Taxes and spending: City Council debates, kills housing trust fund proposal
(Missoula Current) One month removed from passing a budget that included a tax increase of 9.7%, members of the City Council on Wednesday considered a new spending proposal that would require the city to place $200,000 more each year into the Affordable Housing Trust Fund.
The trust fund was established several years ago, and it requires the city to deposit a minimum of $100,000 each year into the account. Several years have seen a larger allocations, such 2020 when the city deposited $750,000 into the account. In other years, the deposit has met the minimum requirement.
Council member Daniel Carlino this week sought to commit the city to place $300,000 into the account each year at a minimum.
“This is not a proposal to increase taxes. It's to declare the Affordable Housing Trust Fund more of a budget priority from the city, and to direct our staff and the mayor's office to ensure it has at least $300,000 in it each year from the General Fund,” Carlino said.
The measure failed on a 9-2 vote, with Carlino and council member Kristen Jordan voting in support. The majority said it was a bad idea to commit the city to additional spending with no way to pay for it, other than cutting other programs or raising taxes.
Dale Bickell, the city's CAO, said the current allocation of $100,000 was established to cover the trust fund's staffing and administration. Requiring more would challenge future city budgets, he said.
“We are in an environment where our costs are increasing faster than the growth allowed in the general fund,” Bickell said. “To the extent that we don't have the ability to raise taxes to the level we want, we'd have to provide cuts in other areas.”
Other housing efforts underway
While the city is required to place $100,000 into the account each year, it has taken steps in recent years to ensure the fund receives larger deposits that aren't directly supported by the general fund.
Under former Mayor John Engen, the city adopted its first-ever housing policy, which included a strategy to bank land that could directly support the construction of affordable housing or be sold, with the proceeds going into the trust fund.
This year, the city could close on two significant land sales including the old Sleepy Inn property, along with 9 acres off Scott Street. The sales could infuse the trust fund with $5 million or more, and the Scott Street property will also include the construction of deed-restricted housing.
Such efforts are seen as a win-win among city officials, and it has a greater potential to grow the Affordable Housing Trust Fund without directing revenue from the general fund.
“It either comes from somewhere else or from increasing property taxes,” said council member Amber Sherrill. “What I would like to see before I look at something like this is what money we're able to put into the trust fund from property sales this next year. We may have $5 million in it.”
Sherrill also noted the challenges the city will face next year in serving the homeless population. Its allocation of American Rescue Plan Act funding will be spent down this year to operate the Johnson Street shelter, leaving nothing for next year.
“The other piece, and something all of us feel nervous about, is the loss of our ARPA funding,” said Sherrill. “After this year, we don't even know how we're going to operate this second shelter. It's going to have a huge impact on our budget next year. We have a lot of things we need to figure out.”
The trust fund is also positioned to benefit from a new program set for adoption by the Missoula Redevelopment Agency. MRA has allocated $1 million each year to help subsidize the construction of affordable housing, and the new policy will see the agency require most recipients of Tax Increment Financing to place 10% of their allocation into the Affordable Housing Trust Fund.
City officials said that could also generate millions of dollars in the account while sparing the general fund.
“We're moving forward as quickly as possible in a super-challenging environment in which we don't have enough resources. I'm also highly aware of the incredible tensions and constraints on our general fund,” said council member Gwen Jones. “We pull funding for the trust fund from any source we can, trying to not go into the general fund because there are so many constraints on the general fund.”
An endless cycle
Others also expressed concern that committing taxpayers to even more spending next year would likely result in deep cuts to other programs, or another sizable tax increase.
If taxes continue to grow – they've increased 20% at the city over the last two years – it could jeopardize the stability of people who are currently housed but are no longer able to afford their homes.
“What we'd be doing is robbing Peter to pay Paul,” said council member Mirtha Becerra. “By raising property taxes, we could potentially be displacing or putting people in a situation where they are going to be needing to tap into the Affordable Housing Trust Fund.”
Council member Sandra Vasecka agreed, saying it would create an endless cycle of need and subsidy.
“A lot of folks are barely able to stay in their homes right now. If we do this, we probably will have to raise taxes again next year, and more people will probably need the Affordable Housing Trust Fund,” she said. “It'll just be a cycle.”
Carlino said he understood the efforts the city is taking to grow the trust fund from other sources, but he criticized his peers for voting against his proposal, saying it suggested that affordable housing wasn't a high priority.
“Affordable housing is something everyone in our community needs access to, and many don't have access to affordable housing in Missoula,” Carlino said. “It's ultimately a system failure that's left people without their basic needs met in our community. It's our job as government to help create those opportunities.”