Property Taxes Rising Too Fast? A New Bill Aims to Cap Local Revenue Growth at 4%

The Bottom Line

Property values in Colorado have skyrocketed, which naturally drives up how much tax revenue local governments pull in. This bill aims to keep more money in your pocket by temporarily dropping the state's statutory limits on local government property tax revenue growth down to a flat 4% through 2032. It's a move that would slow your tax bill's upward climb, but it will also force local cities, counties, and school districts to tighten their operating budgets.

What This Bill Actually Does

Right now, Colorado uses three different statutory speed limits to control how fast local governments can grow their property tax revenues. First, the oldest one is the annual levy law, which generally caps revenue growth at 5.5% per year for most special districts and non-home-rule municipalities. Second, for local governments that have previously received voter permission to "waive" that old limit, there is a newer cap of 10.5% over a two-year reassessment cycle (effectively 5.25% per year). Finally, school districts operate under their own statewide limit, which caps their revenue growth at 12% over that same two-year cycle (6% per year).

House Bill 26-1209 proposes putting all three of these growth caps on a six-year diet. Starting with the 2027 property tax year and running through 2032, the bill temporarily shrinks all three of these growth rate limits down to a flat 4% per year. For the caps that are calculated over a two-year property reassessment cycle, that means the limit drops from 10.5% or 12% down to just 8% total for the cycle.

So, what happens if property values in a town surge by 20% and blow right past that 4% cap? The local government isn't allowed to just pocket the windfall. To comply with the law, they have to figure out how to give the excess back or avoid collecting it altogether. They typically accomplish this through temporary mill levy reductions or property tax credits. Essentially, this legislation dictates that local taxing entities cannot automatically ride the wave of a hot real estate market to massive revenue increases—they have to intentionally pump the brakes unless they go directly to voters to ask for an exception.

What It Means for You

For the average Colorado homeowner, this bill is all about trying to cushion the blow when property reassessments roll around. Over the last few years, we have all opened those mailers from the county assessor and experienced a mild heart attack. Because property tax formulas are tied to home values, when your home's assessed value spikes, the taxes you owe usually follow suit. By lowering the revenue growth cap to 4% for property tax years 2027 through 2032, this bill forces local governments to lower their actual tax rates when property values skyrocket. By artificially restricting how big the government's revenue pie can grow, you're inherently keeping your individual slice of the tax burden smaller.

But there is a flip side to consider when it comes to the community services you and your family rely on every day. Local governments depend heavily on property tax revenue to fund everything from fire departments and road maintenance to local parks, libraries, and public schools. With inflation making everything from asphalt to fire trucks significantly more expensive, a tighter 4% revenue cap means your local city or special district will likely have to make hard choices about what they can afford to maintain or upgrade.

If this framework takes effect, the most noticeable impact on your household might not just be the dollar amount on your tax bill—it could also be a surge in local ballot measures. When local governments hit these caps but genuinely need more money for specific infrastructure projects, their only recourse is to ask you, the taxpayer, for permission to keep the excess funds. You can expect your election ballots to feature a lot more local questions asking if you are willing to waive the 4% limit to fund a new school roof, hire more sheriff's deputies, or expand the local sanitation district.

What It Means for Your Business

If you own commercial property, run a business that owns significant equipment (which is subject to business personal property tax), or lease a retail space on a triple-net basis, property tax volatility is a massive headache for your bottom line. Because commercial property in Colorado is assessed at a noticeably higher rate than residential property, commercial owners bear a heavy brunt of valuation spikes. Dropping the revenue growth cap to 4% gives your business a much more predictable, flattened trajectory for tax liabilities starting in 2027. When commercial property values surge, this tighter cap acts as an automatic shock absorber, triggering local tax rate reductions that help protect your operating budget from unexpected tax spikes.

However, if you are a real estate developer, a general contractor, or a business that relies heavily on local government contracts, you need to view this through a distinctly different lens. Local municipalities, special districts, and school districts are massive economic engines that fund infrastructure, new public construction, and local facility upgrades. By squeezing their allowable revenue growth to 4%, this bill could force local governments to delay capital projects, pause heavy equipment upgrades, or scale back on public-private partnerships. If your firm's revenue pipeline relies on public sector spending, a tighter local government budget directly impacts your future contracts.

It is also highly worth noting how this plays into new development. The legislation retains existing rules that specifically exclude revenues generated from new construction and annexations from the growth limit calculation. This is a critical detail. It means local governments can still capture the full, new tax value of fresh development without it counting against their 4% growth limit. If you are developing raw land or building new commercial spaces, cities will still be highly incentivized to approve, zone, and annex your projects, as new development remains one of their few remaining avenues for unrestricted revenue growth.

Follow the Money

The most immediate financial impact of this bill falls squarely on local governments. For the 2027 property tax year alone, the state's nonpartisan fiscal analysts project that dropping the annual levy law limit from 5.5% to 4% will cut at least $10.6 million out of local government revenue growth statewide. Because property values historically grow much faster than 4% a year, that revenue gap will compound dramatically through 2032. This represents a zero-sum game: every dollar shaved off local government revenue limits is a dollar of savings kept in taxpayers' pockets.

At the state government level, the administrative costs to implement this are relatively minor—the bill requires about $86,413 in the 2026-27 budget to help the Department of Local Affairs update software and assist local governments in navigating the new math. However, a massive hidden cost lies in public education funding. Under Colorado's school finance formula, if local property taxes don't generate enough revenue to meet a school district's baseline funding requirements, the state is legally required to step in and pay the difference. If this tighter 4% cap forces school districts to lower their mill levies, the state's General Fund will eventually be on the hook to backfill millions of dollars in lost local revenue to keep public schools fully funded.

Where This Bill Stands

HB26-1209 is currently Dead. The latest official action came on 03/10/2026: House Committee on Transportation, Housing & Local Government Postpone Indefinitely.

That means the bill is no longer advancing this session. In practice, measures that are postponed indefinitely or otherwise declared lost generally stay dead unless they are reintroduced in a future session.