Tax debate heats up in Missoula under pinch of inflation

Martin Kidston

(Missoula Current) As the governor extended the deadline Monday for Montana residents to apply for property tax relief, leaders in Missoula gathered to discuss the state of the community, where inflationary costs and taxation played a central theme.

Leaders from the city and county of Missoula, along with the University of Montana, said they have few tools available to fight today's high inflation and the pinch it puts on consumers. When it comes to taxes it's a similar story, though all jurisdictions said they acknowledge the impacts that rising costs are taking on homeowners and they're doing what they can to keep them in check.

As in past conversations, the city and county called for tax reform at the state level, contending the current structure is no longer sustainable and not fitting of a modern economy.

“This past year, Missoula County – in recognition of the inflation that we're in and our desire to get as frugal as possible – kept the increase of the county budget at 5.4%,” said Commissioner Dave Strohmaier. “That was lower than the rate of inflation at the time.”

Missoula County represents only one slice of a complicated tax pie and, as residents opened their new property tax bill this spring, they found a tax increase of roughly 30% or more. The county increased taxes 5.4% and the city raised taxes around 9.7%, but taken together, the increases don't nearly account for the entire increase in one's property tax bill.

Strohmaier and other officials have attributed the increase to the state's ongoing shift in taxation, where property owners are now paying 65% of state taxes while large corporations and industry only contribute 42%. Two decades ago it was the other way around, tax experts have said, and as it stands, a growing number of elected officials contend the system is at a breaking point.

“That is something we tried hard to do, keep our taxes as low as we can, recognizing that ultimately tax reform is going to be necessary, and it's going to have to happen in Helena at the Legislature,” said Strohmaier.

The Democratic Governor's Association also has weighed in on Montana's current tax woes. On Monday, it accused Gov. Greg Gianforte of failing to address the “property tax crisis,” one that has left “thousands of Montana's trying to find out why their property taxes increased so much, and how they're going to pay for them.”

“Montanans are struggling under the weight of a property-tax crisis that Gov. Greg Gianforte had every chance to address, and his failure to do so is threatening the homes and livelihoods of working families across the state,” said DGA national press secretary Devon Cruz. “While Montanans wonder how they're going to make ends meet and pay their skyrocketing property tax bills, Gianforte and his ultra-wealthy friends enjoy expensive tax giveaways.”

Gianforte has pushed back against such claims. The governor's office said Monday that Gianforte delivered $120 million in permanent property-tax relief and secured $1,350 in property tax rebates for homeowners, half delivered in 2023 and the other half coming this year.

The governor's office said the rebates “provide the average Montana homeowner with relief that more than offsets” one's property taxes. Gianforte in January also convened a property tax task force to explore solutions and has stated his agreement that property taxes are too high.

“Property taxes are too high, and homeowners deserve relief,” he said Monday in a statement.

The governor's property tax task force is expected to provide a written report by August and include recommendations the Legislature can consider when it convenes next year. Local governments are also pushing for reform, and they're banding together to lobby the Legislature with ideas of their own.

Davis said the coalition also includes businesses and, together, it looks to “hold folks in the Legislature accountable to this very real issue at the local level.”

“I have never seen so many people interested in and having a conversation about property taxes,” said Davis. “This is something that's really complex in the state of Montana. We're in 21st century Montana but our tax structure is not. We really need to give this attention.”

Inflation

While Gianforte has blamed local governments for reckless and unnecessary spending, local governments in response have said the rising cost of services will become unsustainable due in part to a city or county's inability to generate additional revenue – and from sources other than property taxes.

Inflation has taken a bite out of local governments and homeowners alike, and local officials said they're doing what they can to address it, though options may be limited.

For its part, Missoula County is updating its land-use plan and zoning to help streamline development. The work will also encourage a variety of housing types in hopes of increasing housing inventory and combating rising housing costs.

The county has turned its focus to the Wye and a wide planning area that, if supported by needed infrastructure, could support nearly 15,000 homes, new business centers and hundreds of jobs. The county also has created a targeted economic development district at the Wye to help fund needed infrastructure.

“Just from the standpoint of housing stock and availability, it's something we can work on at local government,” said Strohmaier. “It's not the full extent of the solutions we'd might like to see, but it's part of the array of options and solutions we're trying to bring to the table.”

With inflation and taxes in mind, Davis said the city will also take a different approach to crafting its FY25 budget. In years past, the mayor has opened the budgeting season with an executive budget, followed by debate by City Council and input from the public.

This year, she said, the process will be reversed. Every city department will be asked to provide program inventories, revealing what programs are required versus those that are not. The information will help inform department budgets – all before the mayor presents her executive budget.

“It ideally identifies ways where one, we can find efficiencies and two, really demonstrate some of the incredible programs that provide value,” Davis said. “I totally hear and understand the impact we're all facing when it comes to the pinch on our cost of living. We're responsive to that. We're using your money wisely.”