Through the wonkiness, city taxes on most residential properties to drop
Martin Kidston
(Missoula Current) The Missoula City Council on Wednesday continued to debate its budget for the new fiscal year, with some looking to cut it and others looking to grow it.
The current draft will grow the city's tax revenues by roughly $2.8 million, but with recent changes made by the Legislature, the owner of a median-priced primary home will likely see a slight reduction in city taxes, as will some commercial properties.
However, the owners of second homes or vacation rentals are likely to see an increase in city taxes.
“This year our city mills are one fewer than last year, so if all the taxable values stay the same, then property taxes would have decreased very slightly,” said Jessica Miller with central services. “But because of the big changes in taxable value, we're going to see significant reductions in property taxes for most property owners.”
In 2025, the state shifted to a tiered property tax system and property taxes for most primary homes dropped last year. That savings is expected to continue in the new fiscal year.
Broken down, the city's tax impact on a primary home with an assessed value of $500,000 will pay roughly $71 less in city taxes this year, Miller said. City taxes on on a commercial property with an assessed value of $1 million will decrease around $700.
“Many commercial properties are also going to see a significant reduction in their property taxes at many price points,” said Miller.
This year, the value of newly taxable properties in Missoula amount to $3.69 million, up from $3.47 million last year. But despite the growth and increased tax revenue, city officials said new development doesn't always pay for itself.
The city only receives 75% of the value of newly taxable property, according to city CAO Dale Bickell.
“Even though Missoula has been a fairly rapidly growing community, new construction doesn't contribute to a large amount of the total tax base,” said Bickell. “That new growth doesn't necessarily pay for itself and cities use things like impact fees to try to help mitigate that.”
Bickell said that while the Legislature has chipped away at taxation, the state's tax burden still relies heavily on residential properties.
Those properties still account for nearly 65% of the state's tax base while business equipment and centrally assessed properties, like railroads and utilities, account for less than 8% combined. Back in 1999, residential properties only accounted for 43% of the tax base.
“There's a heavy reliance on the residential tax base to fund local governments,” Bickell said. “You can see what's happening with the Legislative policy changes. Our property tax system was established in a time where we were reliant on asset-based businesses like natural resources.”
Still, Bickell said, local property owners will see their share of city taxes tick down in FY27, even as the budget calls for a $2.8 million increase in tax revenue.
“These tax-rate changes are going to have the effect that people in their primary residence are going to pay lower taxes while owners of second homes are going to pay quite a bit more,” Bickell said. “We're trying to be transparent about it.”