City continuing budget discussion
City Commissioners continued their budget discussions during a special work session on June 28.
They didn’t make any decisions and will have another meeting at 4 p.m. June 29.
During the meeting, commissioners asked staff what they needed to help move the budget process forward.
City Manager Greg Doyon said that he needed commissioners to reach a consensus on whether they’d support staff’s proposal to take the full allowable tax increase this year.
Staff is recommending taking the full inflationary factor, which is capped by state law, and the permissive medical levy. If commissioners don’t take those, staff said the budget would be $2 million short and in that case, Doyon said he’d go back to cut department requests and make further budget adjustments that would likely include eliminating staff positions.
Staff is recommending taking the full tax increase, after not raising any taxes for the last two years, and making some adjustments to utility rates and other assessments, including the boulevard district, Portage Meadows and street lighting districts. None of those rates have been adjusted over the last two years.
The city budget year begins July 1 and staff first presented the proposed budget during a June 21 work session. Commissioners are scheduled to vote on the budget and tax increases later this summer.
Staff are also proposing to use a mix of CARES Act funds and a portion of the fund balance to balance the budget without depleting the fund balance. City policy is to maintain a 22 percent fund balance, which equates to about a month of operating expenses and is maintained in the event of cash flow interruption, unanticipated expenses, or as public officials learned lately, the impact of a pandemic.
Municipal governments are limited by state law on how much they can raise taxes annually and the rate is half of the three year average of inflation. That typically doesn’t generate much in terms of new tax revenue for the city, but as the national inflation levels rise, those figures could also increase.
If the commission approves taking the full inflationary increase, that’s an $8.36 increase on a house with a $100,000 taxable value, according to the city finance office. It’s a $16.72 increase on a house with a $200,000 taxable value.
City staff are also proposing to take the full permissive medical levy, which would add $248,305 in new revenue, with an impact of $3.23 on $100,000 house and $6.47 on a $200,000 house.
For comparison, the city is projecting $22.9 million in tax revenue for the upcoming budget in the general fund, the proposed police and fire budgets are $27.4 million.
If the city takes the full inflationary factor, plus the estimated $400,000 in newly taxable property and an estimated $294,004 in the entitlement share from the state, the city is looking at about $1.3 million in additional tax revenue, according to the finance office.
Staff said that of a resident’s total tax bill, about 26 percent goes to the city. The bulk goes to the state and school district.
Doyon is recommending using about $1.6 million in CARES Act funds and a portion of the undesignated fund balance to balance the budget.
Without using raising taxes this year, Doyon said the budget would have a $2 million shortfall.
Doyon told commissioners that if they chose that option, they could direct him to reduce the budget, or use the fund balance, which would take it down to about 15 percent.
Doyon cautioned commissioners about managing the fund balance as there could be another large tax appeal, like the one from Calumet a few years ago that tied up millions from the city’s revenues for several years.
He also pointed out that while there’s a lot of construction going on in the city, some of it may not yet be taxable, or not be taxable at rates that the public expects due to the state’s tax formulas, whether it’s in a tax increment financing district where some of the tax revenue is directed back into the district, or there may be tax abatements on the property.
Commissioners have recently approved hundreds of thousands of dollars of tax abatements on new construction, which the development community applauds, but staff noted it takes those resources out of the city’s coffers for a set amount of time.
The city is looking to use some of its CARES Act and ARPA federal COVID relief funds to offset some costs and budget shortfalls, but those programs have specific regulations.
The city also opened some of those funds to applications from the community and has received two requests from the Great Falls Development Authority for $5.4 million of CARES funds. Of that, GFDA has requested $1.4 million for loan capital for the Milwaukee Station project and $4 million for local capital for housing.
Mayor Bob Kelly said those requests warrant further discussion.
Doyon said staff is trying to make commissioners aware of the bigger picture so that they can make informed decisions and that commissioners and staff are still vetting some other city needs that might need CARES funding so to give the full GFDA request may limit that ability.
Commissioners and staff largely agree that housing is a community need, but staff pointed out that in terms of increasing the tax base, residential construction usually has a low taxable value to the city and that’s outweighed by the cost of providing services to new construction areas.
Staff provided commissioners with some new options to use CARES and ARPA to support development through three new programs to support development and meet the federal requirements.
Those include creating a reimbursement program for up to $500,000 for permit and subdivision application and review fees for low to moderate income housing; up to $ 1.2 million for stormwater facilities on the north end of the city where housing development is currently underway; and up to $2 million for infrastructure expansion to the new NeighborWorks development currently in the planning stage.
Commissioner Susan Wolff said that the city had been considering hiring a part-time employee to support the Neighborhood Councils to free up time of the city’s communication specialist, but that position wasn’t funded in the proposed budget
She said that citizens don’t know much about city operations and that they need to communicate good news and needs to the public.
Commissioner Rick Tryon said that he cautioned against adding more employees as residents are concerned about increasing taxes and the cost of consumer goods.
He said that “the communication effort from the city has been really outstanding. I think you guys are doing a great job. I think that a lot of folks in our community know what’s available and they’ll access it if they want to. They know where to go to get information.”
Doyon said that he understands the desire to add communication staff, but that he’d been reminded today of what’s happening on the judicial side in the Municipal Court and city legal department.
He said he talked to the city attorney before the meeting and that for many previous budgets, they’ve outlined the caseload of the city prosecutors and have a continued increase in expectations.
Doyon said some of that need was discussed during the crime task force meetings that if they’re going to add police officers and another judge, they need to have the appropriate staff to support that on the legal side.
Right now, he said, the city doesn’t have that staffing level.
He said “there has to be some level of mutual understanding in order for the community to understand how budgeting works and where we’re falling short. Right now, there’s areas where structurally we’re not meeting the needs of the public.”