Mill to be taxing for business

Gallagher burdens commercial property

FORT COLLINS — When voters go to the polls this November, they will decide the future of Poudre School District. They will also decide the business community’s share of the cost of building it.

If they say “yes” to Referendums 3A and 3B — and $185 million in bonds and mill levy overrides — PSD will build five new schools in the next 10 years, make a host of improvements to other facilities and fund staffing for schools both new and old.

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The majority of the money the district is seeking — $175 million — will come from bonds. The remaining $10 million will come from a mill levy override and, in turn, property taxes.

Businesses will carry most of that $10 million mill levy burden due to current state tax structure, namely the 1982 Gallagher Amendment.

Under Gallagher, residential property-tax assessment rates fluctuate so they make up only 45 percent of total state property taxes. For example, the 1993 residential property assessment rate was 14.43 percent; in 1999, it dropped to 9.74 percent. Meanwhile, business property-tax assessment rates remain flat at 29 percent.

The numbers mean business owners bear a tax share three times higher than homeowners carry.

The assessment rate outlined in Gallagher is applied to the actual value of property, and determines how much businesses and homeowners pay in property taxes. A business valued at $100,000 in 1999 had an assessed value of $29,000 while a $100,000 home had an assessed value of $9,740.

“Anytime there’s a proposed tax increase, it hits business harder,´ said Roland Mower, president of the Fort Collins Economic Development Corp.

The override equates to slightly more than 6 mills. In dollars, those 6 mills will mean $174 more in taxes for the owner of a $100,000 business and an additional $1,742 for $1 million-business owners. For residential property owners, the tax increase would equal $59 on a $100,000 home and $585 on a $1 million home.

PSD administrators say if they could balance the discrepancy in taxes, they would.

“We believe Gallagher is very, very repressive to businesses,´ said Ken Forrest, assistant superintendent of business services. “The state should analyze the entire tax structure and do what needs to be done to provide (tax) relief to businesses.”

This year, the state is analyzing its tax structure: A legislative commission on taxes convened in August, marking the first in-depth tax study since 1957.

While the commission does its work, Forrest, other PSD administrators and PSD supporters are hoping business people will look beyond the bottom line to the benefits of the mill levy override.

“Good school districts attract good employees,´ said PSD finance director Jim Sarchet.

Most business people are seeing the bigger picture, Forrest said. “They understand the value of having a good school district and having the facilities to maintain a good school district.”

Facilities are where the $175 million in bonds come into the equation. PSD has 37 modular buildings scattered around its campuses — the equivalent of three elementary schools PSD will build with the bond money.

The bond will also build a new junior high and a new high school. Two junior highs are above capacity now with a third nearing capacity. PSD’s three traditional high schools are expected to exceed 2,000 students by 2003, Forrest said.

The bonds won’t work without the mill levy override, though, Forrest said.

Bob Everitt, Everitt Companies CEO, said, “(The mill levy override) will certainly raise our taxes. If there’s one thing that most businesses agree on it’s that you need to have a good education system. We sure can’t have schools with more kids than they can logically have; if they don’t get a good education, it’s worse than the taxes.”

Forrest said, “If we build the buildings and don’t get the operating dollars ` we’re in big trouble. We would be like Loveland: We got a great building but we can’t open it.”

Loveland voters approved a $49 million bond initiative for Thompson School District in 1996. Those bonds built Mountain View High School. But when TSD went back to voters in 1998 for a $7.5 million mill levy override to operate the school, voters said “no.” The override eventually passed last fall and Mountain View opened Aug. 23.

Without that approval “we would have been looking at whether we could open Mountain View. …´ said Melissa Adams, TSD spokeswoman.

Larry Chisesi, co-chair of the Future is Now Political Action Committee support ing Referendums 3A and 3B, said the mill increase isn’t that much when put in the perspective of recent tax loads.

Mill levies are assigned for fiscal years, which means 1998 mill levy funds were collected in 1999 and so on.

“We’re returning to the mill levy set in (tax year) 1999,” Chisesi said. “The district dropped it by 5 mills (in the current tax year) because the base had grown. My feeling is if people could survive in 1999, they will survive in 2001.”

The 5-mill decrease was due to an increase in the county’s overall assessed valuation. Voters passed two PSD mill levy overrides in 1988 and 1996 for a total of almost $9 million. Those overrides are for fixed amounts, so as the assessed valuation of the county grows, the mill levy necessary to collect the $9 million shrinks.

The 54.250 mills PSD would collect if the current override passes would represent a 5.239 mill increase from last year, Forrest said, but only a .538 increase from two years ago.

PSD estimates the mill levy will hold steady at 54.250 through 2023 based on annual assessed valuation growth of 3 percent. But past growth in the county’s assessed valuation indicates the levy could drop year by year.