January 2008 Some Questions & Answers

1. What is incorporation?

When a large group of voters occupy a relatively small geographic area they can petition their county to form a municipal corporation in order to govern themselves. If a majority of voters in the defined boundaries then vote to do so, the new municipality receives general powers of a corporation and legislative, administrative, and judicial powers provided by law. The legislative powers are vested in the governing body of the municipality, the executive powers come from the form of government adopted by the municipality, and the judicial powers rest with a municipal court. Our sources for the detail have been the Montana Constitution and the Montana Code Annotated (MCA). Both can be found www.mt.gov. Click on "State Laws." Ken Weaver's book, Governing Montana at the Grass Roots, is also an excellent resource and is available from the MSU Local Government Center.

2. Why should Big Sky consider it?

There are a number of real reasons that the Big Sky community should consider becoming a legal municipality. Duplicating services we receive from special districts is not a reason. As Big Sky has grown, these special districts have filled many needs, but gaps exist. Here are the key reasons for considering incorporating:

Local Control to ensure that the health and safety needs of a community are met is the basic reason that communities incorporate.

Big Sky has met a key public health need through the establishment of a water and sewer district. Fire protection is provided through another special district. However, underneath these two well-run services, there are gaps in the public safety arena that were identified by residents who responded to the 2004 Chamber survey. Concerns about the adequacy of county-provided law enforcement and the lack of enforceable ordinances for road safety were two significant issues that surfaced. Special districts have ably met the needs for necessary, but very specific services in Big Sky. However, there is no formal means for coordination of these when needed nor can any of these on its own, serve as the local forum for meeting new or additional local needs.

Local Accountability of public officials and governmental bodies for decision-making is a second reason that communities incorporate.

Incorporation creates a central authority directly accountable to citizens in the form of locally elected officials. It provides official standing, local citizen control of their community's destiny, a place to go for answers, a public forum for improvement, accountable local elected officials, the potential for more efficient service delivery and the ability to manage the issues that come with growth such as enforceable ordinances, improvements in public safety and security, foresight and planning.

County government is not particularly responsive to local needs.

In Governing Montana at the Grass Roots , Weaver states, "While county government was created by the state primarily to meet the needs of the state, a municipal corporation and its governing structures are the creation of a community to meet community needs." Gallatin County serves 85,000 citizens spread out over 2,600 square miles. It must provide uniform services throughout its jurisdiction and cannot easily respond to local requests. The fact that the county seat is 45 miles away, the county is growing rapidly, and Big Sky has a local revenue source (resort tax) means that, for better or worse, Big Sky receives limited attention and no direct funding from Gallatin County. Experience over the past few years indicates the trend is not improving: Gallatin County declined to help fund the Big Sky and Bozeman bus transit link, has eliminated the snow plowing subsidy, and reneged on a trails grant it had previously promised. Many residents feel neglected or ignored by county officials.

Provide for legitimate standing as an official place in Montana government.

Municipal government is a voice for the community to express its will on issues. It has recognized authority and legal standing to represent its citizens in transactions with county, state, federal governments and in the private sector. Local government can take the lead on a number of issues - speak with authority with quick access to decision makers in both the public and private sectors. Independent citizen groups in Big Sky have done a good job, but require organization on an ad hoc basis, usually from a small group of dedicated people who are called on repeatedly for their skills and commitment. Below are some examples of issues that have arisen in Big Sky. A municipal government might have served an effective role in getting quicker action or any attention to these:

* Highway 191 Safety (Might a municipal government have received a quicker response from the state of Montana?)
* ORW proposal. (Would an outside legislator sponsor a bill without the knowledge of a local municipal government?)
* NorthWestern Energy (Regarding frequent power interruptions and surges, might a municipal government have received attention more promptly? Might a solution take less time than the 4-5 years recently announced?)
* Fire Season of 2000 and other emergency situations (Who's is in charge of keeping Big Sky informed?)
* Solid Waste Disposal: Bears, dumpster availability & garbage (Could a municipal government exert some pressure?)

