Analysis by Issue
- Tax and Finance Policy
Option Taxes – The Legislature again refused to extend local option tax authority to cities and counties. SB-184 would have allowed local voters to enact a 4% tax on goods and services geared to the tourist economy. The bill also provided for the distribution of 25% of the money collected in the regional trade centers to smaller cities and towns and rural counties. If the seven largest counties would have enacted the option tax at the full rate, the revenue distributions to rural areas would have averaged more the $15 per capita. The bill passed the Senate by a 30-20 margin, but was tabled by an 11-9 vote in the House Taxation Committee.
HB-551 would have given local governments broad powers to impose voter approved sales taxes without the revenue sharing provision. This bill was also tabled in the House Taxation Committee.
Impact Fees – In the last three sessions of the Legislature, cities have been in a steel cage death match with builders and developers over impact fees. The authority of cities with self-government powers to collect fees for services and facilities related to new development was implied in a Supreme Court decision. The Building Industry Association introduced several bills to restrict this authority, but it finally agreed to sit down with cities and work out the differences on this issue. SB-185 will allow all cities and towns to collect impact fees under conditions that are intended to provide fairness and certainty on both sides. This bill represents a significant expansion of authority in an area of finance policy that is crucial to the future development of cities and towns.
Oil and Gas Impact Account – HB-758 sets up a special account for local governments across Central and Eastern Montana to allow them to manage the impacts of increased oil and gas development. Cities and towns in producing counties will receive about $800,000 per year in state funds to ease some of the pressure that is being exerted on local services by the latest boom cycle in the Oil Patch.
Business Equipment Taxes – The 1999 Legislature passed a law that cut the business equipment tax from 6% to 3%, and provided for reductions all the way down to zero if economic conditions improved. SB-48 removes the economic triggers and sets the business equipment tax rate at 3%. The new law also increases the business equipment exemption from $5,000 to $20,000. This change will reduce city property tax revenues $99,000 next year and $265,000 in FY-2007. Cities could have lost as much as $13-million a year by 2010 if the full tax reduction had been triggered under the repealed section of law.
Local Option Fuel Tax – SB-222 provides for the collection of local option fuel taxes at the retail level and requires cities and counties to determine the method of allocating revenues through an interlocal agreement. Past attempts to pass local option fuel taxes have been stalled by the collection issue. This problem has been corrected, and the obvious impediment now would be high pump prices.
Investments – SB-225 revises federal deposit insurance (FDIC) requirements for local governments. Under this measure, banks will be able to pool certificates of deposit which will allow cities to invest more than $100,000 in a single institution and could lead to better returns.
Mill Levies – Categorical mill levy requirements for cities and counties have been virtually eliminated by practice and previous Legislative enactments. SB-301 finishes the job by allowing local governments to levy mills for any public purpose.
Construction Bonds – HB-451 allows local governments to issue bonds to finance Urban Highway System projects. Under the bill, the bonds will be backed by future allocations from the Urban Highway System account.
- State Assumed and Mandated Programs
Statewide Public Defender System – Cities and towns will no longer be required to provide attorneys for indigent defendants. SB-146 sets up a statewide public defender system at a cost for cities and towns of about $1.75 per capita. The League and the Department of Justice conducted polls to determine how much cities and towns were spending on public defenders. Some cities and towns will pay more for these services beginning in 2006, but SB-146 seems to be a reasonable way to shut the door on the higher costs and legal challenges that were inevitable under the old system.
Water Adjudication – HB-22 assesses fees on all water rights in Montana to provide the money and additional staff necessary to complete the adjudication process some time within the next 10 years. The two-year charges for municipal systems will be based on the following table:
1,000 acre feet $ 20
1,000 to 4,000 acre feet $1,000
above 4,000 acre feet $2,000.
Note: This bill has been voided because it was not properly coordinated with the budget act. There may be an attempt to correct this problem in the December special session.
- Community Development
Main Street Program – HB-481 establishes a Main Street Program in Montana through the Department of Commerce and under the guidelines of the National Trust for Historic Preservation. Main Street is a remarkably successful economic development program for smaller cities and towns. It has combined historic preservation with marketing and business development strategies to revitalize the central business districts of cities and towns all across the country. The program will be funded by a $250,000 biennial appropriation, and the Department should be soliciting applications some time later this year from cities and towns interested in this new approach to downtown development.
