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Gallagher Amendment Review

September 23, 2020

What does the Gallagher Amendment do? 
  • Divides the state's total property tax burden between residential and nonresidential (commercial) property.
  • Further, the Amendment mandates that the assessment rate for commercial property, which is responsible for 55% of the total state property tax burden, be fixed at 29%. The residential rate, on the other hand, is annually adjusted to hold the 45%/55% split constant. 
How was the 45%/55% split set by the Gallagher Amendment determined? 
  • In 1982, residential property was responsible for 45% of the state's total property value, and the commercial property was responsible for 55% of the state's total property value. The authors of the Gallagher Amendment believed that the overall property tax burden should continue to reflect this split. As a result, with the passage of the Gallagher Amendment, the 45%/55% split was set in stone.
Why has the residential assessment rate gone down since 1982?
  • In 1982, the first year of Gallagher, the residential assessment rate was 21% (and the nonresidential property assessment rate was 29%, as fixed by Gallagher in perpetuity). However, the rapid escalation in residential property values, combined with the growth boom of the 1990s, led to the 45% share of property tax collected from residential properties being dispersed across more and more residences that were worth more and more money. Something had to give in order to maintain the 45%/55% split. 
  • In Colorado, in order to maintain the 45%/55% split, the residential property assessment rate has dropped from 21% in 1982 to the current level of 7.15% and an estimated rate of 5.88% for tax years 2021 and 2022.
Does residential property still account for 45% and commercial property 55% of the state's total property value?
  • NO, in the 38 years since Gallagher passed, increases in residential property values have significantly outpaced the increases in the value of commercial property. In fact, residential property, which made up only 45% of the state's total property value in 1982, today accounts for 75% of the state's total property value. However, due to the Gallagher Amendment, residential property is only responsible for 45% of the state's total property tax burden. Conversely, commercial property, which now accounts for only 25% of total property value in the state, is still responsible for 55% of the state's total tax burden. 
 
  • The ballot title for Amendment B is as follows:
"Without increasing property tax rates, to help preserve funding for local districts that provide fire protection, police, ambulance, hospital, kindergarten through twelfth grade education, and other services, and to avoid automatic mill levy increases, shall there be an amendment to the Colorado constitution to repeal the requirement that the general assembly periodically change the residential assessment rate in order to maintain the statewide proportion of residential property as compared to all other taxable property valued for property tax purposes and repeal the nonresidential property tax assessment rate of twenty-nine percent?"

Amendment B would repeal the Gallagher Amendment of 1982, which limits the residential and non-residential property tax assessment rates so that residential property taxes equal 45% of the total share of state property taxes and non-residential property taxes equal 55% of the total share of state property taxes. 

A Yes Vote on Amendment B (Gallagher repeal) means:
  • Repealing the Gallagher Amendment, which set residential and non-residential property tax assessment rates in the state constitution;
  • Allowing the Colorado State Legislature to freeze property tax assessment rates at the current rates (7.15% for residential property and 29% for non-residential property); and
  • Allowing the state legislature to provide for future property tax assessment rate adjustments through state law.
A No Vote on Amendment B (Gallagher repeal) means:
  • Maintaining the Gallagher Amendment, which requires a residential to non-residential property tax ratio of 45% to 55% and requires the state legislature to adjust the residential assessment rate to maintain the required ratio. Since 1982, the residential property tax assessment rate has dropped from 21% to 7.15% under the Gallagher Amendment. 

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