HELENA — Overwhelmed by a flood of property tax appeals following last year’s historic valuation spike, the Montana Department of Revenue acknowledged earlier this month that its Bozeman-area office fell behind this year on tracking new construction that should be added to Gallatin County’s tax rolls.According to Gallatin County Chief Financial Officer Justine Swanson, the snafu will delay the adoption of local government budgets and push back mailing of November tax bills across the county. Additionally, she said in an interview this week, unless revenue department staff can catch up on the backlog over the next month, the owners of some new construction may not be sent 2024 tax bills that reflect the true value of their property. That would shift tax burden to other taxpayers.The situation has caused consternation for Bozeman-area local governments, specifically officials with Gallatin County, the cities of Bozeman and Belgrade, and the Bozeman and Belgrade school districts. In a joint press release distributed Aug. 20, they expressed frustration that the department has failed to provide them with reliable tax roll valuations as they finalize their budgets for the coming year.“If taxes are levied based on these incorrect certified values, existing property owners are likely to pay higher tax bills while newly taxable properties may avoid payments until 2025,” the local governments wrote. “Doing so will also cause revenue shortfalls for some jurisdictions, which may result in a lower level of service to the communities.”As Montana’s tax system is intended to work, the state revenue department keeps tabs on the value of each distinct property across the state, producing the official valuations used to calculate the property taxes that fund local government services such as law enforcement, parks departments and schools.Each August, the department is required by law to provide each city, county and school district with a certified valuation representing its “best estimate” of the total value of the jurisdiction’s properties — in other words, the tax base that’s available to support local services. Once each jurisdiction’s governing body sets its budget for the year, the necessary tax revenue is divided across the tax base to determine the millage rates that are used to calculate tax bills for individual properties.The revenue department is supposed to use building permits and other records to keep tabs on renovations and new construction, which generally make properties more valuable. Tax base growth resulting from newly taxable development is typically a vital resource for city and county budgets because it isn’t subject to the half-the-rate-of-inflation growth cap that applies to aggregate collections on existing properties.However, in Bozeman this year, the revenue department says it failed to get all new construction on the books in time to meet its August certification deadline. In combination with corrections for errors made during the 2023 certification process, that resulted in the department’s tax base estimate for the fast-growing city of Bozeman shrinking by 1.8% between 2023 and 2024, a decrease of $321 million in market value.In an Aug. 15 letter to Bozeman city commissioners explaining the erroneous decrease, Montana Department of Revenue Property Assessment Division Administrator Paula Gilbert noted the department had processed 3,700 tax appeals in Gallatin County last year — work that Gilbert said took 10 months of staff time, even after pulling in assistance from appraisers from other parts of the state.“As a result of that 10-month commitment, we were left with only two months to incorporate new construction which was substantial in your jurisdiction, and which directly affects newly taxable values for taxing jurisdictions,” Gilbert wrote in the letter, which was first reported by the Bozeman Daily Chronicle. “This limited, two-month timeframe naturally impacted our staff’s ability to capture all new construction for tax year 2024 prior to certification of values.”Gilbert also wrote to Bozeman commissioners that the department has “shifted all available resources toward adding newly taxable items in your jurisdiction to the record for 2025 and going forward.”It’s currently unclear whether the department’s new construction backlog is localized to Gallatin County or extends to other parts of the state. A revenue department spokesperson declined to answer a question from Montana Free Press Monday about whether the department is confident that the certified values it has issued for other parts of Montana accurately reflect new construction.Kelly Lynch, executive director of the Montana League of Cities and Towns, said in an interview Monday that she is actively investigating the possibility that the issue is more widespread. Helena City Commissioner Emily Dean also told MTFP this week that she doesn’t believe the department’s figures for the value of new construction in Helena align with the volume of building permits the city has issued in recent years.“We’re anecdotally seeing this significant increase, and it does not seem to be tracking with these taxable values,” Dean said.The revenue department says Helena’s overall tax base grew by about $49.4 million of market value between 2023 and 2024, a 0.8% increase.Dean said the department’s 2024 tax base figure for the city of Helena came in lower than city leaders had expected. She said that after seeing that figure and news coverage about tax base uncertainty in Bozeman, she decided not to push for bumping a planned cost-of-living raise for Helena city staff from 3.5% to 4% as she and other commissioners finalized the city’s annual budget this week.“We have to budget based on the information we have,” Dean said. “And I can’t bring a budget amendment when we don’t know that the revenue is there.” Swanson, the Gallatin County finance director, said it’s fairly common for local officials and state officials to go back and forth over minor discrepancies in the department’s certified values, but that this year will entail a wholesale redo for most taxing jurisdictions in Gallatin County. She said that local officials have worked out a timeline with the revenue department that will give department staff until late September to produce a new set of certified values. That means delaying adoption of the county budget and likely delaying 2023 tax bills, which are typically mailed in early November, until later that month.Because property taxes are typically billed once a year, any construction the state revenue department can’t get to won’t be factored into 2024 taxes, Swanson said — meaning those property owners won’t be paying their fair share over the coming year even as they use tax-funded public services.Swanson added that she doesn’t blame revenue department employees for the situation, saying she thinks they’re managing as best they can.“I think they’re just understaffed, there are a lot of changes being made and they just can’t keep up,” she said.The post State backlog could let some new Bozeman construction skip next year’s property taxes appeared first on Montana Free Press.