City budget proposal includes no tax, utility increases
City staff are proposing a budget with no tax or assessment increases for the upcoming fiscal year, which begins July 1.
Greg Doyon, city manager, said that staff’s proposal this year will continue the economic recovery model from the current budget and will use fund balance to offset the tax relief.
In the current budget, the city didn’t raise any taxes and didn’t collect about $490,000 worth of revenue.
Staff used about $872,000 of fund balance to offset that and was able to maintain a 22 percent fund balance.
The city policy is to maintain a 22 percent fund balance in the general fund, which equates to about two months of operating expenses for cash flow needs, maintaining the city’s quality, low-risk credit rating and to address unexpected expenses.
For the proposed budget for the upcoming fiscal year, there are no proposed tax or assessment increases and no utility increases. Finance staff said there has been discussion that there won’t be large increases to utility rates to make up for the years without increases, but would resume their standard incremental increases to meet needs for capital improvements and regulatory requirements.
That’s about $229,000 in new revenue the city won’t raise and will use about $763,700 in fund balance to offset the tax relief, bringing the unrestricted fund balance in the general fund to 20.3 percent, below the policy level. But that doesn’t include COVID relief funds the city will have, but those dollars come with restrictions.
The city’s collective bargaining agreements are tentatively planned to have increases ranging from 3.25 to 4 4.5 percent but some of those increases will be offset by reductions in the city’s cost for employee health insurance and workers compensation.
For the last few years, the city has been adjusting the employee contribution for health insurance and in the upcoming budget year will go to 85 percent from the city and 15 percent from the employee, an adjustment from the current 90/10 split.
That will be an estimated savings for the city of $576,000.
Workers compensation rates also decreased, Doyon told commissioners, and that’s another estimated $405,000 in savings for the city.
The city is switching its health insurance to Blue Cross Blue Shield on July 1, but for now the rates will remain the same, according to the city finance department.
The finance department is estimating $400,000 in newly taxable property, based on the 20 year average, but that could be less than estimated, like it was last year when it was only $119,488.
The entitlement share, which is from the state collected taxes on a number of items, including gambling and alcohol, is down this year for the city from $284,198 the current fiscal year, which ends June 30, to $120,271 in the upcoming fiscal year.
City taxes aren’t changing, but it’s a new valuation year for the Montana Department of Revenue and taxable values for property owners are changing, in many cases increasing. That increase is unrelated to the taxes levied by the city.
The city taxes and assessments make up about 26 percent of the total tax bill, the rest going to the school district, county, state and other taxing jurisdictions, according to the city finance office.
“We’re trying to do all that we can” by not doing the increases, said Melissa Kinzler, city finance director, but there are other factors on a property owner’s tax bill.
The city already received $4.58 million in CARES Act funds that are restricted by the federal rules and will be held in the general fund. The city is establishing a special revenue fund for the other COVID related relief funds and will moved $5.5 million of CARES Act funds there, as well as the $9.7 million of the American Rescue Plan funds the city has already received.
The city is expecting another $9.7 million in ARP funds in May 2022.
Doyon and city finance staff said no determinations have been made on how to use those COVID relief funds and that those spending decisions will be done separately through mid-year budget amendments.
Staff is still working through ever changing guidelines on use of those funds.
The city will also be making its final $144,000 debt service payment for the Highwood Generating Station feasibility study.
The city golf course fund is slowly recovering but still owes the general fund a substantial amount of money, but Doyon said the debt was shrinking as the private contractors are generating revenue and paying some of that to the city under their agreement.
The city pool fund is considered at risk, as it has been for years, since the pools don’t typically generate enough revenue to cover operations and the fund had additional expenses to lease the Mustang Pool at the Montana School for the Deaf and Blind after the Natatorium was closed.
City Commissioner Rick Tryon asked if the planned new indoor aquatics and recreation facility would be included in the city’s funds since there are separate pools and recreation funds.
Doyon and Kinzler said that was still being discussed and it would need more discussion to determine if it was best to separate the pools or have what will likely be a better performing facility in the same fund to help support the neighborhood pools and water park that will have needed repairs coming soon.
Doyon said the new center would have a very different revenue model and other options that the Natatorium and current recreation center can’t offer.
City Commissioner Rick Tryon asked if the city intended to keep the current rec center open once the new facility was completed.
Doyon repeated what he has said publicly, and has been reported here, for about a year that he will recommend closure of the current rec center once the new facility is open.
Commissioner Mary Moe said that swimming opportunities should be provided by the city at low cost for residents.