Aspen’s real estate value dips
February 4, 2004
The assessed value of Aspen real estate took a $7 million dive in 2003, signaling what may be the tip of the iceberg as the resort’s commercial real estate converts to residential property in the form of timeshares.
Under the state constitution, commercial properties are taxed at a higher rate than are residential parcels, noted Tom Isaac, Pitkin County assessor. The timeshare phenomenon is but one piece in a complex picture that has consequences for city and county governments, school districts, hospitals and any other entity that relies on property taxes to help fund their operations.
“This is something that’s happening statewide,” Isaac said. “This is not just Aspen.”
The Pitkin County treasurer’s office will mail out 2003 tax bills, payable in 2004, shortly. Isaac’s office completed a reassessment of properties last year. The reassessment assigned an updated market value for properties, based on real estate sales for 18 months leading up to June 30, 2002.
Real estate sales were relatively flat during that period, Isaac said, but the overall actual or market value of property in the county rose from $14.8 billion in 2002 to $16.2 billion in 2003.
However, the assessed value of residential property, on which property taxes are based, dropped 12 percent statewide in 2003. The assessed value of residential real estate in Colorado is now 7.96 percent of its market value.
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Under the Gallagher Amendment to the Colorado Constitution, enacted in 1982, the state’s total residential assessed value can’t make up more than 45 percent of the overall assessed value of property in the state. That means as home values rise, or new homes are constructed, the 45 percent cap forces residential real estate to be assessed at an ever-decreasing rate.
In Aspen and elsewhere, a homeowner who saw no change in the actual value of their home in 2003 could see a 12 percent drop on their property tax bill if the mill levy on the bill also remains unchanged.
The $7 million drop in assessed value of Aspen’s real estate is not drastic ” less than a 1 percent decline ” but it’s a sign of things to come, Isaac said.
“This is a warning of what’s coming,” he said. “It’s not just impacting the city. It will impact the school district, the hospital, the county and everybody else.”
Currently, property tax revenues make up a quarter of the city of Aspen’s revenues to fund general operations. It will lose about $20,000 in property tax revenue in 2004, Isaac estimated. Sales tax revenues have also been dropping.
Aspen has not yet begun to feel the effects of the conversion of commercial real estate into residential property through the sale of timeshares or fractional shares of what were formerly hotel rooms.
Commercial property, such as a hotel, is taxed at 29 percent of its market value, as opposed to the 7.96 assessment rate for residential real estate.
The planned conversion of a wing of the St. Regis Aspen into suites that are sold in fractional shares, for example, will make a significant dent in property tax revenues, Isaac said. The hotel has been the largest property-tax payer in the city.
“I think it’s going to be a big impact,” he said. “A property like the St. Regis can have an effect statewide.”
Ten such conversions around the state could drive the residential assessment rate down even farther, Isaac said.
The decline in the assessed value of residential property means less property tax money for school districts, but the state’s Amendment 23 guarantees schools a certain level of revenue. The legislation requires the increasingly cash-strapped state to make up the difference.
Meanwhile, the state’s Tabor Amendment limits the amount of additional property tax revenue governments can take in each year to growth, through new construction, plus inflation. Any excess must be returned to property owners unless voters authorize the government to spend it. Tabor also forces governments to seek voter approval for any new property taxes or tax increases.
When the overall assessed value of property in a taxing district drops, as it has in the city of Aspen, it ratchets down the base from which growth plus inflation are measured, so the municipality loses ground, Isaac explained.
“It keeps ratcheting down a government’s ability to raise funds,” he said. “It has really devastated some communities.”
The whole mess is expected to get plenty of attention in the state Legislature, which convened its new session Wednesday. Among the major proposals before lawmakers is a plan to ask voters to resolve conflicts in constitutional amendments that limit the state government’s tax-and-spending ability and require increased spending for public schools.