Tax revenue collected by the city of Missoula is expected to increase by 3.8% in fiscal year 2027 based on the proposed budget, but Missoula's mayor said Monday night changes to state tax law projects the median home value in the city would see a small tax decrease.

Mayor Andrea Davis said the city initially estimated its proposed budget would increase property taxes on a $507,000 home, but state valuations released on Aug. 3 showed a median home would pay less in taxes by approximately $72. 

"I thought there would be a $72 increase, it is actually a decrease based on department of revenue taxable figures," Davis said. "... Yeah, pretty wild. That is a notable change."

New state property taxes are meant to relieve high property taxes for owner-occupied homes and long-term rentals while increasing tax rates on more expensive residential properties, second homes and short-term rentals. 

The city initially forecasted the median home would see an increase of $72 in city taxes before the official state numbers were released, the Missoulian reported. 

Davis is still proposing a 3.8% tax increase in the city budget, or approximately $2.8 million. Of that, 82.5% would go toward existing staff pay increases, 10.9% for contracted services and 6.5% toward new budget requests. 

The city does not plan to add new programs. Its only new full-time employee would be funded by user fees from the city's water district. Davis said the city also found several cost-savings to limit the financial impact on property taxes. 

Those include not filling three positions in the city's Community, Planning, Innovation and Development Department, totaling $350,000. The city's fire department overtime budget is also planned to decrease by $140,000. 

Other cost-savings were found by stalling new city vehicle purchases and restructuring the city's IT programs. 

"Affordability and fiscal sustainability are top priorities for me as well as my constituents," Davis said. "Over many years, this budget remains to be tight because of capped revenues."

The city is wrestling with cost escalations across several departments, including the city police department, which ended its personnel costs roughly $1.2 million over budget in fiscal year 2026.

Davis said the city still has an annual fiscal deficit, but state law requires cities to operate on a balanced budget each year. 

That gap in funding will be met in part with a Tax Increment Financing remittance from the Missoula Redevelopment Agency, totaling $2.5 million for the city. 

Still, some councilors said the city could reduce the budget. Ward 5 Councilor Bob Campbell proposed freezing all staff wages except for some core services like police, public works and central administration. 

"It’s time for a budget reckoning and making hard decisions/choices on behalf of Missoula’s taxpayers," Campbell wrote in an opinion column in the Missoulian this week. 

Davis said the city's elected officials and top city administrators are already slated to not see a pay increase in the fiscal year 2027 budget. 

Campbell's amendment will be considered with several others during a committee meeting on Wednesday, Aug. 12 starting at 12:15 p.m. at Missoula City Council Chambers.

The 2027 fiscal year budget runs from July 1, 2027 to June 30, 2026.

The City Council unanimously approved a 3.4% increase in the fiscal year 2026 budget, which also lowered property taxes for lower valued homes, the Missoulian reported. 

The council could take a final vote on the budget next Monday, Aug. 17, but if needed, can continue working on the budget until Aug. 31. For more details on the city budget, visit the city's Engage Missoula website and budget website. 

Griffen Smith is the local government reporter for the Missoulian. He is a 2023 graduate of the University of Montana School of Journalism and previously served as the editor of the Seeley Swan Pathfinder.