Martin Kidston/Missoula Current

While Missoula County hasn't yet unveiled its new budget, frustrations over the City of Missoula's Fiscal Year '23 budget ran high on Monday with its proposed tax increase of more than 11.6%.

But most of the argument focused not on the increase to property owners, but on the city's subsidized Affordable Housing Trust Fund.

While all council members backed the city's Trust Fund, two council members sought to increase funding for the program and were willing to divert revenue from other programs to pay for it, including the city's existing shelter programs and neighborhood security.

If adopted, the proposed budgetary increase already pushes city taxes up to $413 for every $100,000 in a home's assessed value. The assessed value is set by the state and differs from the home's market value.

Other tax requests will also be on the November ballot that could further increase taxes, including a crisis services levy and a $19 million bond to continue further improvements to the fairgrounds.

“We believe the assessed value is behind true market value by about 50%,” said Dale Bickell, the city's chief administrative officer.

When crafting the FY '23 budget, the late Mayor John Engen laid out several priorities, including a goal of maintaining city staff, ensuring long-term financial sustainability, and continuing the city's current level of service. This year, Engen's budget didn't seek to expand or create new programs.

The budget tries to hold the line on existing programs and continue funding once provided by the American Rescue Plan. Inflation is a factor, the city said, as is Montana's 1970s tax system that now places the burden on property owners.

But just as many are getting back on their feet from the pandemic, the proposed tax increase could bring its own economic pandemic, some argued.

“This inflationary aspect that's talked about so often – this 11% that a homeowner is incurring – is going to be passed on directly to a renter. They're not going to stop for a second,” the speaker said. “I just want to emphasize that I feel there's got to be another solution to this budget issue.”

While many lamented the budget on a philosophical level, others played down the complexities of the state's tax system and the city's decision to use ARPA funding to begin new programs, even though those same council members supported the very social programs it funded.

But now the check has come around, and just $900,000 remains in the city's ARPA account. Most want to stretch the funding as far as they can.

“We were holding the line,” said Bickell. “We were using one-time (ARPA) revenue to fund our ongoing operations. We were using that funding not to increase the General Fund. That time is ending. What this budget is proposing to do is get us back to being able to fund our ongoing expenses with property taxes.”

More than an hour into the meeting, the council on Monday first adopted a series of rate increases, including licensing fees, the cemetery fee, a wastewater fee and fire inspection and business fees.

Council member Sandra Vasecka opposed the increases but was alone in doing so.

“These are fees for services. Fees for services are a conservative ideology,” said council member Jordan Hess. “It's a fee paid for a service provided. I don't like it, but I support it.”

Council member Heidi West agreed.

“It's an equitable way of doing business,” she said. “It wouldn't be equitable for all of us to share the cost of checking, per say, pyrotechnics. Having fees for services is a way to provide balance under what's a very regressive tax system we're operating under.”

Three hours into the meeting, the council also defeated a request from Ward 3 council member Daniel Carlino, who sought to place an additional $600,000 into the Affordable Housing Trust Fund by redirecting ARPA funds.

City officials said doing so would jeopardize other social programs, like Operation Shelter, which supports a number of homeless shelters and crisis intervention services. It would also potentially place the city's bond rating at risk, which would make the cost of borrowing much higher.

As it stands – and as reported last week – the Trust Fund is in good shape, housing officials said. Proceeds from the sale of city-owned properties, including the Sleepy Inn, Scott Street and the old library block, will place millions of dollars into the trust fund once the transactions close.

The emergency winter shelter alone costs $700,000 a year to operate and funneling more to the Trust Fund could jeopardize that and other programs.

“We are working hard to diversity contributions across many different areas. We don't want our Affordable Housing Trust Fund relying on a single source, especially the General Fund, which is taxpayer generated dollars,” said the city's housing and development director Eran Pehan, who formerly worked at the Poverello Center and for years has advocated for housing. “Right now, we're capturing that through the sale of city owned property.”

Carlino then sought to defund the security contracted to keep the city's homeless shelters – and surrounding residents – safe. Most council members agreed that security provides necessary health and safety benefits and, without it, the camps would have to close.

Residents requested security several years ago after the city opened the emergency winter shelter on Johnson Street, citing a spike in crime, vandalism and drug use. But supporters of Carlino's proposed $600,000 budget increase called it a humanitarian need, regardless of whether it required defunding security.

“It (Trust Fund) only gets $250,000 – less than one-third of what was originally asked for,” said Leon Seymour. “We're in a housing crisis here in Missoula, and I'm worried it's just getting normalized. We need to be doing more, and we need to be doing more creatively.”

Carlino persisted, even against the advice of the city budgeting officials and other council members, who chose to take a long-term view of city operations and future needs.

“If it's a crisis, then we should put funding toward the crisis,” Carlino said of the city's housing challenge. “It shouldn't be spent on band-aids like more police and security forces. The Affordable Housing Trust Fund is so important for our community right now that we must fund it.”

But Carlino again was alone in his debate, with the exception of council member Kristen Jordan. The two are self-professed Democratic Socialists and have been praised for their efforts to increase funding for social programs while cutting funding for public safety.

The majority of council members said their proposal amounted to “robbing Peter to pay Paul,” adding that it sacrificed the future of other important programs for a temporary gain.

If the crisis services levy doesn't pass this November, council said, funding will be scant in the future and many programs could end.

“You're asking us to take money that's specifically earmarked to provide services to the most vulnerable members of our community during the harshest time of year (winter), and instead put it into the Housing Trust Fund,” said council member Heidi West, a long-time housing employee and housing advocate.

“It's disingenuous to frame that contributing to the Housing Trust Fund is a totality of what we do as a council, as a city or as a community in the realm of affordable housing. The current funding decision is prudent based on the unknowns.”

The current budget places $250,000 into the Trust Fund, with millions more expected upon the sale of city properties.

Carlino's amendment was ultimately defeated on a 10-2 vote. Council members and city staff – many who have worked in the affordable housing sphere – said he and Jordan weren't the sole advocates of affordable housing.

The framework for the Trust Fund program was put into place years ago and the city remains committed to the cause, they said.

“To frame this as we don't care or we don't want to find a solution is inaccurate,” said council member Mirtha Becerra. “Many of us on council were here when the Trust Fund was created, when the oversight committee was created, and we'll continue to do so.”

Council member Stacie Anderson agreed.

“We're going to fund the Affordable Housing Trust Fund with the sale of property,” she said. “We can use the proceeds of that money to fund the Affordable Housing Trust Fund. In the long run, by the end of this year, we'll have much more than $800,000 in the fund. I'm not going to tie up all the funds now when we have other funds coming in in the immediate future.”

The City Council continued to deliberate other aspects of the budget. Check back for updates to the FY '23 budgeting process.