Credit rating agency Moody’s Corp. (NYSE: MCO) gave its thumbs-up to Colorado voters choosing to repeal the Gallagher Amendment in Tuesday’s election, saying it would help stabilize property tax revenues in the following fiscal year.
The Gallagher Amendment was placed in the Colorado Constitution in 1982 and created a ratio where no more than 45% of all property taxes collected would be paid by residential homeowners. It also locked the commercial property assessment rate at 29% of a property’s market value.
In a wrap-up of local government votes across the country, Moody’s analyst Grayson Nichols said the repeal will allow local governments to avoid dropping residential assessment rates further in fiscal year 2022.
That may become particularly useful if the commercial sector loses market valuation due to pandemic-related closures of restaurants, hotels and retailers.
The report also said the repeal benefits the creditworthiness of local school districts, which saw state aid decline as legislators hurried to fill a $3 billion revenue shortfall in Colorado’s budget.
Those districts likely would have seen $247 million in revenue shortfalls in fiscal year 2022 if residential property rates fell again as expected.
“Both actions pose challenges for the K-12 school sector, but the Gallagher repeal shields districts from having to rely on the state to make up for lost funding as the state has historically funded schools at a level lower than prescribed,” the report said.
Moody’s did not change Colorado’s overall credit rating of Aa1, the second-highest within its scale.
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