Calls for service are increasing, while revenue is decreasing at the Montrose Fire Protection District (MFPD). This might force the district to ask voters for a property tax mill levy freeze in November, according to Chief Tad Rowan. “We’re going to see a significant decrease in revenue due to a reduction in the residential assessment rate on property taxes,” he explained to a recent meeting of The Forum at Heidi’s Deli. This is due to the Gallagher Amendment to the Colorado Constitution, which has been in effect since 1982.
“The problem that we face,” he continued, “is that since 1982 that residential assessment rate (property tax assessed on homes) has declined from 21% to down to the current rate of 7.2%.” The decline is due to the Gallagher Amendment’s structure, which requires non-residential properties to carry 55% of the tax burden; residential properties take the remaining 45%. “It was a great theory back in 1982,” Rowan said. “Unfortunately, it’s no longer 1982.”
The original idea was that non-residential growth would continue to exceed residential growth, as it did back then. “Now, residential growth is far exceeding commercial growth, particularly on the Front Range,” the Chief explained. “What’s happening along the I-25 corridor is that as residential construction, and the value of new residential property, begins to grow, the formula that’s used to maintain that 45-55 split is lowering residential assessment rates.” That rate is projected to fall to 6.11% next year.
This is causing a major financial problem for the Montrose Fire Protection District, and many other Special Districts in rural areas around the state. You see, they are all funded primarily by property tax revenue, under state law. As the residential rates plummet, the demand for services increases as the district’s population grows. That may work on the Front Range, but “It doesn’t work well for rural communities, where residential growth is not occurring at the same rate as on the Front Range,” Rowan explained.
For example, in 2017 the residential assessment rate fell from 7.96 to 7.2 percent. That seemingly small rate reduction cut the MFPD’s revenue by $178,000 that year, according to Rowan. “If the residential assessment rate drops to 6.11%, we’re going to see a decrease of $258,000 per year, beginning in 2020.”
This year, the Colorado Fire Chiefs Association and the Special Districts Association lobbied the legislature to put a temporary freeze on the residential rate at its present level; this would have bought time to create a permanent solution. But, “Unfortunately, that did not happen,” Rowan said, and he isn’t exactly sure why the effort failed.
“The legislature did decide to set up an interim committee to study the situation over the summer. Hopefully, that will work, but I don’t have a lot of faith in that, to be honest.” If it doesn’t work, the MFPD might throw a Hail Mary pass to local voters in Novemberto get a freeze put on the residential rate. But, it’s not yet clear whether the MFPD could legally do that. “There is a question about whether that is legal, under TABOR (Taxpayers Bill of Rights), to ask whether we can keep the residential assessment rate at the current 7.2 percent, or whether we have to ask for a specific amount and a specific mill levy, ” Rowan said.
However, these are mere political band-aids, in Rowan’s opinion. “It’s only going to get worse. Residential assessment rates will continue to drop because residential property values will increase far more than non-residential throughout the state of Colorado. So, eventually, it’s going to drop down to nothing,” he predicted.
Ultimately, a permanent solution may have to come from voters around the state; only they can repeal, or radically change, the Gallagher Amendment.
Meanwhile, the MFPD’s calls for service have been increasing by 9 to 10 percent annually and are expected to continue that upward trend. Rowan said that’s due to our increasing population, the increasing average age of our population, and the growing number of people who have health insurance that covers ambulance transportation.
Last year, Montrose firefighters and paramedics responded to 3,891calls for service; 75 percent of those were for medical help.