Property Taxes Increase due to 2009 “Mill Levy Tax Freeze” ruling by Colorado Supreme Court

As property values in Colorado rebound from a years-long slump, many homeowners are experiencing “sticker shock” at the commensurate increase in their property taxes – leading thousands to protest recent property value appraisals across the state.

Prior to the notorious 2009 “Mill Levy Tax Freeze” ruling by the Colorado Supreme Court, an increase in property value would have been greeted positively – but, thanks to the historically high property tax rate locked in by the ruling (affirming an unconstitutional piece of legislation enacted on a partisan basis in 2007), higher property values just mean significantly higher property taxes.

In effect, nearly every homeowner (indeed, nearly all property owners) in the state of Colorado faces a significant property tax increase in the coming year due to nearly decade-old partisan piece of legislation and a Colorado Supreme Court ruling from 2009 – without the constitutionally-required vote of the people (under Colorado’s Taxpayer Bill of Rights, or ‘TABOR’ amendment).

 Flashback: Audacious “Mill Levy Tax Freeze” Legislation ‘Blindsides’ Voters

The Colorado Constitution (Article X, Section 20) specifically requires “voter approval in advance for…

any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase for a property class, or extension of an expiring tax, or a tax policy change directly causing a net tax revenue gain to any district” (Colo. Const. Art. X Section 20(4) et seq)

Historically, property tax (“Mill Levy”) rates under TABOR fluctuated up or down annually to keep property tax revenues steady (preventing increases, but also ensuring some revenue stability for districts collecting property taxes).  So, as property values increased, rates decreased (and vice-versa) keeping the property tax burden stable, and predictable.

However, in 2007, Democrat Governor Bill Ritter proposed (and a Democrat-controlled state legislature approved) a “freeze” in property tax rates during a period in which property values were just beginning to recover from an historic slump (and thus, locking in historically high tax rates going forward).

In the first full year the legislation was in effect, the state collected an additional ‘windfall’ revenue gain of $117 Million – with more to come.

The law was (initially successfully) challenged in court – with Denver District Court Judge Cristina Habas ruling on 30 May 2008 that the legislation violated the Colorado Constitution (specifically, the requirement that any tax increase or “tax policy change directly causing a net tax revenue gain” first gain voter approval).

Undeterred – possibly knowing that “the fix was in” – Governor Ritter and Attorney General John Suthers appealed the District Court ruling to the Colorado Supreme Court.  In an astonishingly rapid turnaround, the Colorado Supreme Court (in a tortuously-argued 4-3 ruling written by Chief Justice Mary Mullarkey issued on 16 March 2009) reversed the lower court ruling and upheld the constitutionality of the “Mill Levy Tax Freeze” legislation, locking in perpetual property tax increases for Colorado.

Mullarkey, living up to her name, based her ruling on time-travel, mind-reading, or both: declaring that some hundred or so “de-Brucing” votes in individual districts years earlier on completely separate local tax revenue issues in the 1990’s constituted the required “voter approval in advance” for the 2007 state legislation – despite the fact that voters in those districts were explicitly told that their votes on those local issues would not trigger future tax increases:

When a large majority of school districts in the 1990s asked voters if they could keep all of the tax revenue they were then collecting rather than return surpluses under the Taxpayer’s Bill of Rights, they were careful to assure homeowners that the change would not trigger a long-term escalation in property taxes.

Absolutely not, district officials promised. As the assessed value of property continued to rise, they added, mill levies would tick downward as they had before.

Those officials had every reason to believe they were telling the truth, too, since literally no expert contradicted them. To the contrary. The state repeatedly reinforced the same position.  (Denver Post Editorial, School bill is a double cross, 2 May 2009)

The Mullarkey court also ignored the defeat of a nearly-identical measure to freeze Colorado’s mill levy tax rates (Amendment 32) in 2003, clearly expressing the voter’s disapproval of the rate-freeze scheme later enacted by legislative fiat and the Colorado Supreme Court’s imprimatur.

Bottom Line:

As property taxes inexorably increase with recovering property valuations – irrespective of whether the owners intend to sell their homes – there is literally no one to blame or hold accountable remaining in office facing a vote (three out of four of the ruling Mullarkey Majority, led by Chief Justice Mary Mullarkey herself, have already left office; the last of the Mullarkey Majority in this case, current Chief Justice Nancy Rice, will retire before again facing voters in a retention election).  The policy, however, lives on, as the tax rate “freeze” actually locks in additional property tax increases (“an escalator tied to inflating housing values”) in future years that will outpace growth in personal earnings (hitting those on fixed incomes especially hard).

Nevertheless, property taxes (and property tax revenues) will continue to ratchet upwards, with no vote – thanks primarily to the Colorado Supreme Court.

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