With a rare dissenting vote, the Missoula Redevelopment Agency’s board of directors on Tuesday approved a one-time remittance of $2.7 million to help the city of Missoula close a shortfall in its Fiscal Year 2019 budget.
That shortfall, members of the board suggested, was created in part by the 750-plus property owners who successfully protested their taxes to the Montana Department of Revenue last year, sweeping away revenue expected by the city to fund essential services.
“We’re in this predicament in large part because folks didn’t want to pay the taxes that were assessed on their property values,” said MRA board member Tasha Jones. “So we’re trying to save them from a tax increase that’s created by their unwillingness to pay the taxes that were levied against their property.”
While the city budget is not yet final, current projections see a $750,000 funding gap, one the mayor intends to close by seeking a one-time remittance in tax increment from the Missoula Redevelopment Agency and its urban renewal districts.
That remittance to the city triggers a larger remittance based upon a set formula to other taxing jurisdictions, including Missoula County and Missoula County Public Schools. It wasn’t immediately known what those taxing jurisdictions planned to do with the funding, which they didn’t expect and labeled as a “windfall.”
MRA board member Ruth Reineking voted against the remittance, saying she was dismayed by the process established by state law.
“It’s not entirely fair to the residents and businesses in the urban renewal districts to be funding infrastructure in the county when we’re deferring improvements to infrastructure in those districts,” Reineking said. “While it’s being called a one-time deal, there’s certainly no guarantee.”
Residents and businesses in Urban Renewal Districts II and III, along with the Northside, will take the biggest hit and won’t likely see any major public improvements over the next year due to the remittance.
Those districts, which include Midtown, West Broadway and part of Russell Street, have several projects in design that are recommended to move forward. But larger development efforts, such as affordable housing, sidewalks and general development intended to boost tax values and quality of life, will likely languish for lack of public funding until the revenues are reestablished.
The city will also have to bond improvements to the fairgrounds instead of paying it from cash.
“The impact this will have on the various districts is the amount of unobligated funding that’s available for walk-in-the door projects that we can’t anticipate,” said MRA Director Ellen Buchanan. “Right now, it’s $350,000 in District II and $750,000 in District III, and those are the two most likely to have projects walk through the door.”
As approved by the board, District II will remit $200,000, leaving a balance for new projects of just $349,000. The city will remit $1.6 million from Midtown, leaving just $758,000 for future projects. The Northside will remit $838,000, leaving $420,000 on hand.
Buchanan said the Riverfront Triangle will remit just $100,000, leaving $575,600 for the development of a new hotel and conference center planned for the corner of Orange and Main streets. That project will require major public improvements, such as sewer and water, and public parking.
“We were trying to protect what revenue is in that district because of the very large, important project that’s on the horizon with the hotel conference center and office buildings,” Buchanan said. “The Riverfront Triangle is moving forward.”
Missoula netted $1.9 million in newly taxable property this year, though transferring Mountain Water to public ownership wiped $600,000 from the tax rolls. Adjustments from the Montana Department of Revenue served the biggest blow, consuming another $1.3 million.
City officials on Sunday received all the property tax data from the county and has been poring over it ever since. So far, Buchanan said, the data shows more than 750 property owners successfully protested their taxes to DOR. The mayor is requesting a tax increase of 3.8 percent.
“A lot has been said in the media about how the urban renewal districts are the reason the city isn’t seeing the taxable values it has anticipated, but we’re not finding that to be the case,” Buchanan said. “It’s property tax protests. There were a lot of parcels where the taxes were reduced. It resulted in a sizable amount of swing in taxes.”
This year’s budget drama has again raised pointed questions about the fairness of the state’s tax system, one that relies almost entirely on property owners.
While tourism serves as one of the state’s largest economic drivers, the city of Missoula – like most other taxing jurisdictions in the state – is unable to capture any revenue from visitors to help fund basic services.
Rather, that falls to property owners.
“Montana is heavily reliant on tourism, and yet we choose not to have any of those folks who enjoy our state and the recreation it provides participate in our tax base through a sales tax,” Jones said. “We choose to rely on property taxes, and this is one of the consequences of that choice.”
While members of the City Council don’t generally attend MRA’s board meetings, John DiBari and Julie Armstrong sat in on Tuesday’s special meeting.
Amrstrong said she’d rather the city leave the money in the urban renewal districts to fund projects when they arise – an investment in the city’s future.
“It’s true, the first we heard about this was in the letter from the mayor,” Amrstrong told the board. “We had no idea this was even being considered. We weren’t asked about it. The money is there and the districts are robust enough to support it, but we weren’t asked so much as we were told this was going to happen.”
DiBari said he, too, would rather see the tax increment used for the purpose it was intended, though he called the current budget situation facing the city a special circumstance.
“While I’m sure the mayor and others didn’t want to go here, this was one way to help offset what would have been an additional 2.2 percent tax increase,” DiBari said. “The situation is such that it’s an all-hands-on-deck kind of time, and for those who can make a contribution, I think it’s reasonable to make that request.”