City budget calls for decrease in taxes, while adding money to reserves

The City of Whitefish’s proposed budget looks to decrease property tax collections while putting an emphasis on keeping funds in the city’s savings account.

The fiscal year 2022 draft budget continues the decrease of 10 mills that was part of the previous year's budget and an additional reduction of 5 mills is proposed to account for additional property tax relief from resort tax collection and the transition of the Flathead Emergency Communications Center from a city tax levy to a county-wide district assessment.

The draft budget also keeps maintenance assessments even.

City Manager Dana Smith said the budget takes into account the continued economic impacts on the community from the COVID-19 pandemic by continuing a decrease in mills. She also points out in her budget message that cash reserves in the property tax supported funds are budgeted to be about $3.5 million representing 28% of the total budgeted expenditures. That’s an increase from nearly 22% from the previous fiscal year budget.

“During a public health crisis like the COVID-19 pandemic, an economic downturn, or a recession having adequate reserves for each fund is essential to maintaining expected levels of services for our citizens and ensuring a timely response to emergencies,” Smith said. “While a possible delay in collections of property taxes and other charges for services can be expected due to uncertain economic times, reserves will help the city manage any cash flow issues that may arise.”

The ability to add to the cash reserves is the result of two key factors, Smith notes. Reimbursements from the CARES Act of about $2 million included not only reimbursements for unexpected expenses in response to the pandemic, but also eligible reimbursements for wages and benefits for police officers and firefighters. Secondly, a shift in the city’s accounting system is adding about $300,000 to the cash reserve balance from the fire and ambulance fund.

The FY22 budget totals about $42.5 million. Spending in the proposed budget is expected to decrease by nearly 42%, which is mostly due to a decrease of $21.4 million in capital expenditures.

The previous year’s budget included two major capital improvement projects — a new wastewater treatment plant with $11.6 million spent last year and expansion of the water treatment plant with $8.8 million spent last year.

The budget does plan for some capital spending for the fire and ambulance fund with the expected purchase of a brush truck at $50,000, an ambulance at just under $250,000 and a Type 3 fire engine with requested funding at $350,000 and $100,000 from the Whitefish Fire Service Area.

The budget also factors in FY22 as a reappraisal year, which means the city’s taxable value will include an adjustment based on market values and the addition of new tax property.

“During the past year property sales prices increased and the building boom continued without pause,” Smith said. “Therefore, the taxable value is estimated to increase 7 percent compared to FY21.”

By comparison, the FY 20 reappraisal resulted in a 6% increase. The city won’t receive it’s official taxable values from the state until the beginning of August.

The total mills levied are expected to be 102 for FY 22, while the total was 107 in FY21 and 117 in FY20.

In terms of resort tax collections, property tax relief from the resort tax in FY22 is estimated to increase by about $120,000 compared to FY21, which is about $18,000 more than FY20. The total citywide property tax relief from the resort tax in FY22 is estimated at $1.3 million, resulting in a total reduction of mills levied at about 30.

Smith said while the resort tax was adversely impacted by the pandemic, it was much lower than anticipated. Two months remain for collections in FY21 so the proposed budget is based on a convservative forecast of the revenue to be collected, she noted.

Not included in the draft budget is the about $2 million the city anticipates receiving from the American Rescue Plan. Final guidance on how funds can be spent is expected this month, therefore, the funds weren’t included in the draft budget.

Smith said use of the funds will be discussed with City Council prior to adoption of the final budget.

“Recommended uses will likely include recovery of lost revenue for the Parks and Recreation fun and the resort tax fund, capital improvement project funding and maintaining a portion as reserves to support our response to the ongoing pandemic,” she said.

The city budget proposes a 3.5% increase in pay for most city employees based on cost of living increase and longevity.

Police officers will receive a one-time pay adjustment of 5% based on a market rate analysis of comparable law enforcement agencies in addition to the normal pay increase of 3.5%.

Firefighters will receive a total increase of 4%.

Staffing increases are included in the budget.

The building department is expected to add an additional administrative assistance to keep up with demand and the position will be fully funded by building related revenue at no increased cost to taxpayers.

Related to the building boom has been an increase in utility accounts resulting in the need to increase one part-time position to full-time. From January 2018 to March 2021, the city added 475 utility accounts not including new garbage accounts without water or sewer service.

The budget includes two 40-hour per week firefighter positions. The fire department since 2010 has maintained the same number of firefighters at 15 while managing a growth in calls and service.

“Just a quick look around and it is clear that the city has not only seen growth in year-round residents, but also visitors who come to enjoy everything Whitefish has to offer,” Smith said, noting that the new positions will improve the level of service, reduce the cost of overtime and lessen the overtime demand on the current firefighters while also providing coverage when a firefighter is on a longer-term leave such as for medical reasons or injury.

The library budget includes adding 10 additional hours per week of staff time prompted by increasing demands for service.

A new position is planned with the new wastewater treatment plant coming online this fall.

Smith says the city has made significant progress in addressing the three financial areas that are often referenced when discussing the city’s financial position — maintaining cash reserves, better funding capital projects and addressing unfunded personnel liabilities.

Reserves are 28% for property tax supported funds largely due to the CARES Act reimbursements for police and firefighter wages.

In FY22 more capital projects are set to be funded with cash or grants than in prior years.

Expenditures have also been increased to pay the final checks for known retirements in FY22.

City Council is set to hold its first work session on the draft budget on Tuesday, June 1 at 5:30 p.m. at City Hall. A second budget work session is scheduled for June 14.

Council will hold a public hearing on and subsequent vote on the final budget in August.