Property owners in Missoula will see a smaller increase in taxes than first expected this year, thanks to an expanding tax base driven by new construction.
Certified tax values released two weeks ago by the Montana Department of Revenue reflected the city’s steady growth, and while city staff initially projected $345,000 in new revenue from new construction, the figure came in higher at $452,000.
Boil it down and the owners of a median-priced home of $225,000 in Missoula will save nearly $7 a year on their property tax bill.
“The taxable values came in higher than we budgeted,” said Dale Bickell, the city’s chief administrative officer. “We were trying to be conservative, but it’s really hard to project what the values are going to be. We’ll apply all those savings to the mill levy and the increase will be less.”
When the city concluded its budgeting process last month, it left property owners facing a 5.7 percent tax increase to maintain existing city services. With the boost provided by new revenue on new construction, the increase will drop to 4.7 percent.
Bickell said new construction is taking place across the board, driven in large part by single- and multifamily housing. In all, the value of new construction has increased 66 percent this year over last.
The current development trends bode well for the city and its taxpayers.
“We're seeing a lot of growth," Bickell said. "One of our goals is to maintain our level of services on that tax-base growth and not have to use mill levy increases just to maintain our level of services.”
The Missoula Redevelopment Agency is also tracking the incremental tax growth in each of its urban renewal districts.
When the DOR released its latest figures, MRA saw a $60,000 increase in tax increment growth in the North Reserve and Scott Street district, and a $1.4 million increase in District 3, which encompasses the south side of Missoula.
But MRA anticipated more incremental tax growth in District 3 than the new figures suggest. South Missoula has seen robust redevelopment take place over the past year with the addition of Kohl’s and Cabela’s, among other stores.
But not all projects were completed by Jan. 1, when the DOR sets taxable values for the next year.
“We did not see the increases in District 3 we had hoped to see,” said MRA Director Ellen Buchanan. “I think it’s a matter of timing. That’s all we could figure out. We’re about halfway back to where we were before Kmart was torn down.”
Buchanan said the sale of the former Vann’s store to the Zootown Church and the razing of the Village 6 Cinema likely held back some incremental growth. The figures are expected to climb next year as new properties come online and anticipated new development takes place.
While most of the districts performed well, Buchanan said the Hellgate District saw a reduction, though the reasons why remain elusive.
“We lost almost $65,000 in incremental value, and can’t think of anything that’s been done out there that would have been done by Jan. 1,” said Buchanan. “We have no idea what that’s about. We’ve asked DOR and haven’t got an answer yet.”
MRA is overseeing several large projects that are expected to break ground in the coming months, including the six-story Stockman Bank building on the corner of Orange Street and West Broadway.
A student housing development is also expected to begin this year on East Front Street, construction is taking place in the Old Sawmill District, and the $150 million redevelopment of the Riverfront Triangle – the Fox Hotel project – continues to move forward.
Southgate Mall still hopes to begin its $70 million expansion and renovation by the end of this year, launching a multi-phased development that would include a new movie theater, housing and new dining opportunities.
Many of the projects are taking place in tax increment financing districts and wouldn’t immediately add to the city's taxable value of new properties. Rather, the benefits are seen in other ways, Bickell said.
“Between this and our building permit numbers, we we’re hopeful that this was the year we’d start seeing the trend go back in our favor, and get back to what we were historically seeing,” he said. “We’re hopeful this trend will continue.”