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Missoula to Legislature: 2-cent local option fuel tax prevented property tax hike

Crews work on a new Missoula city street in this file photo. The city and county of Missoula, along with contractors, realtors, and infrastructure advocates, are defending a 1979 legislative tool that permits counties to adopt a 2-cent local gas tax with the approval of voters. (Martin Kidston/Missoula Current)

Backed by the Montana Infrastructure Coalition and the Contractors Association, Missoula County on Wednesday defended its local option gas tax against one legislator’s efforts to repeal the tool, saying it helped prevent a hike in property taxes this budgeting year.

The law, adopted by the Legislature in 1979, permits individual counties to adopt a 2-cent tax with voter approval and direct the revenue toward infrastructure. But House Bill 464, sponsored by Rep. Matt Regier, R-Kalispell, looks to prevent other counties from adopting the tax.

It would also undue the will of Missoula voters, who approved the 2-cent tax last spring.

“We have a multi billion-dollar infrastructure deficit in Montana,” said Tim Burton, executive director of the Montana League of Cities and Towns. “We continue to under-invest in our infrastructure as it crumbles around us. This (tax) is a valid tool. It was voter approved through a legal and fair election. This bill would essentially overturn that election.”

The House Transportation Committee held its first hearing on Regier’s bill on Wednesday. The state’s petroleum industry, convenience stores and rental car companies supported the bill, saying the 2-cent tax created an undue burden on retailers and was inherently unfair.

But opponents of the bill – meaning supporters of the tax – defended the measure, including the state’s infrastructure lobby, contractors, realtors, residents and individual city and county leaders.

“This is deeply democratic,” said Missoula County Commissioner Josh Slotnick. “Our voters voted on this because they understood the need for infrastructure. If you overturn it, you’re overturning the will of voters in a fair and free election.”

Regier and other supporters of the bill to repeal argued that only one county – Missoula – has adopted the 2-cent tax since it was authorized in 1979. But the Montana League of Cities and Towns and the Montana Association of Counties said Wednesday that other counties are exploring the measure, especially as maintenance costs increase and infrastructure funding dwindles.

As it stands, Slotnick and others argued, the only way for counties to cover the difference under current state rules is to raise property taxes.

“Property taxes are overused and unfair,” Slotnick said. “It behooves us to come up with some other way to solve these problems without raising property taxes. We have tightened our belts and without the gas tax, we would have had to raise taxes on the road fund.”

The Montana Legislature in 2017 approved an increase in the statewide gas tax, known as the Bridge and Road Safety and Accountability Act, or BaRSAA. While the infrastructure lobby and others pushed for a 10-cent increase to the statewide gas tax, the Legislature approved an increase of just 4 cents.

“There’s been a lot of talk of the BaRSAA funds and how in 2017, that should have taken care of everything,” said Tyler Gernant, Missoula County’s clerk and treasurer. “The county of Missoula will get more money from this local option tax than it does from BaRSAA funds. That’s money that goes directly to maintaining and enhancing our roads.”

According to Gernant, the county nets around $450,000 a year from BaRSAA funds, which are distributed statewide based upon a formula. In contrast, the 2-cent gas tax is expected to net around $1.2 million annually, and that’s money that stays local to improve local roads.

The revenue will be split evenly between the city and county of Missoula. Even then, at around $600,000, it’s still more than BaRSAA. It’s also expected that tourists will contribute around $450,000 to the local fund.

“When the Legislature acted in 2017 to create the BaRSAA gas tax, the increase was only half of what was recommended by the infrastructure coalition as the minimum necessary,” said Jeremy Keene, the city’s director of public works. “We’re still trying to fill a hole.”

According to Keene, the City of Missoula maintains around 340 miles of streets, and around 42% of them were found to be in poor or failed condition in a 2019 survey. He said the city currently spends around $7 million a year in street maintenance.

But that’s only half of what’s needed to keep up with maintenance.

“Our options for maintenance funding are pretty limited. This gives us the ability to do more of that preventative maintenance,” Keene said. “Without the local option gas tax and other mechanisms, property taxes are really the only option. We need your help to develop those tax mechanisms that fairly assess the cost of infrastructure, and repealing this tax without another mechanism just deepens the hole for us.”

Rep. Ron Marshall, R-Hamilton

Some legislators on the House committee, including Rep. Barry Usher, R-Laurel, and Rep. Ron Marshall, R-Hamilton, argued that Missoula spends money that could be used for roads on bike lanes and pedestrian bridges.

Usher asked if Missoula charges those cyclists any fees to use the city’s streets and trails. Marshall also suggested that the city should be using its limited road funding differently.

“Being a resident of the county south of you in Ravalli, I’m pretty much aware of what goes on in Missoula,” said Marshall. “Aren’t these funds being used for bike paths and pedestrian bridges and not so much for road maintenance?”

Keene was left to defend the city and county’s Long Range Transportation Plan and its use of funding, saying that while the funds are earmarked for road maintenance and construction, some of that work does include bike lanes.

“We have a Long Range Transportation Plan that includes all those things,” Keene said. “This funding is one portion of many different funding sources that might pay for those.”

Contractors, realtors, counties support Missoula’s local option gas tax; petroleum opposes