Proposed property tax initiative in hands of Montana Supreme Court

Montana Justice Building
Posted at 7:45 PM, Jul 25, 2023

HELENA — In 2022, a proposed ballot measure that would have capped Montana property taxes fell short of the more than 60,000 signatures it needed to go before voters. Now, with many more Montanans raising concerns about the impact of rising property values, advocates are attempting to place a similar measure on the 2024 ballot – but it will have to clear some legal hurdles if it’s going to qualify.

“The future of Montana belongs to those who can afford to live here – and without a change in our property tax system, that future won’t include many of us,” said Matthew Monforton, a Bozeman attorney and one of the main sponsors of last year’s Constitutional Initiative 121.

CI-121 would have based residential property’s assessed value on what it was in 2019, then limited any increases in value to no more than 2% per year. Property could only be reassessed to its new market value after it was sold or substantially improved. CI-121 would also have limited total residential property taxes to 1% of the assessed value.

Matthew Monforton, a Bozeman attorney and one of the main sponsors of CI-121, is now backing a proposed measure that’s currently designated as Ballot Issue 2. It would make broadly the same changes as CI-121, but its cap would apply to all real property – not just residential properties. He said they made the change in response to concerns that the previous proposal would have shifted the tax burden from homeowners to other property owners.

“The rallying cry that we heard last year was, ‘Oh, there's no need for a ballot initiative. Let the Legislature do its job. Let the legislature fix the problem with property taxes,’” Monforton said. “The problem, as we saw in this latest session, just like the session before that, is that the Legislature refuses to enact any kind of meaningful reform of property taxes because they like the system as it is.”

However, last month, Attorney General Austin Knudsen’s office ruled Ballot Issue 2 was “legally insufficient” and could not go forward for signature gathering. They argued it violated a rule that a single constitutional amendment can’t make more than one substantive change, and that it was “ambiguous in its terms, and its application, thereby making it impossible for voters to understand the Measure, and what they are voting for or against.”

The attorney general’s office said the limit on property valuations and the overall cap on property taxes are related, but that their vastly different fiscal impacts point to them not being closely related enough to count as a single subject. In a legal brief to the Montana Supreme Court, they argued the proposal should instead be submitted as multiple separate initiatives.

“For example, a citizen could reasonably decide to limit the State’s ability to increase property values by more than 2% per appraisal cycle, but not support a 1% tax cap that results in a revenue loss to their local school district, county, and rural fire district,” they said. “Those present distinct political decisions for citizens.”

Knudsen’s office also said the language of the measure needed clearer definitions for terms like “real property” and “significantly improved,” and that it wasn’t clear whether “special assessments” would count against the tax cap.

Monforton challenged the attorney general’s decision to the Supreme Court. He noted that CI-121 was very similar and cleared the review for legal sufficiency. He accused the attorney general of overstepping his authority and questioned the Department of Justice’s response to his petition, in which they said Ballot Issue 2 also “implicitly amends” four other constitutional provisions – though they said that wasn’t the only reason it violated the separate-vote rule.

Monforton also objected to the state’s proposed statement on Ballot Issue 2’s fiscal impact, prepared in accordance with Montana law. That fiscal analysis said that, without further changes to the tax system, the measure could reduce the amount of property taxes the state can collect by up to $459 million in the first year – and reduce revenues to counties, cities, school districts and other local authorities by well over $1 billion.

Monforton argued that the law allowing the state to put a fiscal statement on petitions for a ballot measure isn’t constitutional, and that if they did have the authority to add it, it should only cover impacts on the state, not local governments.

Knudsen’s office said not including the fiscal statement – for both the state and local level – would be denying voters the information they need to make a fully-informed decision.

A number of organizations filed amicus briefs with the Supreme Court, raising concerns about Ballot Issue 2 and supporting either the attorney general’s decision to find it insufficient or to provide the fiscal statement. They included the Montana League of Cities and Towns, the Montana Association of Counties, the Montana Federation of Public Employees, the Montana Bankers Association, the Montana Association of Realtors, the Montana Building Industry Association and the Montana Chamber of Commerce. Many of those organizations were also involved with the campaign against CI-121 last year.

“Petitioner’s proposed ballot issue threatens the very fabric of local government,” said an amicus brief from the League, MACO and the Montana Quality Education Coalition. “It does so without giving voters the information needed to understand the broad effects of the ballot issue, by violating constitutional requirements, and rendering a vote on the ballot issue as destructive as it would be pointless.”

Monforton said the opposition comes from “special interests” that benefit from the current system.

“They're trying to use the courts to stall our signature-gathering process as much as possible to keep this petition out of the hands of Montana voters and Montana homeowners – because they know that if Montana voters get a chance to sign this, they will sign it and they will vote for it,” he said.

He argued opponents have overstated the impact the measure would have on governments.

“The kind of initiative that we're trying to bring forth, the kind of property tax reform that we're trying to bring forth, has been done in state after state after state – and in every one of those states, the same kind of groups said that the sky would fall, there would be a financial collapse of local governments,” he said. “That never happens, because local governments learn to manage when there is true property tax reform.”

Monforton says he expects it will be at least several weeks before the Supreme Court rules in this case.