. The state would backfill any reduction in local government property tax revenues. Administrative expenses will be incurred by county assessors.

This bill, as amended by the Senate Appropriations Committee (Senate Journal, March 26, 1998, pp. 576 - 582), is a companion bill to the constitutional changes identified in SCR 98-4. Specifically, the changes contained within the bill would require that for property tax years commencing on or after January 1, 1999:

• Section 3 (1)(b) of Article X of the State Constitution (known as the Gallagher Amendment) would be repealed. In its place, residential real property would be valued for assessment at 9.6 percent of its actual value;

• the valuation for assessment for vacant land would be reduced from the current rate of 29 percent to 25 percent;

• the valuation for assessment for all other taxable property (excluding producing mines and lands or leaseholds producing oil or gas) would be reduced from the current rate of 29 percent to 28 percent;

• for producing mines and lands or leaseholds producing oil or gas, the General Assembly would be required to reduce the current methods of valuation by one-twentyninth (3.45 percent);

• a homestead exemption would be authorized for residential real property that is owner-occupied and is used as a primary residence. For homeowners who are less than 65 years of age, the homestead exemption would be the lesser of $75,000 of actual value, or an amount equal to 30 percent of the actual value. For homeowners who are 65 years of age or older, the homestead exemption would be the lesser of $75,000 of actual value, or an amount equal to 60 percent of the actual value;

• The homestead exemption which lowers the assessed value on qualified residential properties would be applied only against the statewide mill levy imposed for the purpose of funding public schools. The homestead exemption would not reduce residential assessed values used for determining property taxes for other units of local government. The actual maximum value of the homestead exemption would be annually adjusted to reflect the percentage change in the consumer price index for the calendar year immediately preceding a given property tax year;

• a credit against state income tax for persons who rent and occupy residential property as their primary residence would be established by the General Assembly; and

• revenues attributable to 0.25 percent of the state income tax rate would annually be credited to the Property Tax Relief Fund beginning in FY 1999-00. Revenues credited to the fund would be used to reimburse local governments for property tax revenue losses due to changes in assessment ratios, the homestead exemption, and school district mill levy reductions made by the General Assembly through the School Finance Act. In addition, the revenues would be used to offset the state revenue losses due to the renters’ income tax credit.

HB 98-1152 would take effect following the approval of SCR 98-4 by the registered electors at the November 1998 General Election. The bill would not take effect unless the voters approve SCR 98-4. Therefore, the bill is assessed as having conditional state and local fiscal impact. The fiscal impact that would occur with passage of HB 98-1152 and voter approval of SCR 98-4 is shown on the fiscal note for SCR 98-4.

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