Missoula City Council adopts FY26 budget, holds tax increase to 3.39%

Martin Kidston

(Missoula Current) Calling it a good budget in lean times, the Missoula City Council on Monday unanimously adopted the municipal budget for the new fiscal year, holding to a 3.39% tax increase that largely covers cost-of-living increases.

While the funding decisions within the budget didn't please all, most praised the end result. Given changes made by the Legislature earlier this year, many residential property owners will pay less in city taxes this year when compared to last, despite the budgetary increase.

“This is the culmination of many months, with council giving the mayor and staff feedback on the budget as departments brought forward their priorities and needs,” said council member Amber Sherrill. “It really does show what our values are as a community. There were lots of wants and needs. Many wants didn't get funded, and some of the needs, too.”

The 3.39% increase is the smallest budget increase at the city in recent memory. It generates roughly $4.4 million in new revenue, most of which covers wage increases and the rising cost of providing basic services.

City departments were asked to find efficiencies and keep new requests at a minimum.

“Our revenue does not keep pace with the demand for services. But the creativity and ingenuity that goes into stretching those dollars to keep service levels intact and keep departments at a functioning level so they're not gutted is a ton of work,” said council member Gwen Jones.

The Legislature made headway this year in reducing the tax rate on residential properties from 1.35% to 0.75%. But several council members said more work is needed to diversify the state's tax system so other forms of revenue are captured beyond property taxes.

“A lot of work still needs to be done in that arena,” Jones added. “I don't care how you slice it and dice it. Until there are new forms of revenue, property taxes are the workforce for our city, county and schools.”

While the FY26 budget maintains basic services with its modest increase, concerns still linger. Among them, the city once again relied on a remittance from the Missoula Redevelopment Agency to balance the budget. It also relied on a range of fee increases.

Council members Mike Nugent and Sandra Vasecka said those increases will have impacts.

“These high fees translate to higher rent and higher property taxes, as well as higher property prices,” said Vasecka. “I've seen firsthand from both the government side and the builder side how expensive it is to build new housing, especially in Missoula County.”

Vasecka, who has voted against past city budgets, said her support for the FY26 budget came with mixed feelings.

“On one hand, the city property taxpayers are struggling, and the majority of them don't get a cost-of-living adjustment every year. But I don't want to punish city employees for so-called 'equity.'” she said.

In each of the past several years, starting under the Engen administration, the city has called on the Missoula Redevelopment Agency to provide a remittance to help cover shortfalls in the budget. But whatever MRA provides the city, it must provide the same amount to other taxing jurisdictions including Missoula County and public schools.

That has slowly eroded the amount of revenue available in the city's urban renewal districts, which the city relies upon for infrastructure and other economic goals.

“I've been really hung up on this part of the budget being propped up by the MRA remittance,” said council member Bob Campbell. “This is not sustainable. There's going to become a crash point at some point in the future. We're going to have to have a real conversation about what services we provide, personnel and whatnot.”

Mayor Andrea Davis said she and the city's various departments will work to address those fee increases and MRA's annual remittance. But despite the concerns, most described the adopted budget as “a well-functioning budget in a tough tax climate.”

Most property owners will see a decrease in property taxes paid to the city. A median home with a market value of $507,000 will see it's taxable value decrease by roughly 21%, meaning the owner will pay $14% less in city taxes, or around $257 less than the prior year, city officials said.

“This is a budget that continues to reflect the needs of our community and the commitment of this city to provide services,” said council member Mirtha Becerra. “That's not an easy thing to do. Trying to balance those two aspects of the budget is really challenging.”