Property Tax Bills Force Denver Office Property Owners to Shave Hundreds of Millions Off Building Valuations
Despite the clear need to address the skyrocketing property valuations in Colorado, the state legislature has chosen not to take action, leaving property owners in a dire situation. This includes not only homeowners but also business property owners, many of whom have been struggling since the onset of the COVID-19 pandemic.
The post-pandemic surge in property prices has only exacerbated years of continuous appreciation.
In Denver alone, assessed median home values have increased by a staggering 33% in just two years, leading thousands of individuals to challenge the assessed value of their properties in an attempt to mitigate their tax bills.
Office property owners in Denver have also taken part in these challenges, despite the fact that the increase in office property values has been only half as much as that seen by homeowners since 2021. For these owners, valuation challenges have become a regular part of their business, but this tax cycle was particularly high-stakes, with millions of dollars hanging in the balance.
Many office owners were successful in their challenges and managed to reduce their tax bills by a significant amount. Collectively, they were able to slash $223 million off the initial valuations estimated by Denver tax assessors.
The timing of last year's tax assessment valuations compounded the issue.
The assessments were based on a mid-2022 date required by state law, which meant that property owners began receiving notices of higher tax bills despite experiencing a significant decline in market values during the preceding months.
Last year, approximately 25,000 owners of residential and commercial properties across Denver challenged their tax assessments. Many of these challenges were aimed at rectifying simple mistakes or preserving the ability to appeal later.
Denver Assessor Keith Erffmeyer revealed that over 4,100 assessments were subsequently moved into the appeal phase, with the majority of them being commercial properties, according to the Denver Business Journal. The success rate for challenges in this cycle was around 43% for commercial property owners. These owners often hire lawyers, gather specialized data, and utilize their experience in assessment challenges as part of their regular business operations.
To take the challenge beyond the assessor's staff level, property owners must present their case to the Board of Equalization.
Data from the hearings concluded in November shows that 450 Denver office property owners contested their assessments, with 82 of them succeeding in their appeals. These challenges resulted in a collective reduction of $223 million in assessed values, translating to an average annual property tax bill reduction of approximately $52,789 per property.
While the reduction in valuations may seem significant, Denver Assessor Keith Erffmeyer claims that it will not have a noticeable effect on local government revenue. He argues that the reductions will be offset by the rate of property appreciation, adjustments to mill levies, and other factors.
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It is crucial to recognize the importance of property tax revenue, which contributes to funding schools, libraries, and municipal government functions. In 2023, property tax revenue accounted for 11% of the city and county's budget, making it the second-largest source of funding after sales and use taxes, which generate 57% of Denver's funding.
Despite the reassurances from the assessor's office, the failure of the state legislature to address the issue of out-of-control property valuations is deeply concerning. It is a missed opportunity to provide much-needed relief to property owners, particularly those who have been severely impacted by the economic consequences of the pandemic.