(pensive music) (logo whooshes) - [Breanna] Coming up on "Impact," after a major increase in projected property taxes, homeowners are begging for some relief.

But the search for solutions is sparking a new debate and even a lawsuit.

- [Mike] This is money that needs to stay in the pocket of the taxpayers.

- [Breanna] And could passenger trains return to Montana's historical railroad towns?

A major study is looking at expanding Amtrak routes nationwide.

Some say it's about time.

- [Richard] At some point, they gotta have pity for the people that live out here in the big empty.

- [Breanna] That's just ahead on "Impact."

(pensive music continues) - [Announcer] Production of "Impact" is made possible with support from the Otto Bremer Trust, investing in people, places, and opportunities in our region.

Online at ottobremer.org.

The Greater Montana Foundation, encouraging communication on issues, trends, and values of importance to Montanans, and viewers like you who are friends of Montana PBS.

Thank you.

- Welcome to "Impact," our in-depth reporting series on issues important to Montanans.

I'm Breanna McCabe.

As Montana property values spiked, taxpayers panicked when they received their reappraisals and estimated new taxes.

Now the governor's office and counties across the state are clashing over an effort to lessen the burden.

As Joe Lesar reports, homeowners aren't particular how the relief comes, they just hope it comes soon.

- [Joe] Jane Klockman has memories of Bozeman that few people do.

- I came to Bozeman in 1927.

I was a baby.

I had just been born, and that kind of dates me, but (chuckles) I'm willing to accept it.

I've seen a lot of history.

- [Joe] Her childhood summers were spent here at the home that her aunt and uncle, Florence and James Hamilton, bought in 1924.

- [Jane] James Hamilton had been the third president of MSU, and so there is a history with this house and it means a lot in terms of keeping it in the family.

- [Joe] As her savings have dwindled, rising property tax bills have become more worrisome for her and her children, who hope to keep the house in the family.

- It then becomes a matter of do we give up the house or do we, what do we do?

What do we do?

- [Joe] Like many homeowners, Klockman was shocked by the estimated tax bill on this year's property reappraisal notices.

Some counties saw 40, 50, even 60% increases in home values, with tax estimates reflecting those increases.

Those estimates, though, are based on last year's mill rates, which means the actual numbers on tax bills coming out this fall should be substantially lower.

But that doesn't negate the fact that residential property owners continue to shoulder more of the property tax burden in Montana.

The overall share of property taxes paid by homeowners has grown from 38 to 52% over the last 30 years.

Rose Bender with the Montana Budget and Policy Center says the reason why is two-fold.

- That is a result of both the increase in residential values rising faster than other classes, and also legislative decisions to both lower tax rates in other classes of property and also pass exemptions.

- [Joe] State legislators were given estimates last November forecasting the steep jump in property values.

So what was done about it this past session?

Governor Greg Gianforte and the Republican-controlled legislature's main move was two property tax rebates of $675, available to homeowners this year and next.

Homeowners had to apply.

The Department of Revenue says just under 207,000 applications were approved.

According to House appropriations chair Llew Jones, the rebates cover the average estimated tax increase for homeowners in all but two counties.

For now, he says, Montanans are covered from any rise in property taxes.

- You know, one of the nice parts about meeting every couple years is as long as you have a couple-year solution, you have another time to take care of it.

- [Joe] But Democrats criticized that short-term approach, saying that with Montana's historic surplus to work with, last session was the time for long-term relief.

They say the relief wasn't targeted to homeowners who need it most, and renters were left out.

- I would argue that you know somebody who's a millionaire doesn't really need $675 and that the person serving you your breakfast at a local diner or a firefighter or a teacher could really use long-term, not one time only relief, that helps them stay in their home.

- [Joe] Republicans point out that the majority of property taxes go to local governments, and only 17% goes to the state.

(teacher speaking faintly) That money is referred to as the 95 mills, and it gets used to balance education funding between tax-rich and tax-poor school districts.

Last session, Jones crafted a bill that sends some of that money back to counties to help pay for local school mill levies.

