Boosted by new construction and higher mill values, the City of Missoula will finish writing its FY22 budget with more revenue than in years past, and its taxes and assessments remain below several peer cities, officials said.
Every two years, the Montana Department of Revenue establishes the new market value of property across the state and applies a tax rate set by law to establish local mill values.
As a result of the process, Missoula’s mill values continue to climb, increasing around 12.4% in FY22 when compared to this fiscal year. In FY20 – the last appraisal – the mill rate climbed 16.2% over the prior fiscal year.
“We have a large increase this year in the mill value based upon the increases in market value we’re seeing across Missoula and the state,” said city CAO Dale Bickell.
The state shifted to a two-year appraisal process in 2018. Prior to that, it was conducted every seven years. During the appraisal process, the state determines the new taxable value of both commercial and residential properties across the state.
Since the process was changed, the taxable value of homes in Missoula County have risen dramatically, as have the fair market value of properties.
“That (change by the state) coincided with rapid increases in real estate markets across Montana,” Bickell said.
An increase in mill values isn’t all bad news for local governments. Among the benefits, they can use fewer mills to raise more revenue, since the mills have higher value. Still, with higher taxable values, an unchanged mill will cost property owners more.
Bickell said newly taxable property will also help the city’s FY22 budget. While around 8.7% of newly taxable property is locked with Missoula’s urban renewal districts, more growth is taking place outside the districts, and that revenue goes to the city’s general fund.
Outside FY20, which saw a significant spike in newly taxable property due to Missoula’s 2019 annexation of property west of Reserve Street, this year’s $4.1 million boost is a return to figures seen prior to the recession years.
Bickell said that expanding the tax base spreads the revenue needed to fund local services across a wider number of property owners.
“Despite the pandemic, we had a really strong number,” Bickell said. “This is returning to numbers we saw in the past. It’s a good trend, and with all the new construction we’re seeing, hopefully that will continue.”
When comparing taxation in Missoula to peer cities, Bickell said Missoula stands in the middle, higher than some but less than others. When looking at debt per capita, Missoula’s rate of $520 is more than Helena, Great Falls and Kalispell, but less than Billings and Bozeman, which has a rate of $1,165.
In taxes and assessments, Missoula claims more taxes when converted to mills, but has less assessments than any peer city. When taxes and assessments are combined, Missoula remains below Great Falls, Helena and Kalispell, which rely heavily on special assessments.
Missoula also generates less revenue per capita, according to the city’s comparison. It’s rate of $555 is less than Kalispell at $658, Bozeman at $708 and Billings at $713.