New Colorado initiatives, lots of pain, a big surprise, and lighter wallet!

Now that the election is over, cities/counties all over the state of Colorado have approved billions in new spending.  This will all be flowing through to your tax bill shortly.  The impacts will be felt by residential and commercial property owners.  There is one unintended consequence of all the initiatives that could hit your wallet the worst.

Below is a summary of some of the bigger initiatives that were passed throughout the state.  The one initiative that could surprise you the most and  hit your wallet the hardest is the green roof initiative.  Many houses and condos are part of Homeowners associations that have large roofs; for example if a homeowners association had an indoor pool/rec center for the neighborhood and needed to replace the roof.  The current dues have not factored in the huge increase in costs.  For example, on a 30k foot roof, the normal price of a traditional flat membrane roof is about 5/ft.  A new green roof that is now required would be 35/ft; this is an increase of 900k that will be passed on to the homeowners via a special assessment (or to commercial tenants via higher rents).  This will happen to condo associations and commercial property owners around the city over the next several years.  Most property owners don’t have an extra 15k laying around for a special roof assessment for a condo association and many tenants are unable to absorb large increases (especially on the retail side as margins are already thin).

What should you do?

When you are looking to buy a commercial or residential property in Denver county, ensure you know the current condition of the roof and factor in the large increases in costs for replacement/upgrading the roof.

Watch your tax bill?

With all the initiatives your tax bill will go up substantially in many cases due to not only the rise in values, but also the increased costs from the various initiatives.  Below is a quick summary of some of the more notable changes from the last election cycle that will impact real estate.

Denver:

1. 1 Billion bond initiative: First, If you live in Denver, hang on to your saddle!  Two major ballot items were approved.  First, voters approved a 1-billion-dollar bond package.  Ironically this was advertised as “not increasing taxes”.  On the surface this is correct, but as property values increased taxes increased.  Under the gallager and Tabor amendments, government spending is capped.  The bond initiatives basically increased the mill levy (or stopped the mill levy from dropping) therefore increasing the revenue for the city.  Here is an interesting article on Tabor (Colorado Department of Education)
2. Green Roof initiative:   It requires green roofs on all new buildings along with remodels.  On the surface it sounds like an intuitive initiative; a green roof sounds nice!  The devil is in the details.  An average green roof costs 20-35/ft as opposed to a conventional roof that costs under 5/ft.  Assume you had a 100k foot building you were constructing for Walmart.  The roof originally costs 500k, under the new plan the roof would now cost 2m.  Somebody is going to pay for the increase in costs.  Rents will no doubt go up to at least break even on the increased costs

Brighton:

1. Ballot 301: require city officials to consider public health impacts when approving oil/gas drilling: Basically this initiative gives the city the broad latitude in setbacks and other measures that could impact health.  Although this is destined for litigation in the courts, its passage was interesting since the oil and gas spent considerable money trying to defeat it.

Grand Junction:

1. Ballot 3a &B: This totaled 126 million (mill and bond overrides) for a new school and various other educational needs

Fort Collins:

1. Ballot 2B: Allows the city of Fort Collins to build out its own high speed internet and create a telecommunication utility (Coloradoan); the goal is to provide high speed service of up to 1 gig per second throughout he city.

Crested Butte:

1. Ballot 2A Vacation Rental Tax: This would levy an additional 5% tax on vacation rental which would be allocated towards affordable housing initiatives. The margin this won is astounding.  80% voted in favor of this tax.  This would bring the total tax on vacation rentals to 18.4%!  This is a pretty high tax to say the least.

El Paso County

1. Ballot 1A: This would allow I 25 to be widened between castle rock and monument, paid for in part by property owners.  It essentially kept taxes the same so that excess wasn’t refunded to property owners due to Tabor

All in all, Colorado was in a spending mood approving billions in new spending initiatives.  I was surprised at how easily many of these initiatives passed.  It reflects how well the Colorado economy has improved over the last 10 years.  Many of the increases were for schools which were in dire need of funding.  Unfortunately, these new initiatives will start flowing through to your mailbox in the form of tax bills in the coming year.  The higher taxes will have a byproduct of making housing and commercial real estate even more expensive in many areas.

Resources:

• https://www.denverpost.com/2017/12/31/denver-green-roof-law/

Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.

Fairview is the recognized leader in Colorado Hard Money and Colorado private lending focusing on residential investment properties and commercial properties  both in Denver and throughout the state. We are the Colorado experts having closed thousands of loans throughout the state.

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