The Bozeman City Commission on August 18 adopted its fiscal 2027 budget through a series of votes on property tax mill levies, utility rates, and four special assessment districts, resulting in an overall 5.5% increase in the cost of living in Bozeman despite a decrease in city property taxes themselves.
Deputy Mayor Douglas Fischer presided in the absence of Mayor Joey Morrison, whose absence was authorized. One kennel license revocation appeal was struck from the agenda after the appellant withdrew.
The centerpiece was Finance Director Melissa Hodnett's presentation on property tax mill levies. The state Department of Revenue delivered certified taxable values on August 4, showing an overall 6.9% increase in taxable value and an 8% increase in mill value to roughly $235,500. However, because the city's general fund levy cap is set in dollars rather than mills—calculated as the prior year's authorized amount plus a three-year inflation average plus newly taxable property—the city faced a structural deficit.
The shortfall came in newly taxable value. The city had projected $6.4 million; the actual figure was $3.3 million. Hodnett said staff verified the data with the state Department of Revenue by checking specific known new properties and found them included, though conversations continue. City Manager Chuck Winn offered an example: a Main Street building costing more than $10 million was assessed at only $600,000 because the state had not reappraised it at certificate of occupancy. That value would be captured in a future year.
Hodnett said the gap turned the general fund's six-year operating margin negative. Staff made adjustments—removing four new police patrol positions in favor of vacancy-based overhiring, assuming 4% operational savings, and modeling a 50% reduction in the planning fund subsidy starting in the 2029 biennium—but still recommended levying the maximum statutory authority. The city has roughly four mills of previously unlevied capacity, tied to a past commitment not to double-tax residents for 911 services.
Hodnett framed the timing. Under city code and Government Finance Officers Association practice, the city must maintain reserves equal to 16.67% of revenues—about two months of operating expenses. The city would not fall below that until fiscal 2030, but delaying the levy increase compounds the shortfall through inflation. She calculated the difference between levying the maximum and holding 4.5 mills back as roughly $24 per year for a typical homeowner in fiscal 2027—but about $6.7 million to the general fund over six years.
Crucially, under every option, city taxes for a typical primary residence decrease. Hodnett said the recommended levy produces a decrease of about $101 annually from fiscal 2026, driven by state legislative changes that shifted tax burden from primary residences to second homes and long-term rentals. The fiscal 2027 city portion for a home valued at $652,100—approximately the median—would be lower than in fiscal 2023.
Mill Levy Vote and Debate
Commissioner Alison Sweeney moved to adopt the resolution establishing and affixing property tax mill levies for fiscal year 2027. In speaking to her motion, she noted the unique opportunity to levy maximum mills without additional burden to homeowners. However, she raised concern about the commission's practice of funding community housing, Streamline bus service, and support for HRDC, Family Promise, and Haven from the general fund. She said these should go to voters as dedicated funding streams, noting that the public safety levy failed partly because voters expect their taxes to fund police and fire.
Commissioner Jennifer Madgic disagreed, saying the city has a responsibility to address these needs and that upstream investment saves money later. She noted these are not philanthropic but core functions. Commissioner Emma Bode emphasized that police and fire contracts plus operating costs exceed 50% of the general fund, and that the $400,000 to Streamline qualifies the service for more than $2 million in federal matching funds. She also noted the Urban Transportation District, approved by voters years ago and covering a larger area than the city, may be better positioned to handle transit funding going forward.
Fischer said the reserve requirement gives him pause, noting taxpayers often live paycheck to paycheck. He said he would support the best practice but wants every tax dollar tied to essential services. The resolution passed unanimously.
Fee Increases and Assessment Districts
Planning fees rose 15%, the third such increase in consecutive years, ahead of a fee study returning to the commission this winter. Hodnett said the main driver is expenses—largely staff salaries—rather than revenue declines. She outlined which planning functions can be charged to applicants versus community-wide work like growth policy and historic preservation that cannot. The planning fee resolution passed unanimously.
Transportation and Engineering permit fees also rose approximately 15%, with a larger increase to the floodplain permit reflecting about four hours of staff review time. The resolution passed unanimously.
The five rate and assessment resolutions were presented together. Hodnett tied much of the increase to the city shops complex—an $84 million project with debt service split across water, wastewater, stormwater, street maintenance, parks, trails, and forestry. Environmental assessment began the week of the meeting; final design kicks off in September.
