"I have been looking at the budget just going, 'OK, who do we inflict the pain on?'" said Councilwoman Lisa Adams. "I think we're all just trying to regroup and look at everything."
Although $1 million represents a small fraction of Mayor Jackie Biskupski's $273 million proposed budget, council members had described the budget as tight, with few dollars available for pet projects.
Infrastructure, identified as one of the council's top priorities in 2017, might be especially susceptible to cuts. The council could also choose to make up the $1 million with a tax increase.
Adams said that several council members had been impressed by a Tuesday night presentation from the Salt Lake City police union and might have considered a pay increase beyond the 1 percent proposed by Biskupski, but that "now, with this news, I just don't know that there's even any chance of that."
Salt Lake City spokesman Matthew Rojas said in a text message that it was "disappointing news which caught both the administration and council by surprise."
"The administration presented a well-structured and balanced budget, and we are working internally to review options based on the state Tax Commission's interpretation of this new legislation," Rojas wrote.
Property taxes account for about a third of the city's general fund, which pays for public safety, street maintenance, parks and housing, among other things.
Beginning this year, the state Tax Commission separates taxes on real estate and buildings from taxes on personal property like cars, computers or machinery.
Multiple council members said they didn't blame the city's staff for having expected to receive an additional $1.1 million in new growth from taxes on personal property.
"I don't see them as having made a big mistake here," Adams said. "I feel like [Finance Director Mary Beth Thompson] is really conservative as far as running numbers. I think it's probably blindsiding all of us."
Rep. Dan McCay, R-Riverton, tweeted an earlier version of this story crediting his 2016 bill for the shortfall, which he regards as savings for Utah families.
McCay said he wasn't "trying to dance on anyone's grave" but that he had worked for three years to end what he viewed as automatic tax increases for property owners.
He would be surprised, he said, if the legislation had been misinterpreted by city officials.
"I think they're looking at it for the first time through real dollars and they're recognizing its impact and calling it a mistake when it may not be a mistake at all," McCay said.
Cameron Diehl, director of government relations for the Utah League of Cities and Towns, said Friday that he's unaware of any other cities in the same predicament.
The City Council is still expected to approve a budget Tuesday, according to the council news release, though it has until its scheduled June 22 meeting to do so.