Missoula County: Why are my property taxes so high?

Dave Strohmaier, Josh Slotnick, Junita Vero

Property taxes can make your head spin, not only because they’ve shot up to the stratosphere, but because the mechanics of the system resist easy explanation. That said, this historical moment – during which many Montanans are struggling to pay this year’s property tax bill – screams out for a good-faith attempt.

For the sake of simplicity, this column will focus only on property taxes that fund counties, not cities, schools or other jurisdictions.

For a few minutes, please envision the property taxes you pay to your county, which fund services for all county residents, as a pie. In the equation that generates the final number on the county property tax bill, the county’s role is to determine the size of the pie. In Missoula County this year, we increased the size of the pie by 5.4%, which mainly covers the cost of keeping current staff working to provide county services. We own this increase and can truthfully say we raised taxes on the county as an entirety by 5.4%. This percentage varies depending on the county you live in.

So, how is that in our county, and most others in Montana, nearly every homeowners’ property taxes grew by way more than the county’s increase?

Here’s what happened.

Montana divides real estate into 16 major property tax classifications. The specifics of that division have a powerful effect on the equation that determines your property taxes. So, cut our imaginary pie into 16 portions, a single portion for each classification. Residential property, like homes and apartments, is but one of those classifications. Other classifications include forests, agricultural, commercial, industrial, et cetera. Each classification corresponds to a portion of the pie.

For most people, their first inclination would be to cut the pie into 16 equal portions. That’s a great strategy if you’re serving pie to a group, but that’s not how property taxes work. By law, the Department of Revenue has a specific method for assessing the value of property in each classification, and a specific tax rate for each classification. Different math for each classification means the size of each of the 16  portions of pie varies widely.

The state assesses residential property at 100% of market value, and this year’s residential tax rate was 1.35%. Those two numbers combined determine the “taxable value” of a home. If every home is a slice of pie, the taxable values of all the homes in the county added together make up the residential portion of the pie. Taxable values are crucial in determining both the size of the residential portion of the property tax pie, and the size of your home’s slice.

In terms of who is responsible for what in property taxes: County policy determines the size of the property tax pie; State policy determines the size of your slice.

Historically, in times of big economic shifts, the state has taken bipartisan action to adjust tax rates and/or valuation methods of the various property tax classifications. Doing this adjustment raises or lowers taxable values and ensures that one class of property doesn’t pay too much or too little of their fair share. The state can make the 16 portions of the pie look more balanced.

During the 2023 session, the Legislature chose to maintain the 1.35% rate on residential property. They also chose to allow other classifications to enjoy a reduction in taxable values. These choices meant the residential portion of the pie grew disproportionally compared to the overall size of the pie. If the residential portion of the pie grows, that means all the individual residential slices grew (your house, too). In dollars, that translates to a massive tax hike for homeowners and renters, and a tax break for some of the other property classes. Simply put – the residential portion of the tax pie expanded so other portions could shrink.

This year the property tax classification called centrally assessed (airlines, pipelines, telecoms, Northwestern Energy, and railroads) saw a $53 million decrease in taxable values in Missoula County. Meanwhile, residential property saw a $69.7 million increase in taxable values in our county. Here’s a mathematical description of what that meant for the pie: The pie got 5.4% bigger, and residential property taxpayers absorbed 185% of that increase.

Because of the policy-driven, dramatic change in taxable values, if we, the Missoula County commissioners, had kept property taxes flat, increased taxation by zero, residential taxpayers would still have seen a tax increase this year.

Let’s go back to our pie: Even if the county kept the size of the property tax pie exactly the same as last year, because of the changes in taxable values, residential slices would still have gotten much bigger, while other tax classification’s slices (like centrally assessed properties) got much smaller. This played out in reality this year in Butte-Silverbow, where their commissioners decreased property tax revenue by $4 million, but residential homeowners still saw an increase on their tax bills due to the new sky-high values of their properties and the unchanged tax rate.

Here’s another way to frame this: If the assessed value of your home had stayed the same as last year, or if the state had lowered the residential tax rate, most homeowners across the state would actually be paying less in county taxes this year.

This recitation of facts is not meant to demonize centrally assessed companies or other property classes – they play by the rules, just like you. Similarly, it’s unlikely most legislators have willfully sold out their friends and neighbors. The causes for this mess are way less dramatic than all that – and that’s the subject of another letter.

This column was authored by the Missoula County Commissioners Dave Strohmaier, Juanita Vero and Josh Slotnick.