Newly taxable property significantly lower than projected; city able to cover shortfall without cutting services
In the final step of the budget process, City Commissioners will consider the annual tax levy for Great Falls residents during Tuesday’s meeting.
The city was projecting $2 million in newly taxable property based on estimates from the Montana Department of Revenue and $840,000 worth of additional tax revenue that was received in the last fiscal year.
But when the city received its taxable valuation from MTDOR on Aug. 4, the revised figure was $437,295, which creates a deficit of $1,562,705 from the original revenue projection for this fiscal year, which began July 1.
A significant potion of the newly taxable revenue was related to Calumet’s recent expansion. MTDOR had valued the refinery for 2017 at $424,140,856, but Calumet has indicated that they feel the value is $230,000,000. MTDOR and Calumet are having a meeting on Wednesday and that meeting could affect the taxable value for the city, according to an Aug. 3 MTDOR letter to the city.
Melissa Kinzler, city fiscal director, said the revised $437,295 taxable valuation, plus the $840,000 received late in the last fiscal year leave the city about $700,000 short of their projections and that deficit can be made up with the available fund balance.
Situations like this are why the city is generally conservative in budgeting to spend large increases in newly taxable property because those dollars might never materialize in city coffers.
Kinzler said the city was less conservative in budgeting the new revenue this year, but budgeted the funds for capital improvements and one-time expenditures versus adding new staff and creating ongoing expenses in case the additional revenue did not continue.
The projected undesignated fund balance in the General Fund is $8.4 million, or 29.7 percent, of expenditures. City policy requires that the city maintain a fund balance of 17 to 20 percent, or about two months of operating expenses.
Using the fund balance to offset the projected tax revenue loss would reduce the fund balance to $7.74 million, or 25.2 percent, of expenditures, a move city staff recommends.
Staff is recommending that the commission adopt the tax levies as originally planned and make budget adjustments as necessary later in the year.
According to the city, the newly taxable property increases the taxable value per mills from $89,978 in fiscal year 2017 to $94,164 for the current fiscal year, indicating growth in the city’s tax base.
That’s good news for the Great Falls Public Library since under an agreement with the city, the library receives nine mills. With the newly taxable value, that means an additional $37,674 for the library this fiscal year. That will be a big help since the library will likely lose $28,000 in state funding this year and next year due to legislative action in the last session. The library was also hoping to restore Monday hours for an estimated $35,000.
The permissive medical levy is increase 1.66 percent over last year, but the soccer park debt payment will decrease slightly and the pool bond was paid off in June.
The differences between the last year’s mill levy of $17.8 million and the $18,341,320, or 194.78 mills, the city will mill this year includes: $437,295 for newly taxable property; $88,793 for the inflationary adjustment; $249,726 for the permissive medical levy.
As proposed, the projected impact on a $100,000 home with a taxable market value is a total increase of $1.09 annually.