Higher property tax bills are hitting homeowners across Montana this year as the state’s tax system shudders into a new alignment following the first reappraisal cycle using tax appraisals reflecting the explosive growth in Montana home values during and after the COVID-19 pandemic.
Those higher bills for residential properties appear to be the result of higher local and state-level tax collections, as well as how the Montana Department of Revenue’s valuations for residential properties have spiked while its valuations for some industrial and utility properties have declined, a dynamic that pushes more tax burden onto homeowners.
The median Montana residential property owner will pay about 21% more on their taxes this year than they did last year, with typical increases ranging between 11% and 35%, according to a Montana Free Press analysis of revenue department data for the 956,000 properties on the state’s property tax rolls in both 2022 and 2023. That translates into residential tax bills that will be $98 to $660 a year more.
Those increases are, however, lower on a percentage basis than those for the department’s residential valuations, which are up 40% on median this year. Reappraisal notices sent to hundreds of thousands of property owners by the revenue department this summer indicated that taxes would rise proportionately to value, using a calculation that didn’t take into account how most local property tax rates shift downward when overall tax bases grow.
In aggregate, the owners of residential properties that were on the tax rolls in both 2022 and 2023 will pay about $213 million more this year than last.
MTFP estimates that about $70 million, or a third, of that $213 million increase on existing residential properties is attributable to growth in collections of the “95 mills,” a statewide school funding equalization tax that has been subject to extensive debate as one of the few parts of property tax bills calculated in direct proportion to property values.
Tax bills for non-residential properties typically grew more slowly this year, or even declined. The median bill for office buildings, retail storefronts and other commercial properties, for example, is up a comparatively modest 12%, for a total statewide increase of $53.9 million. While some agricultural properties grew in value, the median tax bill for agricultural property is down 3%.
The median industrial property tax bill increased 6%. However, some industrial properties, including those owned by some of the state’s most prominent large companies, saw their bills decline by as much as 20%. As a result, total collections on industrial property are down by about $52.9 million.
Property taxes represent the primary source of funding in Montana for local government services including K-12 schools, law enforcement and fire departments. In comparison, state income taxes generally fund the operations of state services, including universities and prisons. Montana also remains one of the few states in the nation without a statewide sales tax.
Tax bills are mailed annually by county treasurers in late fall, with semi-annual payments due at the ends of November and May. Most homeowners with mortgages have property taxes bundled in with other housing costs, meaning their banks will likely adjust monthly payments upwards to account for the higher bills.
Angst over rising property taxes is likely to be a key issue heading into the 2024 election season and the Legislature’s next biennial session in 2025. Democrat Ryan Busse, for example, currently the most prominent opponent of Republican Gov. Greg Gianforte’s likely re-election bid, fired a shotgun at a clay pigeon emblazoned with “20% property tax increase” attributed to the incumbent governor in his September campaign launch video.
Gianforte, who said earlier this week that he’ll appoint a task force to tackle the property tax issue, has defended his handling of the tax situation by pointing to rebates passed this year by the GOP-controlled Legislature. In addition to income tax rebates, the Legislature and governor authorized two-time property tax rebates of up to $675 this year and next. (Those rebates, available only to homeowners, won’t offset any taxes that landlords renting out residential properties pass on to their tenants.)
The governor and prominent Republican lawmakers have also sought to point the finger at local governments for driving up property taxes by allegedly failing to keep their budgets in check. Local government leaders from both liberal and conservative communities have in turn criticized that characterization, arguing that much of what homeowners are seeing on their tax bills is fundamentally attributable to state-level policy such as the 95 mills.
Complicating the matter is the fact that property valuation shifts, homeowner tax bills and overall tax collections vary wildly between different parts of the state.
Residential properties in Bozeman’s Gallatin County, for example, are typically seeing increases of 21% to 39% on their tax bills, meaning most residential owners will pay between $579 and $1,266 more a year. In comparison, many residents in Scobey’s Daniels County — where residential property values have held nearly steady — will see their taxes decrease. The median residential tax bill in Daniels County is down by 3%.
Additionally, typical tax bills vary dramatically between different parts of the state, even between different urban centers. In Cascade County, which encompasses Great Falls, the typical residential tax bill is between $1,226 and $2,761 this year, MTFP’s analysis indicates. In comparison, Missoula County bills are typically between $3,066 and $5,254 this year — roughly twice as much.
