Montana legislative committee opposes measure to cap residential property taxes

Montana State Capitol
Posted at 6:25 PM, Apr 19, 2022

HELENA — On Tuesday, state lawmakers said they’ve heard the message that Montanans are concerned about rising property taxes – but that a proposed constitutional amendment isn’t the right way to address the issue.

The Revenue Interim Committee voted unanimously Tuesday to oppose Constitutional Initiative 121, which would cap taxes on residential property in the state. Lawmakers said the measure would put the Legislature in the position of having to either reduce revenues for local government services or shift the tax burden to other sources.

“I think that’s part of what we want the folks out there in Montana to understand about this initiative: There’s no good choices for the Legislature in order to implement this,” said Sen. Jill Cohenour, D-East Helena, the committee’s chair.

The vote does not have any binding effect.

Advocates are currently collecting signatures, trying to get CI-121 on the November ballot. The measure would base residential property’s assessed value on what it was in 2019, then limit any increases in value to no more than 2% per year, based on the rate of inflation. Property could be reassessed to its new market value only after it’s sold or substantially improved. CI-121 would also limit total residential property taxes to 1% of the assessed value.

Bozeman attorney Matthew Monforton and Montana State Auditor Troy Downing are sponsoring the measure.

“People are going to continue to move into Montana, there’s going to continue to be upward pressure on real estate values here in Montana and upward pressure on property taxes, and we need to do something about that, or more of us are going to start getting taxed out of our home,” Monforton told MTN.

State analysts estimate CI-121 could reduce property tax collections by about $175 million a year, starting in 2024. Much of the impact could fall on local governments – including cities, counties and school districts.

During Tuesday’s hearing, lawmakers heard a panel discussion where groups including the Montana Chamber of Commerce, Montana Association of Counties, Montana League of Cities and Towns expressed concerns about the measure’s potential effects.

“Let me be clear: Passage of CI-121 would create chaos across the state,” said Montana Chamber President and CEO Todd O’Hair.

Those speaking Tuesday argued CI-121 could disrupt local government services, lead to higher taxes or fees on businesses and make it harder for local governments to borrow money for large construction projects.

Lawmakers said they understood why the sponsors brought CI-121, but that they believed there needed to be a more extensive discussion about the tax system before making such a significant change.

“This is an issue that really needs to be discussed in a full legislative session to discuss comprehensive tax reform in our state, and take it piece by piece, responsibly and effectively and efficiently,” said Rep. Becky Beard, R-Elliston.

Sen. Greg Hertz, R-Polson, said he doubts the worst-case scenarios local governments have laid out would occur if CI-121 passes, but he agreed it’s not the best way to move forward.

“It’s an administrative nightmare,” he said.

Monforton said the measure is designed to cap the rate of growth, not cut existing revenues, and he argued leaders shouldn’t be relying on large tax increases to operate.

“It’s a great system for legislators, for special interests, for government bureaucrats,” he said. “It’s good for everyone except Montana homeowners.”

Monforton said Tuesday’s discussion was a “farce” since no supporters of CI-121 were invited to sit on the panel. He said he didn’t trust the Legislature to make serious property tax reforms if the measure doesn’t go forward.

Still, committee members said looking into CI-121 has given them more understanding of the property tax issue, and they’re willing to start looking at what can be done to address it.

“If nothing else, this initiative has brought us together to have a more thorough discussion about how we can help those that need it most in the state of Montana,” said Cohenour.

On Tuesday afternoon, the committee did have a discussion about some other possible options for reducing residential property taxes – such as a “circuit breaker” program to provide relief for lower-income households or expanding existing assistance for people on limited or fixed incomes. It’s part of a larger study being done into the property tax system, set up during last year’s legislative session.