MISSOULA — A bill that would revise the treatment of tax increment passed the Senate on its second reading on Tuesday, though Missoula County officials remain opposed to the measure.
SB2, sponsored by Sen. Greg Hertz, R-Polson, would ensure the release of tax increment is not considered newly taxable property for the purpose of calculating levies.
It identifies newly taxable property as the annexation of property, new development, subdividing or renovating, along with other investments within a tax financing district.
“It would basically eliminate all the value that's created within a Targeted Economic Development District or an Urban Renewal District,” said Missoula County CAO Chris Lounsbury. “We're messaging our opposition to that one.”
Hertz said tax increment districts like TEDDs and URDs are subsidized by taxpayers outside the district for the life of the district. He also contends that such districts increase taxes and divert money away from schools and other services.
Several Montana cities and counties have established tax increment financing districts, though Hertz has routinely focused on Missoula.
“In Missoula, TIFs currently collect approximately $20 million per year in property taxes, indirectly raising taxes on everyone in the city,” Hertz wrote in a recent op-ed. “Common sense dictates that diverting $20 million in property taxes will cause other Missoula residents’ taxes to increase.”
While Hertz believes that his bill doesn't stop the establishment of districts, civic leaders and businesses disagree. Among other things, they say the bill would remove the incentive for creating a district and stifle one of the few tools Montana cities have to drive economic development.
Along with Missoula County, the Missoula Redevelopment Agency, the Montana Association of Counties and the business community have voiced opposition to the measure.
Tax increment has also helped develop housing under changes made by the Legislature in 2023. Among other things, the changes qualified the construction of workforce housing as a suitable use of tax increment financing.
“Why would you want to do away with catalyzing economic development?" said Commissioner Josh Slotnick.
