Taxpayers in the Bozeman School District pay slightly more because the city of Bozeman has created four “tax-increment finance” districts to help boost the local economy, and now it has a fifth district in the works.
Tax-increment finance (TIF) district No. 5 would help the nonprofit Montana State University Innovation Campus, formerly called the Advanced Technology Park.
The district would provide up to $1 million in property tax dollars to help the 25-acre technology park on West College Street expand by 45 acres. The Innovation Campus wants to spend $2 million to put in new streets, water and sewer lines and to support new buildings that could create a “hot spot” for high-tech businesses.
Brit Fontenot, the city’s economic development director, told the School Board the city is working with the MSU Innovation Campus to create jobs, which would allow more people to buy homes and “increase our tax base.”
Steve Johnson, Bozeman schools deputy superintendent, said the vacant land now pays only about $5,000 a year in taxes. “Once it’s developed, taxpayers reap the benefit,” Johnson said.
Bozeman School Board trustees discussed the proposal at their meeting Monday. They plan to meet next Monday with the Bozeman City Commission to discuss it further.
“The reason the school district cares is because our taxpayers may be less willing to approve bonds” needed to build new schools in the future, School Board Trustee Elizabeth Williamson said.
Teresa McKnight, executive director of the Innovation Campus, said it would also provide educational opportunities for students, show them how to be entrepreneurs and decrease Montana’s “brain drain.”
School Board Chair Gary Lusin said he supports the economic development effort, but added, “At some point, taxpayers will let us know enough is enough.”
“This proposal has a lot of merit,” Trustee Denise Hayman said, though she added, “I’m not a fan of TIFs. They ought to be limited … (so) we can protect our taxpayers.”
Johnson said officials are willing to limit the new TIF district, so that it would collect up to $1 million and last only 15 years.
The City Commission has the power to create a TIF. It sets boundaries around a specific area, like downtown. The TIF freezes the amount of property taxes that the city, county and schools collect from that district at the first-year level for up to 15 years.
Any additional taxes – the “increment” generated by inflation or new businesses or new construction — are invested inside the district. The idea is that by the end of the 15 years, the district has more buildings, businesses and jobs, and it pays more taxes than it would have without the investment.
“If it can stimulate growth that wouldn’t otherwise occur, everyone wins,” Johnson said.
To make up for the dollars lost to the TIF district, the School Board by law can spread the cost over other taxpayers by raising the tax rate slightly. Cities and counties can’t do that.
The city has four tax-increment districts – the downtown, North Seventh Avenue, Northeast Urban Renewal and Mandeville Farm Industrial districts. Downtown generates the most in taxes; at the end of 15 years its TIF was extended 20 years to pay off bonds for constructing a parking garage.
The cost to school taxpayers from Bozeman’s four TIF districts totals $7 a year for the owner of a house with a state-assessed market value of $100,000 that’s located within both the Bozeman elementary and high school districts.
Since the first TIF was created about 16 years ago, the four districts have cost a Bozeman homeowner with a $100,000 house a grand total of $43.11.
For homeowners in the Monforton, Anderson, Gallatin Gateway and other rural districts that send their teenagers to Bozeman High, the cost over 16 years has totaled $13.30 on a $100,000 house.
Gail Schontzler can be reached at firstname.lastname@example.org or 582-2633.