Let's Get Real About Property Taxes
Updated: Oct 23, 2019
Over the past few months I’ve spoken with seniors living on fixed incomes who have told me that their property tax bills are cutting into their grocery budgets. We cannot simultaneously tackle our affordability crisis on the one hand while driving up the cost of housing with property taxes on the other.
While it’s true that tourists don’t pay their share, they’re not the reason why property taxes are going up. There’s an elephant in the room: growth isn’t paying for growth.
Only the State Legislature can authorize a tourist tax. Our legislature has been consistently rejecting the idea since 1981. I support taking action now at the City Commission level to reduce property taxes, even while we continue to lobby for a tourist tax. At best, pinning our hopes on a “tourist tax” may be wishful thinking. At worst, it's akin to increasing our national debt—a false promise that we don't have to make difficult decisions today because someone else will pick up the check in the future.
A hope is not a plan. Here’s my tax plan:
Rein in the sprawl that’s driving up our taxes by unlocking the productivity of our land. This includes policies that allow more housing (such as through ADUs and the types of duplexes and triplexes that are common throughout the historic core) and that support more small-scale commercial development in more places.
Fix our Impact Fees to properly account for future net tax revenues, not just install costs.
Continue working on tax fairness reform, including lobbying for a tourist tax, supporting a statewide sales tax, or implementing a county gas tax.
If we do these three things, we’ll bring down the per-capita infrastructure costs, make it easier for affordable housing to be created, reduce sprawl, and gift our walkable neighborhoods with places to actually walk to.
The Most Defeated Idea in Modern Montana Politics
The idea of a local options sales tax (a.k.a “tourist tax”) is likely the most defeated idea in modern Montana politics.
It turns out, cities across Montana have been trying to get legislative authorization for a local options sales tax since before this year’s City Commission candidates were even born (source).
Two years ago, Deputy Mayor Mehl ran on a tourist tax platform. Of 2019's crop of local option sales tax bills introduced in the State Legislature (including one by Bozeman Rep. Chris Pope), five died in committee; only one (pertaining only to existing resort communities like Red Lodge) made it to the legislature for a vote.
Our next opportunity for a tourist tax bill is in 2021. Two-thirds of our state legislature are Republicans. The far-right Republicans oppose taxes of any sort. Even the more moderate Republicans oppose a local option sales tax because it makes passing a statewide sales tax less likely. My guess is that Montana will get a statewide sales tax before cities like Bozeman get to create their own local sales taxes.
Frankly, I find it a bit disingenuous for a City Commission candidate to promise a tourist tax when a tourist tax is beyond the power of City Commission to compel or create. We’re fooling ourselves (and doing everyone a disservice) if choose to ignore the imperative of making hard choices today by instead fantasizing that tourists will pick up the tab tomorrow.
Get Our Impact Fees Right
Smart cities don’t budget based on installation cost—they budget based on life-cycle costs.
Impact fees should be set at the life-cycle cost of infrastructure net of the expected future property tax revenues. A city block for 6 single-family homes, 16 rowhouses, or 60 apartment units costs substantially the same amount to build and maintain. The property taxes revenues are dramatically different.
Urban3's analysis of Bozeman shows that compact neighborhoods (such as those north and south of Downtown) with proximity to daily destinations generate far more tax revenue per dollar of city infrastructure costs (streets, water and sewer lines) than low density neighborhoods. By updating our land use policies to enable more neighborhoods like those in the historic core, we'll not only reduce per-capita infrastructure costs (and thus per capita property taxes), we'll also create more livable neighborhoods in the process.
Let’s Stop Trying the Same Thing and Expecting Different Results
We shouldn’t give up on the idea of working with the state legislature to diversity our sources of tax revenue, including a local option sales tax. That said, a change of tactic might get us further. Here are some alternatives that we should consider:
One viable option is to work with Gallatin County to create a 2¢ county gas tax. Like a restaurant "tourist tax," a 2¢ gas tax would target tourists more than locals. We’re already authorized under state law for Gallatin County to enact one. Gallatin County Commission seems amenable to the idea if someone else will do the legwork. If elected, I'd volunteer.
Or, let’s lobby for an empty house tax that applies to vacant investment properties. Vancouver just created one, and last year it generated $30m for Vancouver’s affordable housing fund.
Finally, we should work with the legislature to transform our tax code to stop incentivizing cheap buildings and vast parking lots. The Co-op on West Main pays more in property taxes than Costco, and both pay more than Walmart—yet Walmart costs the city far more (adjacent city streets, water lines, sewer lines, stormwater management, emergency responders).
A tourist idea is a nice sounding idea, but a hope is not a plan. To stop property taxes from going up, we need a plan. Reining in the sprawl that’s driving up property taxes; unleashing the productivity of our land; and, getting our Impact Fees right is not just a nice idea—it’s the plan I’ll begin working on in January if elected.
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