Long awaited property tax reforms up for scrutiny
About a year after Montanans were blindsided with an exorbitant hike in property taxes, the governor's task force has delivered its plan to rein in and reform the system with long-term solutions.
The bipartisan panel — including Republican Flathead County Commissioner Pam Holmquist and Whitefish's Democratic Rep. Dave Fern — crafted an intriguing menu of options for Gov. Greg Gianforte's consideration in the upcoming legislative session.
The so-called homestead exemption is the prized remedy, which garnered immediate praise from Gianforte.
Under this plan, the tax rate on a primary residence or one used for a long-term rental would be reduced. Second-homeowners and owners of vacation rentals, meanwhile, would pay a higher rate to make up the difference.
According to task force member Rep. Llew Jones, R-Conrad, the homestead plan would provide property tax relief for up to 215,000 Montana homeowners, 130,000 renters and 32,000 businesses.
The plan acutely affects desirable, high-growth areas like the Flathead Valley and Gallatin County, where property tax increases were most pronounced due to significant post-Covid reappraisal values.
In Flathead County where the average home value is $555,295 — third highest in the state — the rate shift would lower the property tax on a primary residence by about 22%. In the task force's analysis, an average home in Flathead County would pay about $708 less annually. That’s significant.
Another potential benefit of the homestead plan is that it could persuade some vacation rental owners to relist their property for long-term tenants. This would help ease the housing crunch that was brought on, in part, by the proliferation of VRBO-style properties.
While there's a lot to like about the homestead tax-fairness plan, the task force whiffed on its ideas to reform local government and school levies with supermajority vote requirements.
Forcing a municipality to hit a 60% affirmative vote to pass a levy is a great way to ensure local services are perpetually underfunded. A prime example would be Kalispell's recent public safety levy, which was supported by a 57% affirmative vote — overwhelming support, but not enough under these proposed rules.
On school levies, the unreasonable 60% threshold could cause real harm to school districts that are already underfunded by that state's busted tax system.
The supermajority plan would also tip the balance of power to the dissenting side. Why should a no vote carry more weight than the affirmative? It's unreasonable and unfair.
The task force also missed the mark on its idea to require local government levies to sunset after 10 years. This would stymie a municipality's ability to do any meaningful long-range planning. If a mandatory sunset is considered, it should be no less than 20 years.
Restricting levy elections to a dollar amount instead of a mill amount is one of the task force's recommendations that should see broad support. A dollar amount is fixed, while a mill amount can fluctuate based on reappraisal values. When values go way up, like they did in the 2023 cycle, those mill levies become a revenue windfall. Converting to a dollar amount would help avoid those big jolts.
There's a heap of other reform recommendations included in the task force's final report. It can be found online at budget.mt.gov.
All the ideas deserve public scrutiny, so only the best rise.