November 2023
How commercial property taxes impact commercial property owners and Colorado's economy: 7,520 fewer jobs, $177 million less GDP, $223 million less household income
Steven L. Byers is a senior economist at the Common Sense Institute.
Common Sense Institute is a nonpartisan research institute dedicated to protecting and promoting Colorado's economy. CSI is at the forefront of important debates about the future of free enterprise and seeks to influence the issues that matter most to Coloradans. CSI's mission is to examine the financial impacts of policies, initiatives and bills to help Coloradans be educated and informed about the issues that affect their lives. CSI uses rigorous research methodologies and dynamic modeling to assess the potential impacts of these measures on the economy and individual opportunity.
CSI is committed to independent, thorough research examining the impact of policies, initiatives, and bills so that Coloradans are educated and informed about the issues that affect their lives. CSI's commitment to institutional independence is rooted in the individual independence of its researchers, economists, and fellows. At the core of CSI's mission is a belief in the power of the free enterprise system. Our work explores ideas that protect and promote jobs and the economy, and the CSI team and fellows participate in this pursuit with academic freedom. Our team's work is based on data-driven research and evidence. Fellows' views and opinions do not reflect those of CSI as an institution. CSI operates independently of any political party and does not take positions.
Colorado Commercial Property Values
Based on county assessor surveys of initial values, the estimated average growth rate for commercial property values in 2023 is 26%. County growth rates range from a low of 0% to a high of 62%. Commercial property assessments by county are listed in the table at the end of this document. This growth rate represents the largest annual growth rate in both commercial property values and property taxes in the state's annual report records going back to 1993. Using the county assessor estimated growth rates, as shown in the following graph, Colorado's total commercial property value is estimated to be $187 billion in 2023. If commercial property total values grew at a long-term two-year rate of 11.6%, the total value would be $157 billion in 2023.
In the graph above, the black line shows what the total value of commercial property in Colorado would have been if it had grown based on the U.S. Commercial Property Price Index. The change in value from 2022 to 2023 is significantly different from the total value based on both county assessor estimates and long-term biennial growth rates. This highlights how the change in commercial property values in Colorado is unusual in every respect.
The difference between the 2023 gross value of commercial property as assessed by county assessors and the long-term biennial gross value of commercial property is $30 billion. While rents are primarily market driven, commercial landlords typically pass on property tax changes to their tenants. However, historically high vacancy rates make it difficult to recoup increased costs through rent increases. Rent increases are either borne by the landlord or borne by the remaining tenants. Regardless of who pays the property tax increase, it ultimately leads to higher prices for goods and services as businesses seek to maintain profit margins, impacting consumers and economic growth.
Small businesses are expected to be severely affected by these commercial property tax increases, with a recent NFIB survey showing that 63% of small business owners consider property taxes to be a very/moderate burden.[i]
Estimated Increase in Commercial Property Taxes
Using each county’s current mill tax rates and estimated commercial property values, estimated tax revenues from commercial property are $4.7 billion based on the county assessors’ total commercial property values and $3.9 billion based on estimated total property values using historical biennial growth rates. The difference between the two estimates is $776 million.
Estimated Increase in Property Tax Revenues Actual 2023 growth rate for commercial real estate is 26% Long-term compound annual growth rate = 11.6% difference from 2022 assessed value
(Actual report from the state)
$43,082,912,380 N/AN/A 2022 Total Value Estimated $148,561,766,828 N/AN/A 2023 Total Value Estimated $187,191,114,878 $156,881,225,770 $30,309,889,108 2023 Assessed Value Estimated $52,226,321,051 $43,769,861,990 $8,456,459,061 2023 Tax Revenue Actual – Estimated $4,721,779,258 $3,945,871,414 $775,907,844
The economic impact of a historically unusual commercial property tax increase on Colorado's economy
Considering the $776 million difference in commercial property tax revenues to be “anomalous” when compared to historical changes in commercial property tax revenues in Colorado and the United States, it is expected to have an impact on Colorado’s economy if vacancy rates are historically high and rents, which are typically tied to the Consumer Price Index, fluctuate significantly due to increases in commercial property assessments.
CSI uses REMI, a dynamic general equilibrium model of the Colorado economy, to estimate the impact of an abnormal commercial property tax increase of $776 million on employment, GDP, and personal income per household. The results are shown in the following table: The commercial property tax increase would result in the loss of 7,520 jobs, a $177 million decrease in GDP, and a $223 million decrease in personal income.