Tax Increment Districts – The Legislature passed two bills that will expand the uses and clarify the procedures for tax increment taxing districts. SB-167 allows for the creation of technology districts.
SB-345 clarifies the termination procedures for increment districts, allows for the adjustment of the tax base, authorizes tax liens and makes other adjustments in the urban renewal laws that have been on the books for nearly 30 years.
Competitive Bidding – HB-636 raises the competitive bid limits for municipal contracts and equipment and supply purchases to $50,000. The bill was requested by Laurel and passed without opposition from the Contractor’s Association.
Design and Build Contracts – SB-342 authorizes design and build contracts for public projects under conditions that are intended expedite development and control costs. Cities have been interested for many years in design and build contracting, but there was no clear statutory authorization. This bill permits the practice and provides practical guidelines on how to proceed.
Statute of Limitations – SB-458 reduces the time allowed to file suit on a local government land use decision from 3 years to 6 months. The bill is intended to protect cities and builders from lawsuits that come after they have invested money in developments.
Zoning – SB-350 provides that divisions of land are subject to zoning regulations.
- Special Districts and Community Services
Sidewalks – SB-32, requested by Billings, permits minor sidewalk repairs to be paid through street maintenance assessments. The bill provides a very narrow definition of the sidewalk repairs that can be covered.
Street Maintenance – Under SB-175, also from Billings, a “trip generation” formula is now available as one of the methods of assessment for street maintenance districts. The purpose is to factor traffic into the assessment calculations.
Sewers – HB-342 would have reduced the protest requirement for the installation of sanitary sewers from 75% to 50%, and nullified waivers of the right to protest. The bill was amended in the House and tabled in the Senate.
Annexation – Bills were introduced in the House and Senate that would have made it possible to incorporate a new municipality within one-mile of an existing city or town. The advocates for these bills are not interested in promoting the benefits of municipal government. The purpose is to stymie the natural growth of cities by setting up shadow regimes to block annexation. The Legislature understood this subterfuge, and killed these bills.
Regulatory Certainty – HB-720 provides that developments will proceed under the ordinances, regulations, or rules that were in effect at the time the project application received final approval.
Takings – HB-572 was the latest in a cluster of bills that would supplement the protections in Article V of the Federal Constitution by providing expedited proceedings and bonus compensation for those claiming that a government action diminished the value of their property. The bill was opposed by cities, counties and the state. It was tabled in the House Local Government Committee.
- Public Employees and Pensions
Volunteer Fire Departments – HB-283 gives cities and towns the option of setting the funding requirements for volunteer firefighter disability and pension accounts through an actuarial study instead of a formula based on the market value of property. This bill assures full funding of the pension accounts and protects cities with relatively high property valuations from overpaying for these programs.
Police Arbitration – HB-483 mandates binding arbitration for police officers in first- and second-class cities. The Legislature rejected arguments that this bill was an infringement on local management authority, and also the suggestion that it should be expanded to include deputy sheriffs, prison guards, highway patrol officers, bill drafters and others in critical positions.
Police and Fire Pensions – Several bills were introduced to increase police and fire pension benefits. The general push in these measures was to include holiday and overtime pay under the definition of compensation used to calculate pension payments. The House and Senate budget committees killed these bills because of the costs to the state general fund and local governments. Another bill that would have required an immediate increase in employer contributions to PERS was stalled until the Legislature has more answers on the sudden actuarial deficits in most state pension accounts.
- General Legislation
Keg Registration – Bozeman requested support for this bill during the conference last fall in Kalispell. HB-348 requires beer kegs to be registered at the time they are sold for the purpose of discouraging underage drinking.
Freedom of Information – HB-794 would have established civil and criminal penalties for violations of Montana’s right to know laws and removed indemnification for public employees charged under the proposed statute. The bill died a quick and deserved death in the House Judiciary Committee.
Billboards – SB-411 would have required cities with outdoor advertising ordinances to pay extravagant compensation for the removal of billboards. The bill flew through the Senate, but was killed in the House after Whitefish and other cities identified some of the serious problems with the legislation.
Business Licenses – The Realtors Association arranged for the introduction of a bill to exempt agents from municipal licensing. The bill was amended to provide that real estate offices could be included under a city’s general business license ordinance.