Growth in Great Falls means property taxes will be lower

An unanticipated windfall in property tax revenues was one focal point at Tuesday’s Great Falls City Commission meeting, where commissioners unanimously passed the city’s annual property tax levy. The other was continuing criticism of funding for the Great Falls Public Library, which could receive close to $650,000 above what voters approved during the June 6 election

In June, many Montana property owners were appalled when they opened their appraisal notices from the Montana Department of Revenue (DOR). The DOR reappraises property values every two years. This year’s appraisals saw near-historic increases, with some districts assessed values spiking by as much as 40% over the prior year.

Property value increases in Cascade County were more modest, with an increase of slightly more than 28% over 2022 valuations. However, the shock of these increases were not lost on Great Falls property owners.

At Tuesday’s meeting, city officials made it a point to inform taxpayers that while the appraised taxable value of their home or business may have gone up, the property taxes they will be expected to pay in the coming year will not rise at the same level. Instead, city officials have chosen to reduce the number of property tax mills assessed on privately owned property within city limits.

“Last year, in total, we levied 214.15 mills,” explained City Financial Director Melissa Kinzler. “This year we’re only levying 200.72 mills.”

Property tax methodology in Montana is complicated and nuanced, but in very simplistic terms property taxes are calculated locally by applying “mills” to a property’s taxable value. A “mill” is simply a unit of measurement. One mill is calculated to generate $1 dollar in tax revenue each year for every $1,000 of a specific property’s assessed value. Raising and lowering the mills directly impacts the bill any property owner can expect to receive. The fewer the mills, the lower the tax bill. Any increase in mills means property taxes will rise.

On Tuesday, Great Falls City Commissioners voted to reduce the city’s property tax levy by 13.43 mills. That means that the city’s 2023 - 2024 property mill levy will be the lowest it has been since 2017. Great Falls property owners can still expect a slight rise in this year’s tax bill due to passage of the Public Library mill levy last June, and slight increases factored in for inflation and the cost of medical insurance for city employees.

Figures provided by the City of Great Falls show that the city’s portion of property taxes on a home appraised at $300,000 will increase by $85.31 in the coming year. That’s roughly a 2.4% increase over 2023 and well below the national rate of inflation as reported by the U.S. Department of Labor, at 3.2% for the 12 months leading up to August 2023.

The mill levy decrease is not simply a matter city largess. A near historic increase in newly taxable property with Great Falls city limits will likely result in a windfall for the city, with expected returns of $1.1 million in additional property tax revenue.

The Montana Department of Revenue calculates the value of new property developments within Great Falls city limits at $9.9 million, a figure nearly four times what city planners were budgeting for.

“It’s actually the biggest increase in newly taxable property we’ve seen since we began tracking it in 2002,” Kinzler said. “It’s important to remember that this is newly taxable property. It’s not dealing with any valuation increases. It’s actual new property that is on the tax rolls.”

When the Great Falls city budget was passed in July, city planners forecast a $400,000 increase in new development property tax revenues. That figure was based upon the average rate of growth in Great Falls over the past three years. What came back two weeks ago from the Department of Revenue was a valuation of new property in the city that added $1.1 million to the tax rolls.

“This is what we’ve been talking about for years,” said Commissioner Rick Tryon at Tuesday’s meeting. “If we want the tax burden for taxpayers to stabilize or go down, we need a bunch of newly taxable property. We need to grow the tax base.”

The Montana Department of Revenue has not identified the specific development in Great Falls that are pushing property tax base increases; however multiple multi-family housing projects, continued developments along the West Bank Landing, and upgrades at the Calumet refinery are likely sources.

According to Kinzler, the bulk of the $1.1 million in additional city funding will be applied to offsetting any uncollected taxes, and to pay down the budgetary deficit accrued over the past two years.

During the COVID pandemic and the economic downturn it prompted, the Great Falls City Commission voted to suspend any property tax mill levy increases. That forced the city to dip into its budget reserves and led to a deficit within the city’s general fund judged unsustainable in the fiscal year ahead.

The City of Great Falls’ goal is to set aside 22% of its annual budget in reserve. The amount is intended to offset any unanticipated fiscal shortfalls that could sap city funds. The current offset has remained below the city’s target goal for several years, and now stands at 17.6%.

“It’s important to remember that its newly taxable property that’s generating this,” Kinsler said. “It’s got nothing to do with valuation increases. It’s actual new property that is going on the tax rolls.”

Library draws disproportionate mill levy funds

While the increase in taxable evaluations were “good news” for the city budget, not all budget news was welcomed equally by city taxpayers. While city officials chose to accept a reduction in mill levy for most of the general fund, the same can not be said for property tax funds dedicated to the Great Falls Public Library.

The largest increase for city taxpayers is associated with passage of the voter approved mill levy increase for the Great Falls Public Library. At the June 6 city election 52% of voters agreed to add 15 mills to funding for the library’s budget, adding $1.59 million to the library’s annual operating budget.

However, the Department of Revenue’s upward appraisal of property values means that the library is eligible for an additional $650,000 in funding beyond the original forecast. City commissioners voted Tuesday to exempt the library from the same mill levy reduction as with the general fund. Instead of the $1.59 million the library was forecast to receive, it could potentially receive $2.24 million instead.

Not all attendees at Tuesday’s meeting were happy with that potential result.

“The city’s breaking the trust of the people by increasing funding to the library instead of taking this opportunity to lower the number of mills levied to each of us,” said tax protester Jenny Dodd. “It is actions like this by the City of Great Falls that prove to residents like me that the city is totally untrustworthy. This example of the city’s deception is what leads residents like me to oppose any and all city levies.”

While not as forceful as Dodd, Commissioner Rick Tryon expressed similar concerns.

“I still have a little bit of a problem with the valuations going up and we’re not passing some of that back to the people who are paying taxes,” Tryon said of increased funding for the library. “If the total valuation of the City of Great Falls has gone up as much as this, isn’t that an argument for reducing the mills (for the library)?”

Yet, as is everything concerning property taxes in Montana, the final conclusion is evasive.

All property owners in Montana have a guaranteed right to appeal their property appraisals. In this year, because the valuations rose so rapidly, the Department of Revenue has received a record number of property tax appeals and has already conceded that it is unlikely they will be able to resolve those appeals before property owners receive their tax bills in November.

“That’s up to you,” Kinzler told the commission, “but there’s a couple of things to consider. This is the first year of the library mill levy so we’re going to need to “cash flow” some of those new things that are happening. Remember. we only get our tax revenues in December and June, so this would be the extra revenue that operation and all the new things the library promised the taxpayers.

“Another thing to think about is all of our protests and changes that may happen in the future, so we may not receive all the revenue that we’re actually milling this year.”

Great Falls Mayor Bob Kelly echoed Kinzler’s explanation, emphasizing that future city commissions will always have the chance to re-evaluate the library’s budget.

“The library never wanted to get a windfall from this,” Kelly said of the property tax boost. “They were looking at their costs and the budget they presented was for $1.6 million. Because of the mill structure the income that is coming their way … will take care of not only those dollars but also establish a reserve fund, which is important. That doesn’t mean that at the next budget that we assess we can’t look at where those dollars have been spent.”

“There’s an opportunity to reduce that for every budget that we have,” Kelly added. “To make sure we’re looking at what’s in the reserves, seeing what’s being expended, and seeing where they are in the process of fulfilling the promises that they made to the people who voted for the mill levy increase.”

This article originally appeared on Great Falls Tribune: Great Falls commissioners cut tax mills as property values spike