Colorado’s property tax system is in the balance as the state’s Supreme Court weighs the challenges of COVID-19 | Courts

On Wednesday, Colorado Supreme Court justices spent three hours pondering a pair of questions that could open the door to widespread, perhaps even perpetual, statewide property reassessments: COVID-19 and health orders? accompanying public policy in 2020 constitute “unusual conditions” that require a reexamination of property values?

And those reassessments had to occur outside of the schedule apparently set in state law?

Court members were reluctant during oral arguments to stray from a property tax methodology that, by design, is not based on real-time changes in land and building values.

“Isn’t that how the whole scheme works? That you’re always paying your property taxes on value that’s falling behind?” asked Judge Melissa Hart. “We are always looking back.”

Late last year, and at the unusual urging of the state Court of Appeals, the Supreme Court took up four cases directly from the trial courts in which dozens of business owners sought county assessors to reassess their properties by 2020.

In total, 11 virtually identical lawsuits were filed across Colorado.

Under state law, January 1 is the assessment date for property values ​​each year. Assessments are conducted in two-year cycles, based on data from January 1 of an odd year to June 30 of an even year. Appraisers use the information to establish the value of the property on January 1 of the following odd year for the next cycle.

However, there is an exception for “unusual conditions” that occur between appraisals.

Appraisers must re-evaluate properties in the event of remodeling, site improvements, or fire. Unusual conditions also include “detrimental acts of nature” and “any new regulations that restrict or increase land use.”

The owners argued that COVID-19 was a detrimental act of nature and that the public health orders that closed or limited operations at many businesses in 2020 were regulations that restricted the use of their property. They sought to trigger a revaluation and reduction of their property values ​​by 2020.

“Regulations that completely shut down a business are obviously regulations that prohibit you, at least temporarily, from operating it for any purpose. Therefore, you cannot use the land for any purpose,” argued attorney James P. Bick Jr. to the Supreme Court. “I think that qualifies as a regulation that restricts the use of the land that the business is on.”

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The trial judges reached various conclusions about whether unusual conditions existed and whether a reassessment could even occur for 2020 after January 1.

The parties acknowledged before the Supreme Court that if the judges ruled against the property owners in either matter, the lawsuits would be doomed.

Lawyers for the counties argued that events in 2020 that affected property values ​​would be properly accounted for with the next property tax cycle beginning in 2021, and local governments need stability in their budgets around the deadline. from January 1.

Along those lines, Hart read the timeline of various COVID-19 health orders in 2020 to illustrate how many potential reassessments could occur if the January 1 cap were not applied.

“March 25 was the Larimer County stay-at-home order. On May 18, Larimer got a variance and relaxed the mask mandates and opened up again,” he said. “On March 25, they would have needed a reassessment, and on May 18, they would have needed a property value increase.”

Deputy County Attorney David Ayraud agreed that the implications were untenable for local governments.

“A 120-room hotel, if they remodel at a rate of two to three days per room, the appraiser would have to go out every two or three days for the next 240 to 360 days and issue new appraisals,” he said.

In October, the Court of Appeals decided the first of 11 cases arising out of Weld County. While the court declined to say whether COVID-19 and the public health orders were unusual conditions, it did agree that evaluators must consider unusual conditions that occur after January 1 of each year. Therefore, the owners could request a reassessment in 2020 based on developments related to the pandemic.

Weighing the implications of a mid-cycle shift in property values, some court members turned to another recent disruptive event: the Marshall Fire in Boulder County.

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“My house is destroyed on December 30,” Judge Maria E. Berkenkotter hypothetically told Ayraud. “Judge Hart’s house is ransacked three days later, let’s say January 2. Under her interpretation of the statute…that couldn’t count for two more years, correct?”

Hart took the analogy in a different direction. Suppose, he said, that the Marshall fire did not affect a dry cleaner but caused affected owners to stop coming to the store, which would negatively affect the business.

Was that a detrimental act of nature that affected the use of the land?

“I think that might represent a closer call than we have in this case,” said attorney for the plaintiffs, Matthew A. Simonsen.

“It’s a detrimental act of nature without any debate,” Hart chimed in. “Why isn’t it exactly the same or actually a stronger case” than COVID-19?

The judges also questioned how severe a government regulation must be to qualify as an unusual condition. They asked whether, under the plaintiffs’ interpretation of the law, a health inspector closing a restaurant for code violations would entitle the restaurant owner to a property tax reassessment.

“I think, technically, yes,” Bick replied.

Berkenkotter noted that some of the landlords in the litigation did not, to the letter, appear to have suffered from the public health orders. He noted that the plaintiffs included at least one funeral home, an essential business that was allowed to operate during the early days of the pandemic.

Ultimately, the law did not provide a definitive answer as to whether a deadly virus that infects humans also falls into the category of conditions that restrict the use of property.

“Zoning clearly affects land use. An impact on a person? Not so clear,” Judge Richard L. Gabriel said.

Citing a famous line from a US Supreme Court case on obscenity, Justice William W. Hood III reflected that it seemed difficult to define an unusual condition affecting land.

“Sounds like proof of porn right now. You know it when you see it, right?”

Appeals arose from Larimer, Douglas, Jefferson and Broomfield counties.

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