Economic impact of abnormal commercial property tax increases on the Colorado economy Abnormal property tax increase = $775,907,844 Change in employment -7,520 Change in GDP -$177M Change in personal income -$533M Change in personal income per household -$223
2023 Commercial Property Assessments by County 2022 Estimated Total Value 2023 Growth Rate From County Assessor Total Value Growth Data 2023 Total Value 30-Year CAGR = 11.6% Used Adams $13,357,339,345 43% $19,095,652,327 $14,105,350,348 Alamosa $200,777,545 4% $208,748,413 $212,021,087 Arapahoe $17,822,897,693 22% $21,743,935,186 $18,820,979,964 Archuleta $199,810,690 14% $227,784,186$211,000,088 Baca $24,981,400 15% $28,728,610 $26,380,358 Bent $71,298,069 0% $71,298,069 $75,290,761 Boulder $9,837,955,914 41% $13,871,517,838 $10,388,881,445 Bloomfield $2,595,495,517 12% $2,906,954,979 $2,740,843,266 Chaffee $501,627,793 21% $606,969,630 $529,718,950 Cheyenne$19,937,014 15% $22,977,408 $21,053,487 Clear Creek $146,172,034 13% $164,589,711 $154,357,668 Conejos $29,200,324 26% $36,929,650 $30,835,542 Costilla $25,687,986 4% $26,715,506 $27,126,513 Crowley $103,547,914 0% $103,547,914 $109,346,597 Custer $33,640,724 30% $43,732,941 $35,524,605 Delta$220,480,793 15% $253,552,912 $232,827,718 Denver $40,324,111,672 17% $47,179,210,657 $42,582,261,926 Dolores $13,862,703 57% $21,778,307 $14,639,015 Douglas $7,651,850,345 19% $9,105,701,910 $8,080,353,964 Eagle $2,893,894,103 40% $4,051,451,745 $3,055,952,173El Paso $10,955,484,414 25% $13,694,355,517 $11,568,991,541 Elbert $101,734,241 35% $137,341,226 $107,431,359 Fremont $346,852,172 20% $416,222,607 $366,275,894 Garfield $1,276,983,483 30% $1,660,078,528 $1,348,494,558 Gilpin $1,018,867,345 22% $1,247,093,630 $1,075,923,916 Grand $418,583,931 45% $606,946,700 $442,024,631 Gunnison $506,714,448 7% $542,184,460 $535,090,457 Hinsdale $32,019,069 14% $36,501,739 $33,812,137 Hufano $73,625,766 32% $97,186,010 $77,748,808 Jackson $35,064,583 1% $35,415,229 $37,028,199 Jefferson $11,535,755,976 20% $13,842,907,171$12,181,758,311 Kiowa $16,718,586 1% $16,904,163 $17,654,827 Kit Carson $145,925,614 31% $191,162,554 $154,097,448 La Plata $1,454,635,759 20% $1,745,562,910 $1,536,095,361 Lake $52,911,507 55% $81,748,278 $55,874,551 Larimar $7,178,306,628 41% $10,121,412,345 $7,580,291,799 Las Animas $139,400,172 2% $142,188,176 $147,206,582 Lincoln $67,119,138 18% $79,200,583 $70,877,810 Logan $174,569,172 20% $209,483,007 $184,345,046 Mesa $2,049,898,586 42% $2,910,855,992 $2,164,692,907 Mineral $45,385,190 15% $52,192,968 $47,926,760 Moffat $138,909,721 9% $151,689,415 $146,688,665 Montezuma $237,256,724 25% $296,570,905 $250,543,101 Montrose $633,552,103 32% $836,288,777 $669,031,021 Morgan $353,880,241 31% $463,583,116 $373,697,535 Otero $102,699,228 9% $111,428,662 $108,450,384 Ouray $123,796,862 56% $193,123,105 $130,729,486 Park $127,916,693 23% $157,337,533 $135,080,028 Phillips $70,743,103 3% $73,148,369 $74,704,717 Pitkin $2,949,522,724 27% $3,745,893,860 $3,114,695,997 Prowers $95,537,207 26% $120,567,955 $100,887,290 Pueblo $1,192,068,417 28% $1,519,887,232 $1,258,824,249 Rio Blanco $72,327,793 12% $81,007,128 $76,378,150 Rio Grande $191,866,721 19% $228,321,398 $202,611,257 Root $1,032,507,207 43% $1,472,355,277 $1,090,327,610 Saguache $49,145,590 35% $66,346,546 $51,897,743 San Juan $43,012,252 62% $69,679,848 $45,420,938 San Miguel $523,696,276 47% $769,519,308 $553,023,267 Sedgwick $18,972,755 5% $19,921,393 $20,035,229 Summit $1,778,190,148 29% $2,285,685,617 $1,877,768,797 Teller $310,849,931 32% $410,321,909 $328,257,527 Washington $18,860,703 53% $28,856,876 $19,916,903 Weld $4,668,466,379 35% $6,302,429,612 $4,929,900,497 Yuma $126,862,690 17% $148,429,347 $133,967,000 TOTAL:$148,561,766,828 26% $187,191,114,878 $156,881,225,770
[i] https://assets.nfib.com/nfibcom/NFIB-Tax-Survey-Full-Report.pdf