Basalt officials say town likely violated property tax restrictions

This graph from the town of Basalt shows in the tan line how the town mill levy rate has flucuated since 1994, trending down until 2010, then generally climbing. The increases probably required voter approval, town officials said Thursday. The blue line is a mill levy rate established in 1994 that could have served as the annual standard.
Courtesy image

Basalt officials said Thursday the town government appears to be facing a taxing problem that might require an election in November to try to fix it.

The town government “may have” violated the Taxpayer Bill of Rights, also known as TABOR, by increasing property tax mill levies without prior voter approval, Town Manager Ryan Mahoney told an audience of about 30 people at a hastily called community meeting. Increases occurred in some but not all years between 1994 and 2018.

Mahoney said the town may have collected as much as $2 million more than TABOR allowed. If an election is held but voters don’t allow the town to keep those funds, the government may have to refund the money.

“I am hoping we would not come to that conclusion,” Mahoney said.

TABOR was approved in 1992 as an amendment to the state Constitution. It restricts government revenue increases and prevents property tax increases without voter approval. Numerous Colorado taxing districts successfully appealed to voters to “de-Bruce” or limit the restrictions of TABOR. Basalt voters granted that permission in April 1994.

At that time, the town’s property tax levy was 6.151 mills.

“What the town could have done then was set it and forget it,” Town Attorney Jeff Conklin said.

But it didn’t. The various town councils and staffs since 1994 have adjusted the mill levy annually depending on the needs of the next year’s budget. A trend line released by the town Thursday showed that mill levies generally decreased from 1994 until they bottomed out in 2010 at 2.56 mills. As real estate values climbed, a lower rate was sufficient to generate the needed revenue.

But the mill levy has generally increased since 2010. Mahoney said it appears that’s a violation of TABOR.

“Once you lower it, it takes it down to a new norm,” he said.

The town’s preliminary interpretation is those mill levies shouldn’t have been increased without voter approval.

Town staffers discovered the problem during routine work on the 2019 budget, when there were fresh eyes on the process. Mahoney was hired in June 2017. Conklin and finance director Christy Hamrick were hired in 2018.

Even though they discovered the potential problem, the issue was repeated with the current mill levy rate. The latest rate for 2018 property taxes for the general fund operational budget is 5.957 mills. The rate for 2017 taxes was 5.792 mills.

“By the time we discovered the issue and were able to discuss with Council, it was too far along in the process to make the change,” Mahoney said. “We were still researching the issue and simply did not have all the facts at that time.”

The town has since consulted with a leading tax attorney in the state and an accountant, according to Mahoney. They are helping determine the best way forward to remedy the problem, he said.

Another community meeting is planned Feb. 6 at 5:30 p.m. in Town Hall to provide an update.

Basalt Mayor Jacque Whitsitt said at the meeting that she credits the current staff for catching an issue that current and prior mayors, council members and staffs missed. The town has also hired outside auditors to go over its budgets, as required by state law.

“We have paid auditors every year to make sure nothing has fallen through the cracks,” she said.

Former Mayor Leroy Duroux, who served from April 2004 to April 2012, said the council and staff adjusted the property tax mill levy to what was needed rather than maximizing what was collected. Without those adjustments, taxes would have soared along with property values.

“We were being fiscally responsible,” he said after the meeting. “They would have been paying tons of money.”