Access to Other Revenue Sources

There are many sources of revenue, grants, loans, and in-kind assistance available to municipalities from the state & federal governments. Here are some of them:

* Montana Department of Commerce - local Government Assistance Division (water & sewer, bridge, rural development)
o Community Development Bloc Grants; Water & Sewer projects. Approximately $2 - 3 million per year - 98% Federal Funds. Must be incorporated to apply directly; otherwise compete at county level.
o Treasure State Endowment program: Water, Sewer and Bridge projects. Approximately $10-15 million per year. Must be a WSD for water and sewer projects - compete directly. Bridge work can apply directly if incorporated; otherwise compete at county level.
o Bonding authority allowed to municipalities.
* Montana Department of Transportation:
o Gas Tax Allocation - allocated to counties and incorporated cities. A share of the state fuel tax. Allocation is based on population and miles of roads in incorporated areas. A total of $10,360,000 goes to incorporated areas per year. Big Sky would qualify for some $10,000 plus or minus per year. Used for construction and maintenance programs
o Community Transportation Enhancement Program for trails, bike/pedestrian projects.
* US Department of Housing and Urban Development - public facility and housing projects.
* Rural Community Block Grants - water quality, public services, health care and fire protection.
* US Department of Agriculture: Rural Development Program. Some 40 programs including low-interest housing loans, SDA-backed loans for businesses, and grants for communities and nonprofit groups. Others include programs for broadband Internet access, telemedicine and long-distance learning, plus housing and rental subsidies.

Provide for a more efficient means for Road Maintenance.

There is no getting around the fact that roads are costly to build and maintain. A municipal authority will be able to bring economies of scale to the process and the authority to negotiate shared maintenance agreements with neighboring developments outside its boundaries. Homeowners Associations find both difficult to achieve.

Water Rights.
A recent judicial decision in Montana limits the ability of non-municipal water districts to install new community wells.

4. What are the disadvantages?

The most common argument against becoming a municipality is that it will increase taxes.

There is a cost to self-government and we have spent a fair amount of time trying to estimate what it will cost and what impact it will have on local property taxes. See below.

The municipality will not include the entire geographic area we know as Big Sky.

Also true, but after three years of studying this issue, we've come to the conclusion that this is more a fact of life; it is not necessarily a real disadvantage. The reasons are legal, political, financial, and practical.

Legally, Big Sky cannot incorporate across the Gallatin-Madison county line. State law does not permit it and after consulting with the county attorney's office and our own counsel in Helena, we're convinced that there is no way around it short of a legislative change. Changing the law is a possibility but there are potential political barriers and the issue of cost. (The last attempt at this was not inexpensive.) We also studied what it would take to create a county of Big Sky. The legal and political hurdles to this are considerably greater than trying to incorporate across a county line. After talking to experts all over the state, we have taken their advice to pursue the discussion in one county. If successful, the resulting municipality will be in a better position to approach the legislature if citizens on both sides of the county line wish to pursue a change in the law. The second legal reason is Montana law on density. A municipality must have 200 "inhabitants" (people who call Big Sky home) for each square mile of land area. This number was reduced from 500 inhabitants during the last legislative session at the request of Seeley Lake. Our own discussions in Helena lead us to believe further reduction is unlikely.

There are additional political, financial, and practical considerations. Politically, municipalities serve the citizens who live within their boundaries. The vast majority of people who live in Big Sky can be brought into a municipal boundary that will meet Montana law. Financially, the taxable property value in Gallatin County that falls within a legally doable boundary is about 80% of the taxable value in the entire Gallatin County area that might be called Big Sky. The other side of the financial coin is the cost of providing services over a vastly dispersed geographic area. Consider any service having to do with roads and think about the ratio of people to road mile. Doesn't it make more sense for a newly formed municipality to bite off only as much as it can chew when it comes to committing to a geographic footprint? Even without the legal constraints, an efficient municipality is one that zeroes in on where its inhabitants (again people who actually call Big Sky "home") live. Put another way, there are very real practical reasons not to include the entire geographic area we know as Big Sky in a municipality.

Quotas on liquor licenses

This is a serious concern to some individuals and developers. Potential solutions exist and we are we are putting together a business group to address this issue specifically.

It will make our affordable housing problem worse.

One argument is that any property tax increase will raise rents. Data on rent and property tax increases in Big Sky do not demonstrate a correlation. Rather rents appear to be linked strongly to demand and market forces. The affordable housing problem in Big Sky is a function of supply and demand in the real estate market. If Big Sky desires to do something serious about affordable housing, a municipality is in a better position to carry out the will of the voters.

5. How much will it cost?

There are basic functions that Montana requires an incorporated municipality to perform. These functions create a fixed cost of operating a municipal government. According to the MSU Local Government Center, they include a council of elected representatives, a clerk and perhaps assistant, judicial and legal services (usually contracted for) and office space, insurance and administrative expense.

We call these "opening the door" costs and in the fall of 2006, estimated them to be $350,000-$450,000 annually. We are increasing that estimate in 2008 to $400,000 - $480,000. You can see a table with the details under question 5. in the .pdf version of this page here.

