HELENA — The next time your city or county proposes a local tax levy, it may look different on your ballot if a bill currently under consideration passes the Montana Legislature.
House Bill 20, sponsored by Rep. Larry Brewster, R-Billings, passed the House in January. On Tuesday morning, it had its first hearing in the Senate Taxation Committee.
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Supporters of HB 20 say a lot of the shock Montanans feel from rising property taxes comes from voted levies – when local governments ask voters to support funding for a specific purpose, like police, fire, parks or other services.
Currently, cities and counties can propose a levy to charge a fixed number of “mills” to all properties in their jurisdiction. Each mill collects $1 per $1,000 of a property’s taxable value.
As property values increase, the value of a mill also rises. That means an increase in the amount of money cities and counties bring in on a fixed-mill levy.
HB 20 would require local governments to instead propose levies in terms of a fixed amount of money they want to collect. Then, if property values rose, they would need to lower the number of mills they charged to keep the total revenue the same.
“I'm trying to be responsible and do a responsible thing, and that is to level the amount of funding that they get,” Brewster said. “They still have the opportunity to increase it whenever they want – whenever they want to engage the voters and share that responsibility. That's a good thing; that makes people participate in government.”
HB 20 would allow cities and counties to increase their levy amount by three-quarters of the average annual rate of inflation. It originally set that maximum increase at one-half of the inflation rate, but lawmakers amended it in the House.
During Tuesday’s hearing, the bill drew opposition from some representatives of local governments. They said, with inflation and the growth some areas are experiencing, it would be difficult for a fixed amount of money to fund services for more than a few years. They expressed concerns that they might get voters’ support for a police or fire levy, bring on new officers, then need to lay them off as costs rise.
“Our voters know when and where and for what purposes they will support voting mill levies,” said Kelly Lynch, executive director of the Montana League of Cities and Towns. “In the past year, as you probably heard, almost no voted mill levies were approved across the state – and there were millions of dollars put before the voters, and they mostly said no. So they know what they're doing, we want to continue to ask them when and where they want to support something.”
Lynch said local governments were open to the idea of fixed-dollar levies, but they wanted to see the bill amended to allow them to increase the amount by the full rate of inflation.
Brewster said he saw a 45% increase in his own property taxes based on voted levies. He argued many local governments should be doing more to control their spending.
“I think if they managed a little better, they could probably deal with this just fine,” he said.
Sen. Greg Hertz, R-Polson, who chairs the Taxation Committee, noted that, if a home’s value doubles, the resident would be paying double the amount they originally expected when they voted on the levy. He questioned whether that was fair to expect of taxpayers.
“We need some type of equalization here, where local governments are looking at what the taxpayers can afford,” he said. “It seems like every time we have a property tax bill to provide some type of relief, the local governments are always in here opposing every bill that so far we have presented to help save taxpayers money.”
Lynch said cities and counties understand residents’ frustration with property taxes, but that they’re concerned about how many limitations the Legislature might place on them.
“I think it's important to recognize that there are other bills floating around that all are putting a cut on this ability to do mill levies, and it's very difficult for us to stand here and not keep those in mind as we are working to try and see how each one can be adjusted to work as a whole for us moving forward after the legislative session,” she said.
Hertz is sponsoring several other bills dealing with voted levies, including one that would require local governments to go back to the voters to extend existing levies and one that would raise the threshold for how many votes a levy must receive to pass.
If the Senate approves HB 20 without making changes, it would then go to Governor Greg Gianforte’s desk.