- We wanted to make sure that money collected from property tax, the 95 mills, was, at least the vast share of it, went to offset local property taxes, to help the local property taxpayers out in their burden.

- [Joe] This was seen as last sessions signature long-term property tax relief bill, and it's projected to provide $123 million in property tax relief from 2025 to 2027.

But those same 95 mills have catalyzed a dispute over a Montana tax law and deepened a divide between local governments and the state over who's to blame for rising property taxes.

To better understand the controversy, here's a quick primer on how property taxes work in Montana.

Property taxes are collected in terms of mills and mill levies.

We'll spare you the complicated math, but what you do need to know is that most of your property taxes are subject to a legal cap.

Statute 15-10-420 limits local government property tax increases to half the average rate of inflation over the last three years, with several exemptions.

So once a county knows what it can charge taxpayers, it adjusts the mills up or down to capture the correct amount of taxes.

Historically, the state's 95 education mills have not been subject to this legal cap, but county commissions across the state are now saying that that law has been wrongly interpreted for decades and that the state is collecting too much.

- This overtaxation is $70 million of taxation they don't need to do.

- [Joe] We've confirmed that 28 county commissions have passed resolutions saying that they'll apply the cap to the 95 mills, something unprecedented in Montana.

They'll be levying 77.89 mills instead.

Beaverhead County Commissioner Mike McGinley, who spearheaded this effort to cap state mills back in August, says 77.89 mills is plenty to keep schools properly funded.

- If they go through the formula like the counties do this year, that 95 mills will increase their revenue this year over last year by approximately $20 million.

- [Joe] But this year, like every year, the state is asking the counties to levy the full 95.

- We don't feel as though we have the clear authority to reduce those mills.

Again, going back to 30 years of precedence is kind of what we're looking at.

- [Joe] To assess the full 95 mills this year, the Department of Revenue is using 17 of its banked mills, mills it didn't use in previous years, and instead saved or banked for future years.

This year, the state plans to use 17 banked mills.

Whether or not that's legally allowed is the crux of this debate.

Separately from the effort by the counties, Republican state senator Brad Molnar filed a class action lawsuit against the Department of Revenue over the 95 mills.

His lawyer, Bozeman attorney Matthew Monforton, says that only counties have the legal authority to bank mills and that the state's use of them is illegal.

- They've done this in previous years, but in previous years, it's been by one banked mill or two banked mills at the most, which although illegal, hasn't been big enough to cause any particular protest amongst taxpayers.

Now that they're doing 17 mills, that's an enormous amount of money.

- [Joe] With the increase in property values, revenue from the 95 mills is estimated to go up by 26%, a $91 million increase from last year.

Here's a look at how much a cut in the 95 mills would save homeowners.

- This is money that needs to stay in the pocket of the taxpayers - Executive director of the Montana School Boards Association Lance Melton disagrees with the counties' and Monforton's reading of the law, and he also argues that in the long run, capping the 95 mills won't bring the property tax relief the counties want.

- And if you cut these levies down, notwithstanding what people think it's going to do, it's actually going to harm local property taxpayers and specifically local residential property taxpayers.

- [Joe] Melton says the more a county relies on school funding revenue from the 95 mills, the more they'd have to raise their local mills in future years if the 95 mills are cut.

- And if you're in a tax-poor community, you're likely to see a 24, 25 mill increase in variable mills to get back to ground zero, just to get back to the beginning.

- [Joe] Several county commissioners we've spoken to including Gallatin County commissioner Zach Brown, think frustration with some at the state house is helping drive this effort from the counties.

- We probably wouldn't be at this point, from my perspective, if county commissioners and cities hadn't been getting kicked by the governor and by the legislature for the last two years, blamed for property tax increases.

- [Joe] Governor Gianforte has said publicly that excessive spending by some local governments is what's driving up property taxes.

With the surplus and the intention to address the issue going into the last session, McGinley wonders why the state is now asking for this increase.

- Especially this year and especially through the legislative session up there, when the biggest concern in the legislature was trying to control the cost of property taxes.

- [Joe] So what do state legislators have in mind for long-term relief?

