An unintended consequence of growth in our community is the continued reduction of funding for our local fire departments. Even as new homes and businesses are coming on line, a provision in the Colorado Constitution known as the Gallagher Amendment wreaks havoc on the funding base to which the district’s mill levy applies.
The Gallagher Amendment was passed by Colorado voters in 1982. By passing, it changed the ways homes were appraised and it set limits on property tax collection at 45% for residential and 55% for commercial property. Commercial property is taxed at a fixed rate of 29%. This creates a fluctuation in residential tax assessment rates. When Gallagher was instituted in the early 1980s, the assessment rate was 21%. Over time, to maintain the 45/55 split, the amount has been reduced to where it is today, at 7.2%. This is the amount that residents pay taxes on, and it is also the amount a mill levy applies to. Within East Grand Fire Protection District No. 4’s (EGFD) borders, 89% of the property is residential, which further impacts the financial challenges they are facing today.
According to EGFD Chief Todd Holzwarth, “A Gallagher repeal/replacement could possibly cause a reduction in non-residential assessments, leading to decreased property taxes for businesses, but that redistribution would probably cause an increase in residential assessments.” Chief Holzwarth added, “Another possibility would be to better classify properties by their use, with many residential properties being used for commercial activities not being assessed that way.”
The mill levy is the primary source of funding for EGFD and, even with all the new development going on, the funding is not keeping up with the rate of inflation, population growth and emergency call volume. In 2009, the assessment rate was at 8.91% and the district received nearly $2 million in revenues. In 2019, the district expects to receive about $1,686,241. In 2020, when new property valuations take effect, the tax assessment rate and level of impact is not yet known.
Chief Holzwarth said EGFD has lost approximately 23%, or almost $500,000 per year since the economic downturn of 2008. “We are getting by at this point by funding capital purchases primarily from reserves. We have been keeping expenses matching revenues, which effectively means no growth, despite the growth occurring in the District. Regaining the lost 23% and being able to slowly grow and keep up with the additional calls for service would get us back in a much better place and allow construction, truck replacement and gradual staffing additions to continue.”
EGFD has submitted a ballot measure placemark to the county to participate in this fall’s coordinated election. The District is not seeking to change the mill levy rate from 6.116, but instead requesting a revenue stabilization measure. “Our intent is to reduce the impact of Gallagher-induced Residential Assessment Rate (RAR) reductions by “de-Gallagherising”,” said Chief Holzwarth. “I do not believe we can “fix” the RAR. We are not proposing to change the Mill Levy, but are looking to avoid drastic drops from future RAR changes and slowly grow when property assessment levels increase. The measure would ‘change’ our mill levy by being able to float it to allow the District to maintain our revenue stream.”
EGFD also receives revenue from new construction impact fees. Currently, new commercial construction pays a one-time impact fee of $.268 per square foot (sf). New residential construction pays a one-time impact fee of $483. Revenues from impact fees can only be used for capital expenditures such as the purchase of additional fire apparatus and equipment and construction of new facilities, like the planned South Station, which is currently on hold. At the end of 2018, the fund balance was at $327,399.
The District is currently in the process of conducting a financial analysis of their funding requirements. Completed every five years, the results of the Nexus study, conducted by Economic Planning Systems (EPS), will provide guidance to the District on where impact fees should be set. Chief Holzwarth said the study would be completed in the next few months. If warranted, EGFD would seek review and approval of any changes in impact fees from the towns of Winter Park and Fraser, along with Grand County.
Who EGFD serves
The District covers eastern Grand County to the top of Red Dirt Hill. There are currently 3 stations located within the district: District Headquarters in Fraser, Tabernash and Red Dirt Hill. Volunteer firefighters reside within each station maintaining fire apparatus, buildings and responding to calls in exchange for housing.
There are approximately 4,500 year-round residents in the District, with frequent surges in seasonal population topping 50,000 at times. The District serves them all.
In 2009, the District serviced 196 incidents with 1218 hours contributed. In 2018, they responded to 357 incidents that involved 7,542 firefighter hours. Caller volume has increased 88% in the last ten years, and the current funding is not adequately meeting the needs of the district to accommodate the growth.
What happens if the ballot measure passes? “If we can pass our revenue stabilization measure, at first nothing may occur, because it does not mean we will get more revenue, unless property values go up. Our mill levy was set in the election back in 2003. That allowed us to convert our bond levy into operating. We have plans in the works for a South Station, continuing capital replacement of equipment and trucks, support of our Volunteer Firefighters, potential staff increases to support increased calls. It just keeps going!” said Chief Holzwarth.
To help the community better understand their situation, EGFD has created a short video that helps describes the conundrum. To learn more about East Grand Fire Protection District No. 4, visit eastgrandfire.com.