The double-edged sword of Colorado's Gallagher Amendment

I never understood that old saying, “All politics are local,” until recently, when one innocent quest for office space brought it to light — a glaring bright light.

I thought with all this empty commercial space around the valley, finding a smokin’ deal on just the right office would be a piece of cake. Not only did I discover that’s not the case, but I got an instant education on something called the Gallagher Amendment in our state constitution.

“At that rate per square foot, the building owner barely covers his taxes,” said Bray commercial real estate agent Sam Suplizio in response to my offer to lease space in a building that’s been vacant for nearly a year. For all the talk about needing to be business-friendly in a tough economy, that sure sounded like a whole lot of...
tax for that empty little building.

“Oh, you’re not familiar with the Gallagher Amendment, are you?” he asked. Then, with patience and good humor, he explained it in a nutshell. But of course I had to know more.

As a result of the Gallagher Amendment, adopted into our state constitution in 1982, Colorado has one of the highest commercial yet lowest residential property tax rates in the nation. In solving a short-term problem of high residential property tax rates in the 1980s, it created exceptionally high commercial rates over the long term.

“It’s a good policy for homeowners and seniors but totally unfair to the commercial community,” Mesa County Commissioner Steve Aquafresca explained. “It’s a double-edged sword, and Colorado loses a lot of business recruits because of it.”

“California is taxing business right out of their state with similar policies,” Colorado Mesa University president and former legislator Tim Foster explained. “We’re doing the same thing here in Colorado as a result of the Gallagher Amendment.”

Back in the mid-1990s, Foster and several other legislators warned of negative impact on the business community if inequities in the Gallagher Amendment weren’t addressed.

“That didn’t go over too well,” Mesa County Assessor Barbara Brewer told me, “which is too bad because they had some interesting solutions at the time.”

By the way, government entities, schools and nonprofits are exempt from commercial property tax. In Mesa County, that means 16 of our top 25 employers are exempt.

Brewer explained that while the residential tax rate gradually slid from a whopping 21 percent of assessed value in 1984 to today’s enviable 7.96 percent, the amendment fixed the commercial rate at 29 percent. Period.

No one wants higher residential property rates. I don’t. Brewer, Foster, Aquafresca and Suplizio don’t either. “Especially in this economy,” Brewer added.

But all agreed that some policies resulting from the Gallagher Amendment obstruct many of our state’s efforts to attract and grow business.

“We can’t continue with policies that shift the tax burden from a large majority to a small minority over the long term, and that’s what the [Gallagher] Amendment does,” Foster said. “It’s not sustainable. There’s got to be a balanced approach. And yes, it’s a serious problem.”

"And it's getting worse," Aquafresca admitted. "We're going to reach a breaking point."

So how do we keep our low residential property tax and still keep our state in the running to attract and nourish business?

“It’s going to take creative, out-of-the-box thinking to resolve this, because a constitutional amendment is basically written in stone,” Brewer said. “They’re going to have to find solutions around it.”

“As much as our legislators talk about wanting to improve the economy, they should be addressing this issue as a priority,” Aquafresca declared. “It’s the obligation of elected policymakers, including the governor and county commissioners, to work with the legislature to address this issue. We need to push for this.”

Oh, but that sounds complex and time-consuming for our busy legislators, considering all the bills they have to push and pass.

“There is only one bill that absolutely has to get passed in the legislature, and that’s the budget bill,” Foster said, pointing out similar distinctions for getting budget bills passed on the state as well as federal levels these days.

OK, if the budget bill and private-sector jobs are the priority, how many more bills could the legislature possibly have time to create and pass?

“Let’s see, in the last session alone the Colorado Senate had 184 bills and the House 361 bills, and that doesn’t even include the resolutions,” Foster answered, laughing.

That’s a lot of bills! And here we are with this serious commercial property tax problem stifling business growth.  What happened to jobs, jobs, jobs?

“We don’t have to repeal Gallagher to solve the problem,” Foster said, all laughter gone. “No homeowner wants higher property taxes; we just need to, as citizens, demand that our legislators step up, admit this is a big issue and push for solutions. And we need the business community to pull together and let our elected officials know that this is a problem we want solved.”

Ah, so “all politics are local.” Oh, I get it! Of course, that also means jobs, jobs, jobs are local too, right?

Now, about that office space…

This post is excerpted from my weekly column in the Daily Sentinel as published in the Sunday, August 12, 2012, edition of the newspaper.