Staff refined the models after budget adoption in June. The projected monthly increase for a typical homeowner dropped from over $20 to $14.89 in fiscal 2027 and $19.89 in fiscal 2028—an overall 5.5% increase rather than the 8.7% projected in June. Specific increases:
- Arterial and collector street assessment: 3% - Tree maintenance district: 20% - Street maintenance district: 15% - Parks and trails district: 23% - Water, wastewater, and stormwater: 11.5% overall (water service down 9% in fiscal 2028; sewer down 1% in first year and 3% in second)
Hodnett also explained the Schedule A—the parcel-by-parcel assessment list. The process is manual, she said. The Unified Development Code update changed which caps apply to many parcels, and staff published a revised schedule the day of the meeting. Every parcel with an increase above 18% was reviewed.
Assessment Equity Concerns
Public comment on these items was extensive. Residents raised concerns about rising costs stacking on one another. Vicki Danhoff, a Bozeman resident since 1972 on a fixed income, said she has paid a tree assessment for 20 years and cannot absorb continued increases. Paul Johnson, who lives in Westridge with no boulevard trees, said he has paid the tree assessment for 23 years and questioned service quality. Another commenter said he received notice of only one assessment by mail and asked why others were not included.
Danielle Smith asked commissioners to challenge the basis for these increases rather than accept them as settled. She raised whether the city should pursue alternative revenue sources like a sales tax. Emily Talego walked through the district budgets and total assessable square footage, suggesting the commission consider language assessing "up to" a given rate to allow staff corrections to the parcel schedules.
Winn responded that the tree maintenance district funds the entire publicly owned urban forest—parks, open space, and boulevards—not individual property trees. He said residents not getting city responses should call him directly. City Attorney Greg Sullivan said he could not answer the "up to" question without research but recommended the commission specifically authorize the city manager to adjust Schedule A after adoption.
Fischer and Sweeney both noted that the state legislature bars Bozeman from even asking voters about a local option sales tax.
Assessment Methodology Debate
Sweeney voted no on all four assessment district increases. She said the 15,000-square-foot cap on residential properties dates from a Bozeman of single-family homes and duplexes. Now, she said, a 100-unit apartment building in a residential zone pays roughly what two average single-family homes pay. The same building in a commercial zone pays 47 times more. "I can't in good conscience raise rates on people when I don't know the answer to—if we just assessed equitably, would we be able to keep rates steady?" she said.
Bode said she shares the concern but that voting no would leave the city unable to deliver committed services, calling a no vote "a bit performative" given governance requirements. Sweeney replied, "I assure you my no vote is not performative."
Winn told the commission that adopting less than presented would affect service levels but staff could not quantify the impact. He asked the commission to allow time for the methodology review, scheduled as a work session on January 26, 2027.
Fischer and Bode both suggested renaming the tree maintenance district to reference urban forest management.
The water, wastewater, stormwater, and solid waste resolution passed unanimously. The arterial and collector street assessment passed 3-1, with Sweeney voting no and the amendment to authorize Schedule A adjustments passing unanimously. The tree maintenance district assessment passed 3-1, with Sweeney voting no. The street maintenance district assessment passed 3-1, with Sweeney voting no. The parks and trails district assessment passed 3-1, with Sweeney voting no.
Strategic Plan Amendment
The final item was Commissioner Jennifer Madgic's resolution adding transportation safety to the city's strategic plan, which dates to 2018. The amendment separates transportation from housing in Section 4.5, adds the word "safe" to the well-planned city language, and adds goals on Vision Zero principles—prioritizing human life over car speed—and priorities for the upcoming transportation master plan.
Bode proposed adding language supporting an efficient public bus system. Fischer and Sweeney said transit is properly the Urban Transportation District's role, now that voters have approved such a district covering a larger area than the city. The amendment drew two ayes and two noes—short of the three votes the commission's own rules require. Bode withdrew it after Madgic noted the city's $400,000 annual Streamline funding already signals support.
The resolution passed unanimously.
The commission set fiscal 2027 mill levies at the statutory maximum, adopted utility rates through fiscal 2028, and adopted four special assessments for one year only. Staff will return January 26, 2027, with assessment methodology options for the commission's consideration.