Calling it a good year, the Missoula City Council on Wednesday gave preliminary approval to its fiscal year 2020 budget, one that will levy fewer mills while investing in new services, including police officers, roads and general maintenance.
Increases in property values across Missoula, a result of state appraisals and what city leaders deem a strong local economy, has strengthened the city’s fiscal standing while giving it room to pad its rainy day fund.
“The fact that we’re lowering mills is a good thing,” said Mayor John Engen. “This budget reflects the interests of most of the folks on this council and the majority of the citizens we serve.”
The city’s tax base expanded from nearly $121 million last fiscal year to more than $141 million this year. The value of newly taxable property also grew from $1.9 million to more than $8.3 million this year.
That and other factors will enable the city to reduce the number of mills it must levy to fund general services. It will also make new investments, including $150,000 to improve residential snowplowing, $746,000 for street maintenance, and $579,000 to hire and equip six new police officers.
“This is something to celebrate, and we ought to do that,” Engen said. “We’re levying fewer mills and at the end of the day, that’s a win in my book. It’s good news for the community. This budget reflects the values we hear over and over.”
Despite what most described as good news, the state’s lopsided tax system still left members of the council frustrated. While city mills will decrease, most property owners will still see an increase in property taxes.
That’s due to higher appraisal values set by the state, along with voter-approved bonds and taxes levied by schools and county government. The city represents just 30 percent of a property owner’s tax bill.
Council member Jesse Ramos voted against the budget despite its investments and mill reduction. The budget, he said, could have done more to hold down increases resulting from higher property appraisals.
He didn’t offer any amendments, however, saying they would have “no chance of passing.”
“I know full well we could have double dipped and we could have raised the mills levied on top of the big increases we got in property valuations,” Ramos said. “I’m very happy the number of mills is going down. But at the end of the day, it doesn’t mean the tax burden is going down.”
Most disagreed, however, saying the city can only reduce its piece of the pie. The city of Missoula, joined by other municipalities, has and will continue lobbying the state for changes to the tax system, saying the burden falls too heavily on property owners.
“We could talk for hours and hours about our tax system,” said council member Gwen Jones. “It’s great we’re going to have a good year and that we’re lowering mill rates. But until the formula changes, we’re not going to have a diverse tax base.”
Along with investments in general services, the city’s budget also invests roughly $27 million in capital improvement projects. Those range from engineering studies for future road connections and water mains to refurbishing the Northside pedestrian bridge.
In its final budgeting session, the council also agreed to take a one-time remittance of $2.4 million in tax increment financing from the city’s urban renewal districts to bolster its rainy day fund. It will disperse a portion of that revenue to schools and county government, hoping it will help them reduce their taxing needs.
“TIF is a remarkably successful program and it’s doing exactly what it’s supposed to do,” said Engen. “The remittance will provide some additional tax relief. In the end, we’re growing the base, and that growing base should reduce the broader burden.”
The remittance in tax increment will net the city roughly $725,000 to grow its rainy day fund to $2.5 million. The recommended goal is a cash reserve of $3.7 million, or roughly 7 percent of the city’s general fund budget.
The reserve hardens the city’s credit rating, shows fiscal health to outside creditors, reduces its borrowing rate, and provides cover for emergencies.
“By making these (TIF) investments over decades, it’s creating a really flexible tool we’ll have in our toolbox in the future, if and when we need it,” said Jones. “We’ve had many years of economic expansion. This is good planning. It gives us lots of options in the future.”
The city’s urban renewal districts work by capping the tax base and diverting new tax revenue toward new investments. Proponents suggest that doing so helps expand the tax base. Opponents believe it diverts revenue from the city’s general fund.
Over the past two years, the city has dipped into its urban renewal districts for a remittance, suggesting the funds aren’t frozen as opponents argue. A portion of this year’s $2.4 million remittance will also go to county government, which could use it to reduce its own mills.
“It really highlights that this program is working as intended, and doing better than intended,” said council member Stacey Anderson. “It allows us to dip into it when it’s needed.”
The council will hold a public hearing on Monday night before adopting the FY20 budget.