Document prepares for financial future

The City of Whitefish has created a plan for how it will respond to economic downturns and recessions in the future.

Assistant City Manager and Finance Director Dana Smith said the Great Recession of 2008-2009 had long lasting financial impacts to many businesses and governments, and as a result many governments have shifted focus to long-term financial planning.

“The economy has a cyclical nature to it,” Smith said. “A recession can have an impact on us, and even a slowing of the Canada economy can have an impact on tourism and an impact on us.”

Smith said the goal in planning is to sustain operations and services and avoid financial distress during future periods of economic decline.

“It’s important that we plan and prepare ourselves so that we don’t have a reduction in services,” she said.

The city’s financial sustainability plan was recently presented to Council. The document plans for what the city may face in balancing its budget due to a list of possible changes, including a reduction in resort tax revenue, increases in delinquencies in utility payments and property tax collections, reduction in building permits, decreased in vestment earnings, reduction in donor contributions, reduction in grant opportunities, population changes and decreased cost of construction and borrowing.

The plan lists a dozen options available to assist in reducing costs and keeping taxes, assessments and fees steady during a recession or periods of economic downturn in order to balance the budget. The items include, re-bid contracts, no new positions allowed, employee furlough days, budget expenditure cuts, shot-term hiring freeze, use cash reserves by spending down reserve level to 10 percent, employee pay freeze, reduce operational hours at City Hall, use cash reserves spending down to 5 percent, employee pay cuts of 5 percent, employee layoffs and reduction in services. The options can be used individually or in combination depending on the severity of the need.

“We focused on the big picture items of what the city can do,” Smith said. “It’s important that we try to have the least impact as possible on employees and we also want to hold assessments and taxes flat to not stress taxpayers during a recession.”

Employee furlough days could be set as a cost-savings measure, and are recommending if needed to fall immediately preceding or following a holiday. Emergency personal would not be subject to furlough days. The estimated savings per eight-hour day is about $22,761 based on the fiscal year 2020 rates.

Another option is to close City Hall one day per week, or reduce hours daily totaling five hours per week. The estimated cost savings to close City Hall for one eight-hour day is $11,400 and does not account for savings from reduced energy usage.

One of the options is to reduce expenditures on a percentage basis. Under this, all department directors would be requested to cut their department budgets by a certain percentage, often with a starting point of 5 percent. Cuts should not significantly impact services and could not include cuts to personnel. Estimated savings based on the FY20 budget for this option would be $268,540.

Two options on the list are to spend down cash reserves to certain percentage levels.

The city has been working the last few years to build up cash reserves with goal of maintaining the reserve at around 20 to 25 percent of the budget.

Smith said this ensures that funds are available for emergency use during recessions or periods of slowed economic activity. The use of cash reserves can help fund one-time purchases or for short-term operating costs, but in future would also need to be replenished.

“The city didn’t feel the impact of the 2008 recession until 2010 because it had reserves,” she said.

The FY20 budget would result in $580,000 available to spend while bringing the budget cash reserves down to 10 percent.

The plan calls for monitoring and recovery, noting that once options are implemented and the budget is balanced, frequent monitoring of projects and actual figures would be a priority. As economic performance were to improve, the challenges would shift to positions that may need filled, hours returning to normal and a focus on building cash reserves again.