Montana’s tax system divides the cost of property-tax-funded programs between properties in counties, cities, school districts and other jurisdictions proportionally to their taxable value, which is derived from the revenue department’s market valuations using formulas specified by the state Legislature. As such, when a particular type of property grows in value faster than other types, the owners of those properties end up paying a greater share of government budgets.
That dynamic appears to have played out with residential properties in many corners of Montana this year.
In Gallatin County, for example, the portion of taxes paid by residential property owners increased by three percentage points as the industrial component of the tax pie shrank. Similar trends played out in counties around Montana’s other major cities, most of which saw typical residential tax bills grow faster than countywide collections.
In Butte’s Silver Bow County, residences ended up paying 39% of overall property taxes this year, up from 31% last year. As a result, even though total tax collections in the county actually decreased slightly, many homeowners are paying hundreds of dollars more in taxes this year, with the median residential bill up 25%.
MTFP estimates that residential properties will pay 47% of property taxes collected statewide in 2023, up by 5 percentage points from 2022. Industrial properties, in comparison, will pay 23% — down by 5 percentage points from last year.
According to MTFP’s analysis, taxes have risen at least $300 a year for about 55% of residential properties statewide. About a quarter of residential properties are seeing annual taxes rise by more than $675, the per-year amount of the state’s two-time property tax rebates.
Additionally, MTFP’s analysis indicates that some of the state’s largest industrial taxpayers have seen significant reductions to their tax bills. For example, NorthWestern Energy, the state’s single largest taxpayer, is paying about $36 million less on its 2023 property tax bill, a 20% decrease from 2022.
Similarly, Montana Rail Link is paying $2.5 million less, a 22% decrease. Charter Communications, which provides internet service in Montana under the Spectrum brand name, is paying $1.8 million less, a 20% decrease.
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NorthWestern spokesperson Jo Dee Black confirmed that the company’s figures for its tax liability are similar to the results of MTFP’s analysis, which estimates its 2023 tax bill at $141 million. Because the state’s utility regulation framework treats the company’s property taxes as a pass-through cost, she said, the shift will translate to somewhat lower bills for NorthWestern’s customers starting in January.
“The reduction in our property tax liability will result in a rate decrease for our customers,” Black said.
Gianforte’s revenue department didn’t provide a response in time for publication to questions submitted by MTFP Nov. 29, including one asking it to explain why tax bills for large industrial taxpayers declined in a year when residential property owners saw notable increases.
While MTFP was waiting for a response to its questions, the governor’s office did send a press release announcing that the governor intends to create a property tax task force charged with developing tax reform proposals for consideration by the 2025 Legislature.
In contrast to the governor’s 2022 housing task force, which was announced in June of last year with a formal executive order and a list of named members, this week’s press release indicated the task force’s membership and specific goals will not be announced until January.
“Leading legislators in tax policy, stakeholders, and others will be at the table,” Gianforte said in the release, which reiterated that the governor believes local spending is the primary root of the issue. “They’ll leave no stone unturned to bring down property taxes, including providing solutions to reform the appraisal system, increase Montanans’ participation in mill levy elections, and rein in local spending,” he continued.
About the numbers in this piece
MTFP’s analysis is based on assessment and millage rate data provided by the state revenue department for 956,000 properties that were on the Montana tax rolls in both 2022 and 2023. A reporter used a computer programming language to calculate and compare estimated tax bills for each of those properties.
Where this piece presents typical ranges, the figures represent values between the 25th and 75th percentiles, meaning half of all tax bills are within the given range, a quarter are above it and a quarter are below it. For readers who recall middle-school math classes, this is what your teacher may have called the interquartile range.
The tax bill estimates used in this analysis will vary somewhat from the specific amounts calculated and billed by county treasurers, which in some cases also factor in special assessments that aren’t necessarily based on property values. Additionally, in line with a November ruling by the Montana Supreme Court, this analysis assumes that taxpayers will eventually pay the full amount of the 95-mill tax, which was billed at a reduced rate by most counties amid a statute interpretation dispute with the revenue department.
Have questions about how and why property taxes have shifted this year that we haven’t addressed here? MTFP would love to hear them as we try to help the public understand this issue in future coverage. Drop us a line at news@montanafreepress.org or write reporter Eric Dietrich directly at edietrich@montanafreepress.org.
This story is published by Montana Free Press as part of the Long Streets Project, which explores Montana’s economy with in-depth reporting. This work is supported in part by a grant from the Greater Montana Foundation, which encourages communication on issues, trends, and values of importance to Montanans. Discuss MTFP’s Long Streets work with Lead Reporter Eric Dietrich at edietrich@montanafreepress.org.
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