House minority leader Abbott says using income tax credits to ensure property tax bills don't rise faster than household income, would be one way to provide targeted relief.

- We've seen that work in a variety of other places.

It's really good policy.

It's targeted to the folks that need it the most and it keeps people in their homes, which is a big deal for Montana right now.

- [Joe] Speaker of the House Matt Regier says passing local government spending caps, limits on the duration of levies, and voter turnout requirements for levies to pass are ways that the legislature can help control the growth of local budgets - It would take, not a fix-all by any means, but once you add up six or eight of these things together, it really makes a big difference for the property taxpayers in Montana.

- Representative Jones thinks the growing number of short-term rentals could be a revenue source.

Last session, a bill aimed to raise the tax rate on corporate-owned, short-term rentals passed the House, but died in a Senate committee.

- Hopefully, there'll be the political will, now that the noise is higher, to be able to take a much more robust look at what belongs in the residential class and what doesn't.

- [Joe] Sales tax efforts have failed for decades and two recent ballot initiatives to cap property value growth were unsuccessful.

However elected officials can provide relief, Klockman and her daughter Karen just hope it will come soon.

She says rising costs in Bozeman are making it more difficult for her to support her mom's fixed income.

- It's caused some financial strain, but we've found ways, you know, to make it work.

- [Joe] They're still exploring options for keeping the house.

Karen says she and her children share Klockman's wish of furthering the generational trend of owning the family home.

- They bonded with that house since they were children too, and they intend to have family and raise children in Montana, which would be the sixth generation.

- [Joe] That sixth generation is on its way.

Klockman's first great-grandchild is due in a few months.

The home will be out of her hands one day, but right now, she's still got memories to make.

- I mean, I'll have to see it go away when I die, but I plan to stick around for a while.

I have some other things I want to do, - [Joe] For "Impact," I'm Joe Lesar.

- The Gianforte administration is now suing Missoula County in an effort to force all counties to collect the full 95 mills.

It's been four decades since travelers could hop aboard a train in Miles City or Billings and get to Bozeman or Missoula, but passenger rail advocates are hopeful that soon could change, especially now that the Federal Railroad Administration is exploring what could be Amtrak's biggest expansion in decades.

And as Stan Parker reports, some Montanans hope all this momentum could put southern Montana back on the passenger rail map.

- [Stan] Devan McGranahan drove 2 1/2 hours from Miles City to Wolf Point to board an Amtrak train.

He's bound for Minneapolis.

I'm gonna hang out with my girlfriend.

She's from Des Moines, so she's able to drive up and then we're gonna spend some time in the city.

- [Stan] The 15-hour journey is a long haul, but his choice to ride rather than fly is informed by some arithmetic familiar to many in rural Montana, where travel options are limited and most involve a fair bit of windshield time.

- [Devan] I would've been looking at driving to Billings, which is about the same distance to the airport.

Flights from Billings to Minneapolis would've been leaving so early and getting back so late, that I would've been staying in Billings the night before the night that I arrived.

So for the same amount of driving time, I got a much more affordable ticket option.

- [Stan] The Empire Builder is the long-distance Amtrak route that links Chicago to Portland and Seattle.

It provides a critical travel option for communities along Montana's Highline.

But the southern half of Montana hasn't seen passenger rail service since Amtrak nixed its North Coast Hiawatha line in 1979, a route that succeeded the former Northern Pacific's historical path across southern Montana.

But there is a growing movement to renew service along that line led by the Big Sky Passenger Rail Authority.

- The Big Sky Passenger Rail Authority is a subdivision of state government.

We came into existence three years ago, November of 2020.

What we realized was that after 43 years of lacking passenger rail service in southern Montana and basically trying the same thing and expecting different results to get it back, we needed to do something different.

- Missoula County Commissioner Dave Strohmaier is the Authority's chair.

- We found a 1990s-era law on the books in the state of Montana that had, to our knowledge, never before been used, and it authorized counties to either establish rail authorities, or multiple counties to come together and establish regional rail authorities.

