The city of Billings is facing a possible money problem.
The Montana Legislature voted to cut some property taxes, and that could hurt the city’s budget.
The city charter currently limits Billings' tax rate for property taxes.
Earlier this week, the Legislature passed laws that allowed the city to increase that rate.
“This legislation that passed does give us a path forward for one year to basically reset that cap in our charter,” said Andy Zoeller, city of Billings finance director.
While the Legislature decreased property taxes to help out home and business owners, taxes will still be collected.
“It gets made up largely by large industry and large commercial,” Zoeller said. “There's going to be tax increases on second homes and short-term rentals.”
Without the ability to increase the tax rate, also known as a mill, the city could lose $8.5 million in tax revenue.
Property tax revenue of about $55 million pays for police, fire, parks, city administration, the library, and MET transit.
That could potentially mean the loss of around 70 jobs, according to Zoeller.
The problem is the city charter and the state law don't line up, and the Billings City Council, which meets Monday, will have to decide what to do.
“We have a charter that says you can levy this tax rate and nothing else,” Zoller said. “But the state says you will levy something more than that tax rate. That's really what the issue is.”
Billings and Sunburst, a small city in western Montana, are the only two cities in the state whose charters present this challenge.
It's not known at this time what would be best for Billings, and it may have to be decided in the courts.
“A court gets to decide that a charter is a contract instrument that says the mills are fixed,” said Rep. Llew Jones, R-Conrad. “The Constitution says the state (Legislature) never cedes its right to be able to address this.”
Jones, the House Appropriations chair, says the Legislature amended the bills to take care of Billings and Sunburst.
“There would be a 4-year hold harmless,” Jones said. “There's going to be two legislatures set over that four-year period. Plus Billings, the state would backfill whatever amount was lost while we determined how to do it different, do it better.”
The options follow the state law, stay with the city charter, or have a vote for a mill levy.
And Zoeller says the finance department needs some direction from the city council on Monday night.
Senate Bill 542 and House Bill 231 still need to be signed by the governor.
