With Tax Law, State Micromanages Cities

By Kellyn Brown

City budgets across the state are in such dire straits that those in the unenviable position of managing municipal money have joked amongst themselves about which one will go bankrupt first. While not funny “ha! ha!” it is, perhaps, a way to lighten the mood when staring down untenable numbers. Right now, it appears Billings is favored to go into the red first, which, like the others, is staying afloat by spending money it doesn’t have.

The largest city in the state has continually tapped into its reserves to make up for operating deficits and to keep its budget afloat. Meanwhile, it is hoping for a change in state law to prevent an inevitable drowning.

Billings’ budget, while dire, is not unique. Other Montana cities have succumbed to cutting popular programs. In Great Falls, for example, the Fourth of July fireworks show is in jeopardy – so is the DARE drug-prevention program money and funding for the popular RiverFest. Oh, and if you live there, your property taxes are going up.

Elsewhere, in Missoula, city councilors are perplexed by a budget shortfall of $367,000 after the Montana Department of Revenue told them how much property tax income it could expect, which was far less than hoped for. To make up the difference, Missoula is mulling cuts and increasing taxes. In Bozeman, the city has begun laying off employees in the planning department, and will consider more cuts across the board if needed. In Helena, to raise more money, it increased the sewer, street maintenance and solid waste fees.

Here in Kalispell, councilors are doing the same, but that won’t make up a hefty budget shortfall that has city employees nervous layoffs are on tap. Cities, after all, are limited to how much they can raise their respective taxes because state lawmakers, in 1999, decided they knew what was best for them. Thus, in some cases, even if city residents wanted to prevent cuts by agreeing to a modest tax increase, they can’t.

And these are not sagging, post-industrial “Rust Belt” cities – Montana’s urban areas are exploding with population growth and economic development. They are the engines powering Montana’s (relatively) resilient economy at a time when the national economy looks more fragile by the day.

So why the budget crunch? The law caps the amount a city can increase taxes to one half of the rate of inflation averaged over three years. For a state that prides itself on its independence, the lawmakers who run it have opted for a parental role toward its largest municipalities. Why should a Glendive legislator decide how Kalispell is best managed?

I’m not advocating more taxes, but I do believe most voters are smarter than legislators, who have proven – by not repealing a law that is roundly and routinely panned as stupid – that they know little about running a city. Moreover, the state recently boasted that its finances are doing better than expected, by about $210 million – salt to the struggling cities’ wounds.

To raise money in other ways, cities and towns are hoping to institute so-called resort taxes and tweak city charters. But it may not be enough. There is a sliver of hope that the cities will be unified in the upcoming session and finally be able to convince lawmakers that they have no business meddling in their affairs. Several options have been proposed before, each of which would have to be approved by a city’s residents before they are implemented.

In most cases, voters would shoot down any tax increase – and that’s a good thing. But at least then they would be making the decision for themselves. Instead those decisions are currently being dictated by state lawmakers, who should share the blame if one of Montana’s cities does go bankrupt.

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