We are not intending to be a railroad and to run trains ourselves, but we really are that institutional and government infrastructure to make it a reality to once again see passenger rail through southern Montana.

- [Stan] The authority has 20 counties among its ranks along with tribal nations, the Montana Department of Transportation, and BNSF Railway, which owns the tracks that the passenger trains would run on.

- One of our signature accomplishments in the past three years was working with members of Congress to draft language that is now written into law in the bipartisan infrastructure law.

Some of that language directs the U.S. Department of Transportation to conduct a nationwide study of restoring discontinued Amtrak routes.

- [Stan] The study, led by the Federal Railroad Administration, also considers the potential for brand new routes.

- It is unprecedented, and this is what is truly different today than we've seen in the past.

- [Stan] The FRA is taking into account current traveler flow data, rural accessibility, geographic coverage and stakeholder input.

- We are doing everything in our power right now, and we have been, to make sure that we are well-positioned to be at the top of the heap or near the top of the heap, as far as routes recommended for restoration.

- [Stan] No routes have been selected yet, but the FRA has identified what it calls route segments, the conceptual building blocks for future routes.

It appears the cities in southern Montana are very much on the menu, along with segments stretching south to Denver and beyond.

Adding to this growing optimism for rail advocates, the 2021 infrastructure law also included $66 billion for rail projects.

- That's the first time that they've authorized as much money as they did towards rail, primarily passenger rail, but also money in there for freight rail projects.

This is kind of the first time to seize on this effort, because generally, Amtrak has kind of had a starving budget ever since its inception on May 1 of '71.

- [Stan] This is a welcome development for Glendive resident Barry Green, a retired locomotive engineer who has been promoting passenger rail since the late '70s.

- When I first moved out here in '77, '78, we still had Greyhound here, three buses a day in each direction.

Now all we have is one a day, each way.

We can't get to western Montana by flying, without going to Billings and then Salt Lake or Denver and then a flight to Missoula or Kalispell, which makes no sense.

- [Stan] And Green says Montana's Highline communities have even fewer options than Glendive.

- [Barry] They don't have the four-lane interstate, they don't have inner city bus service.

Yeah, a couple of them up there have air service, but then there's always people that, you know, can no longer fly or drive.

- Take Wolf Point, for example, a city of 2,500 on the Fort Peck Indian Reservation.

Lance Fourstar, a Wolf Point city councilman, says the community values its passenger rail service.

- The Empire Builder and Amtrak is a great way to connect everybody to places like Wolf Point, which can be very isolated.

- [Stan] Tribal executive board member Patt Iron Cloud agrees.

- A lot of our families only have one car or no car and they have to go and borrow cars to get to Wolf Point, to get on Amtrak, to go out to Seattle, to go out to Spokane.

- Half of our enrolled members live off the reservation.

So when they come home to participate in our ceremonies, our sun dances, our medicine lodge, a lot of times they utilize Amtrak, and it's great because it brings revenue into our tiny little community, which we really need.

- [Stan] According to a report by the Rail Passengers Association, in 2019, the Empire Builder provided $595 million in economic benefit for communities along the route, a roughly ten-fold return on the federal dollars invested in it.

- [Devan] There's no reason to think that the attractiveness and the popularity of passenger rail service in southern Montana would be any less than what we experience along the sparsely populated Highline.

- [Stan] There is some fear among Highline counties that Amtrak wouldn't run two lines in Montana, meaning the revival of the southern route could doom the Empire Builder.

Amtrak, however, maintains that it is not interested in eliminating or changing any existing routes.

All the conversations now are only about adding service.

Those conversations are informed in part by how much local communities want passenger rail.

The Big Sky Passenger Rail Authority has been collecting that sort of feedback during meetings around the state.

The Montana Healthcare Foundation funded some of them, like this gathering on the Crow Reservation back in July.

- Today, your input is really real important, 'cause we will take the results of this study directly into the agency research that came through, the direction from Congress cleared the White House, so... - [Stan] Economic potential was the primary focus, and state Representative Sharon Stewart-Peregoy also highlighted the diplomatic importance passenger rail once held for the Crow people - We've done it in the past, is to be able to ride from Crow to Washington D.C.

