Property tax for commercial properties likely to increase substantially come January 2015. According to Denver County Assessor’s office and their most resent reassessment, commercial properties saw an average of 18% increase in their assessed values. Multifamily properties saw the highest increase in property values, with an average of 33%. State law requires the county assessors to reassess properties in their counties every two years and the reassessment period for the 2015 valuation was from July 2012 through June 2014. The reason commercial property owners are concerned, is that commercial properties are assessed at 29% of actual value, while residential properties are assessed at 7.96% of actual value which is the results of the Gallagher amendment that passed in 1982. Since commercial properties bear the brunt of property taxes, many companies are concerned with the substantial property tax increase, especially companies that are located in the more expensive parts of the metro area. In most cases, tenant’s leases are triple-net, which usually means tenants end up paying the property tax bill.
In addition to the assessed value of a property, the Denver County Assessor’s office uses mill levies to determine how much an owner has to pay in property taxes. Mill levies are set by a number of entities, including city councils, school districts and special districts. One mill is the equivalent to $1 in property tax for every $1000 of assessed value. The currently mill levy for Denver County is 83 mills which is primarily derived by a formula. The 83 mills that is charged, is distributed between the City, Denver Public Schools and other taxing entities such as sanitation and water districts. About 33 mills is allocated to the city and the rest is distributed between Denver Public Schools and other taxing entities.
In addition to the assessed mill levy set by the City, some parts of Denver are also part of special districts, which can add their own mill levies to properties within the boundaries of those districts. For example, Central Platte Valley area near Denver Union Station has assessed an additional 49 mills to property taxes in 2014 according to the Denver County Assessor’s office. Although special districts can accelerate growth and development, the additional tax burden can play an integral part in a company’s decision of whether to relocate within a special district. Those levies, including those added by the school districts, are not set by the City.
Other neighborhoods are also creating new special districts, e.g. Denver’s River North neighborhood, which is experiencing explosive growth. In November, the voters approved the creation of both a business improvement district (BID) and a general improvement district (GID) to infrastructure, advocacy and affordability.
The good news (silver lining) if there is one, is that the voters in 2012 passed a measure that governs the way the city’s portion of the mill levy is set. The 2012 measure places a cap to protect property owners in years in which values grow substantially and limits the city’s revenues from property tax collections which can’t exceed more than 6%. The city is trying to lessen the increase in property taxes triggered by higher valuation by offering credit to lower tax rates. Property owners currently are getting a 2.2 mills credit, but the city has plans to increase the credit by approximately 3.4 mill, totaling 5.6 mills which helps offset the increased taxes.