- Pam Zubeck
- The Citadel mall’s value for tax purposes fell due to vacancies, while most commercial properties gained in value.
The county’s reappraisals, mandated by law every two years, show values have increased from 11 percent in the Briargate and Gleneagle areas to a whopping 37 percent in southeast Colorado Springs.
While it’s nice to see an asset gain value, a higher valuation generally means higher taxes. Some values have increased so much that even the two constitutional amendments designed to hold down residential property taxes won’t be enough to prevent sticker shock.
And rising values undermine efforts to tackle the county’s drastic shortage of affordable housing.
“It’s the biggest increase in quite some time,” says County Assessor Steve Schleiker. “Back in the late 1990s and early 2000s, we saw double-digit increases of 20 and 30 percent. That occurred up to 2005. Then we had the crash of 2007 through 2011. Based on the sales and what’s been going on, this is a supply and demand situation.
“Folks are coming to the closing tables with $5,000, $10,000, $20,000 above the asking price,” he adds, “because they get into bidding wars.”
Higher values are likely to prompt some of the more than 300 taxing entities in the county to lower their mill levies to comply with the Taxpayer’s Bill of Rights (TABOR) revenue caps, or ask voters’ permission to keep the excess.
The soaring values led Schleiker to schedule a series of public meetings this month to explain the reappraisal and appeal process. He hopes the meetings will reduce the number of appeals.
The reappraisal is based on sales between July 1, 2016, and June 30, 2018, when the local market went crazy, due in part to low inventory and a buoyant national economy.
- El Paso County Assessor's Office
- A map of El Paso County shows how property value increases varied throughout the region in the reappraisal, based on sales between July 1, 2016, and June 30, 2018.
“That [area] was the hardest hit in foreclosures in 2007 to 2009,” Schleiker explains, adding those values have now recovered. “If the value is less than $300,000, those houses stayed on the market less than a week.”
In Hillside, on the edge of the Southeast, and in Ivywild, in the city’s southwest area, some values climbed 28 percent during the reappraisal period.
For Keshia Palmer, who owns a house in the Southeast, a higher tax bill could mean she has to work extra hours as a hair stylist to pay the bill.
Her home is valued at $135,500, but if it went up by 37 percent, the new value of $185,700 could bring a tax bill of $877, compared to her current bill of $640.
“That’s a lot,” Palmer says. “You try to figure out how to come up with a couple hundred dollars from a budget where you’re budgeting down to the quarter. You sometimes need another job just to pay the extra.”
Values in middle-class neighborhoods climbed by 18 percent in Stetson Hills, Cimarron Hills and Springs Ranch; 19 percent in Manitou Springs, Ute Pass and the Westside; 21 percent in Garden Ranch, University Bluffs and Erindale; and 24 percent in the Wasson and Palmer Park areas.
But affluent neighborhoods didn’t show huge gains. The Old North End’s values rose by 16 percent; Rockrimmon, Mountain Shadows and Holland Park by 15 percent, and the Broadmoor and Woodmen Valley by a mere 12 percent.
While commercial property values surged by 15 to 20 percent, which could have a major impact on those tax bills, not all businesses saw big bumps.
Hotels, specifically, increased in value by only 5 percent, Schleiker says, because occupancy didn’t show big gains during the appraisal period.
Though the city finance department reports that Lodgers and Automobile Rental Tax revenues increased 14 percent in 2017 and another 5.6 percent in 2018, the county bases valuations of hotels on a longer period of performance.
“This type of property experiences considerable swings in their occupancies and is better suited to look at a minimum of five years in order to determine a more stabilized occupancy and income stream,” Bob Harper, the Assessor’s Office commercial property manager, says via email.
Even then, the area’s premier hotel, The Broadmoor, will see an increase in value from $77.5 million for the hotel alone to $81.3 million, which would push the tax bill from $1.7 million to $1.8 million, about $100,000 higher.
In isolated cases, values declined, such as The Citadel mall, Schleiker says.
“We are dropping the value of The Citadel, because they have huge vacancy issues,” he says, adding the same is true of Chapel Hills Mall. Both malls have lost anchor tenants and have other vacancies as well.
- Pam Zubeck
- Keshia Palmer frets her southeast home’s tax bill will rise.
Given that land values increased by 15 to 20 percent, the cost of developing reasonably priced homes also would go up.
The city’s Community Development Division Manager Steve Posey says rising values for land could discourage owners from donating tracts for affordable housing. However, he says developers who want to build tax-credit-supported housing could qualify for a tax exemption for the land through the Colorado Springs Housing Authority.
“An increase [in value] like that will make it even more important to have the Housing Authority involved in a project,” he says. The authority’s Chad Wright tells the Indy he agrees that rising values could be a barrier to developing more affordable housing, and rents could rise.
But Posey is skeptical landlords will simply raise rents to cover their tax bills, which for apartment complexes could go up by tens of thousands of dollars.
“From the market standpoint, yeah, the value of land might go up, but the rental market itself is softening,” he says, citing a recent report showing rents in the last quarter of 2018 dipped slightly compared to earlier quarters.
“They may not have the ability to raise the rent, because they’re already at what the market can bear,” Posey says. “At the end of the day, you’re only going to be able to rent an apartment for what the market will bear and sell a home for what the market will bear.”
Kevin Walker, chair of the public policy committee of the Housing and Building Association of Colorado Springs, agrees — sort of.
“If your competitors are willing to swallow some of that loss, you’re going to be stuck doing the same thing,” he says.
But, he adds, taxes are a cost of doing business that often gets passed on to the renter. “Any time costs go up for the [rental] owners, then you have to assume the pressure to increase rent is just a little bit higher,” Walker says. “It’s logical in a marketplace where costs are going up that your revenues need to go up to compensate for that.”
But that won’t happen in the next month or two, he says, noting the impact of the reappraisal won’t be seen until early next year when tax bills go out.
“You try to figure out how to come up with a couple hundred dollars when you’re budgeting down to the quarter.” click to tweetBefore hitting the panic button, though, realize there are two parts of the Colorado Constitution that could moderate rising tax bills.
The Gallagher Amendment, adopted in 1982, mandates that residential property tax revenues comprise 45 percent of the statewide total, while 55 percent must come from commercial and other classes of property. The amendment further mandates the rate for non-residential property be fixed at 29 percent. This mandate over time has forced the residential property assessment rate downward to 7.2 percent.
The state Legislature sets that percentage, and Schleiker says a preliminary study suggests the residential rate be lowered to 6.95 percent.
The other provision is the Taxpayer’s Bill of Rights, which limits how much taxing entities can collect before refunding the excess or seeking voter permission to keep it.
If mill levies are lowered to avoid collecting too much money, agencies must get voter approval to restore those mill levies in the future.
Still, given some of the sharp increases in value, Schleiker says it’s not likely tax bills will remain flat, despite those two provisions.
While tax bills might translate to only $30 a month or less in higher rents or house payments, that’s a hardship for some, Schleiker says, such as seniors who live on fixed incomes and already are forced to absorb rising costs of food, medical care and utilities.
That’s why Schleiker suggests the county consider reinstating its senior work-off program, in which seniors perform work for the county to reduce their tax bills, an idea that County Administrator Amy Folsom purportedly says is worth looking into, he says.
All that said, the exact impact of the reappraisal won’t be known for months — after appeals are decided by June 3, after Schleiker certifies final assessed values to taxing agencies by Aug. 25 and after taxing agencies set mill levies based on compliance with TABOR by Dec. 15.
Tax bills go out in January.