Aspen City Council backs Gallagher repeal; statewide nicotine tax
Aspen City Council has officially endorsed two measures that appear on the fall ballot, one of which taxes nicotine products statewide, and the other repeals the Gallagher Amendment, which limits residential and non-residential property tax assessment rates in communities throughout Colorado.
Both measures, council members said during their regular meeting Oct. 13, will help funding for public schools and special districts like fire departments, among other beneficiaries.
Proposition EE would tax cigarettes, wholesalers and, for the first time, vaping, according to Shirley Ritter, the director of the city’s Kids First early-childhood education program.
The proposition is in line with the city of Aspen’s policy toward nicotine use, as elected officials and voters in recent years have raised taxes on cigarettes, banned vaping products and raised the age to 21.
C.J. Oliver, the city’s director of environmental health and sustainability, said a statewide tax would help in dissuading people from going to nearby counties where the prices are lower.
“This does add an additional layer of taxation and additional barriers to entry for young people for purchasing these products, so for those reasons I think this is very aligned with the stances that Aspen has taken on tobacco and nicotine products in the past,” he told council.
Councilman Ward Hauenstein said it was an easy endorsement for him to make.
“I supported this at the council table,” he said.
Revenue from the added and new taxes will go to public schools, including free preschool programs.
First-year tax revenue is expected to be $175 million, increasing to $275 million by 2025.
Councilwoman Rachel Richards said proposition 116, which asks voters to lower state income taxes, would take $175 million of public dollars away from school funding if passed.
“It’s frustrating to me to see, ‘let’s cut here and add there,’ particularly if the tax doesn’t pass and the tax rate is cut because it will leave a $175 million hole in the state’s current budget, so funding kindergarten and pre-K is really threatened by this second measure.”
If passed, Proposition EE would provide every Colorado 4-year-old with access to free preschool for at least 10 hours a week, which will certainly make an impact in Pitkin County where there is a dearth of early-childhood education options.
That means that the roughly 165 4-year-olds and any 5-year-olds not yet in kindergarten in the county stand to benefit from this new funding stream, which would begin paying for preschool in 2023, according to Ritter.
If passed, there will be a 6.5-cent tax on each cigarette until mid-2024, then an increase to 8 cents and then 10 cents.
Until mid-2024, manufacturers would have to charge a minimum of $7 per 20-cigarette pack, or $70 a carton. After that, it would increase to $7.50 and $75.
Revenue generated by the measure also would be invested in helping Colorado’s K-12 schools mitigate nearly $500 million in cuts caused by COVID-19, with $375 million in revenue and generating $2 billion over 10 years to provide universal preschool in the state.
Roughly $90 million would be set aside for the state’s rural school districts, which are disproportionately impacted by state budget cuts, according to Ritter.
That includes Aspen schools, which would get funding for the next three years. Funds are distributed on a per pupil basis; the Aspen School District has 1,646 students, according to the Colorado Children’s Campaign.
Some money also is earmarked for cessation programs for smoking and vaping.
A portion of the revenue in the first few years also would assist renters and homeowners hurt by the pandemic, as well as increased construction of affordable housing and health care programs.
The more complicated measure discussed and backed by council is Amendment B, which would repeal the Gallagher Amendment.
Gallagher limits property tax assessment rates so that residential property taxes equal 45% of the total share of state property taxes, and non-residential property taxes equal 55% of the total share of state property taxes.
To maintain the 45%-55% split between residential and commercial property within the total share of property taxes paid, the residential property tax rate is adjusted every two years, according to Tara Nelson, the city’s senior paralegal.
Property tax assessment rates are set in the state constitution to be 29% for commercial property.
When the Gallagher Amendment passed in 1982, the residential assessment rate was initially set at 21%. Over time, the residential property tax assessment rate has steadily declined as commercial property values have risen.
In 2019-20, the residential property tax assessment rate was 7.15%, according to Nelson. Residential property in Colorado represents about 80% of the assessed valuation of all property in the state.
Special districts and school districts are almost entirely dependent on property taxes to fund their operations. As a result, fire districts and recreation districts have seen the decline of property taxes under the Gallagher system, forcing the reduction in services and the increase in user fees, according to Nelson.
“Amendment B strengthens the primary revenue stream used by the Aspen School District, Colorado Mountain College and the Aspen Fire Protection District, further supporting services benefiting the citizens of our community,” she wrote to council in a memo. “If Amendment B passes, school districts will no longer see an erosion of local property tax from residential property, which is what is currently happening.”
Repealing the Gallagher Amendment will require further legislative action due to the Taxpayer Bill of Rights (TABOR). That is why the legislature adopted Senate Bill 20-223, which would take effect if voters approve the constitutional amendment.
Nelson said SB 223 would prohibit the legislature from changing assessment rates for property, thereby freezing the current rates of 7.15% for residential property and 29% for non-residential property in state statute.
Richards said the Gallagher legislation was brought forward by Sen. Jack Tate (R-Araphoe), one of the most conservative senators in the Assembly.
She explained that the state budget is often referred to as a “Gordian knot.”
“Gallagher is one of the strings in that knot … if you pull one thing something else gets tighter and this is an attempt to take that string out,” she said during last week’s council meeting.
She added that Gallagher is outdated and is hurting not only special districts and rural areas in the state but also businesses.
“You had a formula put in the state constitution 40 years ago that doesn’t work for today,” Richards said. “The worst part about Gallagher is that it averages the entire state so there is no difference between resort communities and Sawatch County, the poorest county in the state and the last thing you want in your state constitution is taking away representation of government from our elected leaders.”
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