Martin Kidston/Missoula Current

The City of Missoula is proposing one of the largest tax increases in recent memory while the county has agreed to place other cost-raising initiatives on the November ballot, including a levy to support crisis services and more to fund improvements at the fairgrounds.

In a hearing on Wednesday, city officials said the proposed FY '23 budget will see mill levies and assessments on the city's portion of a tax bill increase by $44.75 for every $100,000 of a home's assessed value.

That value is determined by the Montana Department of Revenue every two years and it differs from a home's market value. While this year isn't an appraisal year, the state has yet to release its taxable values for the new fiscal year, leaving local governments projecting future revenue versus expenses.

Still, this year's proposed increase to the city's portion of a property owner's tax bill was described by some on Wednesday as “unprecedented.” Council members also said the state's antiquated tax system no longer works for today's economy, and many cities will likely be in the same situation as they develop their own budgets.

“This tax raise we're looking at this year is unprecedented for my time on council. This is a large tax increase,” said council president Gwen Jones. “But there's a huge amount of work in how we approach providing services as best as possible to maintain those services while doing it as efficiently as possible.”

The City of Missoula accounts for roughly 30.4% of a property owner's tax bill while the county represents around 21.9%. Missoula County Public Schools take the largest share at 31.6% while special districts and state schools take the rest.

Those other taxing jurisdictions, including the county, haven't released their proposed budgets. The county has already hinted of a tax increase of its own, possibly making this year's budgeting season even more painful for property owners.

“We're talking about increases to the (city) portion of their bill,” said Leigh Griffing, the city's finance director. “We don't know about the increases these other jurisdictions will or will not have. We're only talking about the percent increase to the portion that the city controls. We only control one-third.”

As the budgeting season kicked off in June, Missoula Mayor John Engen suggested that a significant tax increase was on the horizon. The budget invests heavily in social services and the nuts and bolts of local government.

The city didn't raise taxes in 2020 or 2021, partly due to one-time federal funding tied to the pandemic, such as the CARE's Act and the American Rescue Plan. But the city and county opted to use that one-time funding to prop up new programs directed at affordable housing, homelessness and crisis intervention, among other things, and the funding will now run out.

That has created two issues, starting with what city officials described Wednesday as an unsustainable budget trajectory.

“Not raising taxes created a situation where the city's ongoing expenses had begun to exceed its ongoing revenue,” said Dale Bickell, the city's chief financial officer. “A big priority of this budget was to ensure our financial sustainability long-term, and that's what this does.”

The other issue presented by the new programs launched using one-time federal funding has also come full circle. That funding will soon run dry and neither the city nor county can support the programs they started from their existing general funds.

To cover that, Missoula County last week agreed to place a Crisis Services Levy on the November ballot to raise around $5 million a year. If passed, that would replace federal funding used to begin the programs.

The county also voted to adopt a $4.4 million general obligation bond this month to cover a wage claim with sheriff deputies. It also has agreed to place a $19 million general obligation bond on the ballot this November to fund a livestock center and more ice at the Missoula County Fairgrounds.

In June, local voters also passed a funding increase for Missoula Aging Services. Added up, and some contend that local government is creating another crisis by raising taxes to the point that those on fixed incomes won't be able to keep pace, thus creating more dependency on local government.

“It's going to add to another crisis we have going on in Missoula and Missoula County, which is the regressive, non-progressive property tax rates that are greatly stressing out and causing much housing insecurity for the elderly, the disabled and the retired, and other long-time and fixed-income Missoula homeowners,” resident Kevin Hunt told the City Council on Monday during a hearing on the Crisis Services Levy.

City and county officials have been steadfast in describing the state's current tax structure as broken. As it stands, local governments rely heavily on property taxes and have few other options to raise revenue to cover local programs, from police and fire to water and streets. The Legislature in 2021 went so far as to revoke a small local-option tax on fuel that cities and counties could use for maintenance and repair.

The local marijuana tax approved by Missoula County voters netted the city just $350,000 in this budget cycle. Meanwhile, the state is sitting on a budget surplus of more than $1 billion. Some contend the state is strangling local governments while simultaneously not funding vital services.

“If we had other tools to use to fund these necessary programs, we'd be using them,” Jones said earlier this week. “We have a very dysfunctional, broken tax system that needs attention. We're going to have a very difficult budget session as we do our budget, and a great many cities across Montana are in the same situation as us while there is a huge surplus at the state level.”