Delegations would go to D.C. for meetings and being able to access that.

- [Stan] And there's the nostalgia factor.

She remembers taking the train to Billings as a child, but now there's nothing left of the old passenger depot except an old cottonwood tree.

- Just the idea of being able to get on on that train and travel to Billings and be able to look around and have that adventure was really a big deal that I still remember today.

- [Stan] There's no question that restoring rail service in Montana would be expensive.

The tracks do still exist and for the most part are maintained and currently used for freight.

But the system would still need substantial upgrades to meet the goal of twice-daily service in each direction.

- Adding double tracks rather than just single tracks, adding additional sidings to allow trains to pull over and pass one another.

And also there's the station infrastructure.

- The old Northern Pacific depots could potentially be used once again, but whether it makes sense to restore them or reclaim them from their current uses is another topic of ongoing research.

Some are still used by BNSF, some are boarded up, others, a point of community pride.

- [Dave] Here, in my town of Missoula, Montana, we've got a train station that hasn't been used in decades.

It can once again be a hub for vitality and energy, economic and social, in my community.

- [Stan] And then there's the cost of the trains themselves.

- And the unfortunate reality is with the limited number of trained manufacturing plants here in the the United States and around the world, even if we hit the go button today, it would take several years in order to get the trains actually fabricated and ready to roll.

- I think when a lot of people hear this idea, they're gonna say, "Well, this sounds expensive.

Who's gonna pay for that?"

- Well, first off, I oftentimes get the question, will it pay for itself, to reframe the question a little bit.

And my response to that, I love this question, it will pay for itself exactly the same way as the airline industry pays for itself, as our roads and highways pay for themselves, They do not pay for themselves without public investment, in this case, federal investment.

So we need to kind of just get over this notion that somehow, rail, passenger rail, should be held to a different standard that we don't hold any other mode of transportation to, particularly modes of transportation that move people.

- [Stan] Whether the political will is there to fund such an investment is still an open question.

One thing Strohmaier is optimistic about, though, is the political diversity of the counties who've joined the authority.

- Some might think, "Yeah, passenger rail, that's kind of a blue-colored, urban thing."

No, some of our earliest joiners of the authority, like Prairie County, were interested because they have an aging population, because their constituents have to drive 175 miles to catch a plane or to seek medical services.

This is important to them at a very personal level.

- [Stan] Adding another east-west route south of the Highline certainly would've made Richard Gaughen’s journey easier.

He rode seven hours in a car from the Black Hills to board a train for his trip.

It's quite an ordeal to catch the train from where I live.

So I drove up here, gonna take the train to Minneapolis, and visit my daughter for a week.

I think a really efficient way to move people around.

I mean, east coast, they do it everywhere.

I realize there's a lot more customers on the east coast, but at some point they gotta have pity for the people that live out here in a big empty.

- [Stan] And what he's looking forward to on the train ride?

- Relaxation.

- [Stan] For "Impact," I'm Stan Parker.

- The Federal Railroad Administration plans to publish the results of the long-distance study in 2024.

That will include the proposed new and restored routes and the price tag.

The decision to fund any rail service expansion will ultimately be up to Congress.

That concludes this episode of "Impact," but here's what we're working on for the next edition.

(pensive music) Montana youth won a landmark climate case.

"Impact" discusses what's next with state agencies and experts.

And Montana's stream access law has long allowed anyone to enjoy our rivers, even when they run through private property.

But we've found spots where that's being tested.

We'll share the latest on Montana's public access next time.

Until then, I'm Brianna McCabe, and for all of us at Montana PBS, thanks for watching.

(pensive music continues) (pensive music continues) (pensive music continues) - [Announcer] Production of "Impact is made possible with support from the Otto Bremer Trust, investing in people, places, and opportunities in our region.

Online at ottobremer.org.

The Greater Montana Foundation, encouraging communication on issues, trends, and values of importance to Montanans, and viewers like you who are friends of Montana PBS.

Thank you.

(gentle music)