Last year, the city, county, Transit District, and Missoula Public Schools levied a total of $195 million. This year those same entities are scheduled to levy $209 million. This is an increase of about 7%.
This is no small number and local taxing authorities need to take it seriously. However, considering the recent high inflation, population growth, significant problems created by homelessness and the related very high housing and rental costs, 7% does not seem particularly out of control and it certainly doesn’t explain why the median value home in Missoula saw an increase in taxes of over $1300 or 23%.
Our property tax system starts with the market value of a property, which is multiplied by the tax rate for that type of property (1.35% for residential housing). The result is multiplied by the number of mills, levied by each of the tax jurisdictions that the property is in, divided by 1000.
Property tax levies are either set at a statutorily established number of mills, like the 95 mills for state school equalization or are limited to a dollar amount which is translated into mills. Schools are limited by state formulas that include many factors, with the most significant being the number of students and inflation. Local governments are primarily, but not exclusively capped by their previous year’s property tax revenues with a limited inflation adjustment and the addition of newly constructed property.
Because schools and local governments are capped by a dollar-based formula, when the tax base grows faster than their budgets the number of mills levied must be reduced. That is the case this year where the millage (depending on which jurisdictions you live in) was reduced from about 900 mills to 780 mills. A 12% reduction.
Thus, properties that did not have a significant increase in value saw an actual reduction in taxes.
This last point is illustrated by the fact that 5 of the 6 largest private taxpayers in Missoula County, Northwestern Energy, Montana Rail Link, Charter Communication (Spectrum), Southgate Mall and Verizon had property tax reductions of 20% or more.
Prior to the 2023 legislative session, the Department of Revenue informed the Legislature that reducing the residential tax rate from 1.35% to .94% would on a statewide basis maintain residential property taxable value at the same proportion to the total taxable value as was the case prior to reappraisal. This adjustment has been made several times in the past. This session the Governor and the Legislature choose not to make the adjustment and force residential taxpayers to absorb the new burden.
Mike Kadas: Property tax increase explained