Balancing the County Budget in Uncertain Times

By John Kefalas

There are fast-moving parts that create challenges for the Larimer County Board of Commissioners to adopt a 2024 Balanced Budget by our December deadline. Nevertheless, we will get the job done on behalf of the residents we serve and are fully engaged with our local legislators during the 3–5-day Special Legislative Session that began on November 17. We will need to pivot accordingly once the dust settles, including a temporary mill levy credit as necessary.

Here’s some background to understand our current circumstances. We all experienced historically high home values in property tax year 2023 that will dramatically increase our property taxes owed in 2024 and subsequently affect local government budgets. After Colorado voters rejected Proposition HH, the governor called a special session to provide some short-term property tax relief. The session will focus on specific policy areas concerning property taxes and property tax burden; the fiscal impact on schools and local governments that are funded primarily with property tax revenue; TABOR refund mechanisms; rental assistance; increases to the state Earned Income Tax Credit (EITC); the creation of a bipartisan task force to address long term property tax issues; and the nutrition of food-insecure children during the summer months. 

Let’s consider how we got here. In 2020, the voters approved the repeal of the Gallagher Amendment by 57%. The 1982 Gallagher Amendment is a Constitutional Amendment the voters approved in response to steeply rising property tax increases in the 1970s. It divides the state’s total property tax obligation between residential (homes) and nonresidential (commercial) property – 45%/55%, respectively. The basis for this ratio was that 45% of state property tax revenue came from residential back then. Furthermore, the commercial assessment rate was set at 29%, and over the years, businesses were disproportionately impacted because as home values increased more than business values, the residential assessment rate would decrease so the money coming in was not more than 45%.

Another big factor is that the Assessor’s Office conducted the reappraisals (which happens every two years, by state law) at the height of the bursting housing market between 1/1/21-6/30/22 (by state law), and since the repeal of Gallagher, the Colorado Legislature passed three bills (2021-2023). The 2022 bill gave us the current residential assessment rate of 6.765%, and the 2023 bill gave us Prop. HH. This is relevant to local governments because the state cannot have property taxes, and property taxes pay for vital services and infrastructure that counties provide.

The Larimer County Budget process begins in April and adopts a balanced budget in December, including operating and capital improvement expenses as well as reserves. We strive to be thoughtful and transparent, and the revised 2023 and proposed 2024 budgets were submitted by October 15 (by state law). We assumed Prop. HH would pass because this is a more fiscally prudent approach, and we are committed to being good stewards of our public resources. The 2024 proposed budget is $610.3M compared to the $704.3M 2023 budget (13% reduction) due to budget reductions and other belt-tightening measures and the completion of major capital infrastructure projects including the behavioral health facility, human services renovation, community justice women’s facility and the jail improvement projects.

In closing, we are preparing for all budget scenarios with the understanding that we are all in this together. Happy Thanksgiving – a time to count our blessings and be grateful.

John Kefalas is a Larimer County commissioner representing all of Larimer County