Services that the town provides its citizens are additional costs. Those most frequently mentioned by Big Sky residents are law enforcement, park maintenance, road maintenance, and planning/zoning. The voters, as represented by their elected representatives, would ultimately determine the provision of any of these services and the associated costs. Note that some of these services are currently being paid by homeowners associations (HOAs). To the extent that a local government assumes the responsibility at the same or lower cost, one would expect an offset in HOA dues.

6. Where will the money come from?

Local government in Montana is funded by a variety of sources, including property taxes. (In addition, governments that existed in 2001 receive a portion of state tax revenues from alcohol/gambling/bank taxes.) Gallatin County would also return the county road taxes collected, for which no services are currently being received in Big Sky. It is likely that a municipal government would also receive a portion of the resort tax revenue that is currently generated within the Big Sky area.

7. What kind of property tax increase would result?

We have estimated the property tax impact of "opening the door" costs at $400,000 annually. Our assumption is that $150,000 will be available from sources other than property tax, leaving $250,000 to be covered with a property tax increase. Based on a reasonable estimate of taxable property value, we estimate the increase to be about 34 mills. Look at your Gallatin County tax bill and find the amount labeled, "Total Taxable Value". Multiply this by .034. You can view a table of tax estimates for different taxable market values under question 7 on the .pdf version of this page here.

8. What about the Resort Tax?

Montana resort tax law sets out two kinds of places that are eligible for this revenue source. An unincorporated place is defined as a "resort area". Thus, the existing Big Sky Resort Area District (BSRAD) is a "resort area" and is the only one in the state. The second is a "resort community" and is defined as an incorporated municipality. Whitefish, Red Lodge, and West Yellowstone are examples of "resort communities". The law did not anticipate what happens if a portion of a "resort area" incorporates. The answer requires an opinion from the Montana State Attorney General. We have been working with the BSRAD and several attorneys to draft the request for the opinion in a way that preserves the current revenue stream with minimal disruption to Big Sky. Here is the guidance that we have provided the attorneys:

* The full-time, voting residents of Big Sky who benefit from the current BSRAD and will benefit from municipal government are largely one and the same. They voted to create the BSRAD and have voted for its extension.
* The BSRAD has broad support in terms of operation and governance. Disruptive changes to the status quo will not be viewed favorably within the Big Sky community.
* Given Big Sky's continued visitor and second home growth, the focus of resort tax use should continue to be community infrastructure funding.
* Local control must be maintained.
* The potential for political conflict should be minimized.
* At the same time, the BSRAD and the city government that is within its borders must both be free to operate within the scope of their authorized powers.
* There is no interruption in the tax revenue stream or disbursement of allocations.
* Significant additional administrative costs are not created.
* A petition to incorporate will not be presented to Big Sky's electors until the effect of incorporation on the resort tax revenue is understood.

9. What happens to the other tax districts in Big Sky like the Water & Sewer District, Fire Department, and Ophir School?

Each of these districts have boundaries that are larger than a possible municipality and each will continue to serve their constituents outside of a municipal boundary just have they have done since inception. Residents within the boundaries will continue to be served just as they have since the districts were created. The specifics of accomplishing this are defined by law and vary depending on the district as follows.

School district boundaries are independent of municipal boundaries. Ophir School is completely unaffected by a municipal incorporation and would continue to operate with the same tax base and taxing authority.

While a municipality has the ability to create its own municipal sewer district, it also can choose to remain part of the existing County Water & Sewer District. This can be done in one of two ways. The elected officials of the new municipality can simply affirm that the municipality will remain part of the existing district. Or the municipality can create a municipal district and contract with the existing Water & Sewer District for continuation of services. Which of these options is the more sensible will likely be determined by elected officials, working with the Water & Sewer Board, but the simple point is that the status quo can be maintained.

Municipalities in Montana are required to have a fire department. But those that have a population of 5,000 or less are permitted to contract for fire protection services. If a municipality were created in Big Sky, it would thus be able to contract with the existing Gallatin Canyon Rural Fire Department to provide the same services that are provided currently.

It's worth pointing out that Article XI of the Montana Constitution which covers Local Government, contains a specific section designed to encourage the cooperation and sharing of governmental services, presumably to encourage non-duplication and inefficiency.

10. What's the actual process to incorporate?

The first key requirement is to determine the proposed boundaries of the municipality. A petition describing these boundaries must then be prepared and signed by 300 Gallatin County registered voters that reside within the specified boundaries. The petition is presented to Gallatin County for approval. Once approved it will be put to a vote. All Gallatin county registered voters who reside within the boundaries are eligible to vote. A simple majority is required.