During their July 19 meeting, City Commissioners will be asked to adopt the proposed budget and increase taxes.

Commissioners and city staff have been discussing the proposed budget for the last two months.

Public hearings on city budget, tax increases upcoming

Here’s some key things to know about the city budget:

What is the city budget year?

The city budget year runs July 1 through June 30.

Where can I see the budget documents and information?

All of the budget documents are posted on the city website. There’s also two budget tools to show where your tax dollars go and a budget balancing app to see what would happen if you moved money around in the budget and to send those suggestions to the city staff.

Why doesn’t the city adopt the budget before the budget year starts?

City staff typically presents their proposed budget around June and commissioners are typically asked to adopt the budget in July. The budget isn’t fully finalized until the city receives its certified taxable values from the Montana Department of Revenue. That typically happens in August.

City Commissioners supporting tax increase in proposed budget

Can the city raise property taxes as much as it wants?

No. 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 rate 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.

The city did not take the inflationary factor for the last two budget years due to COVID and “is unable to provide the same level of service while not utilizing the inflationary factor for a third discal year and is therefore recommending the full use of the inflationary factor…which includes carryover mills from the prior two years,” according to the staff report.

City continuing budget discussion

For the fiscal year that began July 1, the allowable inflationary factor is 1.77 percent, which equates to $306,901 of additional revenue for the general fund.

For the budget year than ended June 30, 2022, the allowable inflationary factor was 0.93 percent, which equates to $157,843 of additional revenue.

For the budget year that ended June 30, 2021, the allowable inflationary factor was 1.05 percent, which equates to $176,947 of additional revenue, according to the city finance office.

City holding special meeting to discuss budget proposal

Those three years combined totals $641,691 in additional revenue for general fund services, which include public safety.

For comparison, the cost of a new fire engine is about $750,000, according to Great Falls Fire Rescue.

Are there other revenue sources for the city?

Yes.

There’s the permissive medical levy, which the city is allowed to take to help fund employee health insurance premiums.

This year, staff is also recommending taking the permissive medical levy, for an additional 1.43 percent property tax increase, for health insurance premiums. That will provide $248,305 in revenue to offset those premiums, which increased three percent this year, according to the city finance office.

There’s also special assessments that apply to certain budget items or areas of the city. The assessments are set annually during the budget process and all of them include public hearings.

Commissioners review proposed city budget, tax increases

Those include the general boulevard maintenance district, which maintains more than 15,000 street trees. That assessment was established by resolution in 1946 and that process would have included public meetings. The district was amended slightly in 1987.

This year, staff is proposing a 12 percent increase for that assessment, which equates to an increase of $10.29 for the average size lot to cover the increased costs to the district, according to staff.

The assessment is about $0.012812 per square foot for a total of about $96 for the year for the average size lot of 7,500 square feet.

The last district increase was 5 percent in 2019. There were no increases during the pandemic.

There’s also an assessment for those living in Portage Meadows, which was established in 1977 for that neighborhood and covers the cost of materials, snow removal labor, water, moving labor, fertilizer costs and labor, aerification labor and tree pruning.

Staff is also proposing a 5 percent increase that assessment this year, which is about $17.45 for the average size lot in that district for a total of $0.081393 per square foot, or about $366 for an average lot in the district of 4,501 square feet, according to the finance office.

There were no increases during the pandemic and the last increase was 5 percent in 2019.

There’s also the street maintenance assessment that fund the street division of the public works department and the 383 miles of streets and alleys that they maintain. Maintenance consists of pavement rehabilitation and restoration, street cleaning, snow and ice removal, alley maintenance, and the nuisance weed program. Traffic operations are also funded through the street division and are responsible for the maintenance of all roadway signs, signals and pavement markings.

During the budget process, information is gathered regarding the actual and anticipated expenses of the street district fund, which does not receive property tax support through the general fund, future capital projects are reviewed, and the street maintenance assessment for the next fiscal year is discussed. The fund is also supported by the city’s gas tax allocation and part of the entitlement share from the state, which comes from gambling revenues and other sources.

Staff is not recommending an increase to this assessment and the last one was in 2016.

City officials begin budget development discussion, tax increases likely

The park maintenance district is also a citywide assessment that was approved by voters in 2018. The amount is set annually by commissioners and has not been increased since it was established. It’s been $1.5 million annually, which breaks down by property values as to how much homeowners pay to reach that total amount.

What is in the city budget?

The city has 58 funds. The general fund is the primary operating fund that includes property taxes and pays for public safety, administration, Municipal Court, city legal department, the animal shelter, and supports other areas such as the county health department, Park and Recreation, the library and more.

City caps ARPA funds at $3 million for community grants

Most of the city’s other funds are enterprise or special revenue funds, meaning they are funded for specific purposes by specific revenue. Enterprise funds are those designed to be self-supporting by fees for services, like the swimming pools fund, utilities, parking, sanitation and others.

What’s a fund balance?

The fund balance is how much the fund should carry throughout the year. City policy sets fund balance requirements that range from 17 to 22 percent. The city’s policy is a 22 percent fund balance for the general fund, which equates to about two to three month’s worth of operating expenses to absorb any cash flow issues since tax revenue comes in December and June, or any unanticipated expenses.

City planning to use some CARES Act funds to replenish revenue lost due to COVID

How does the city create the budget?

At the beginning of the calendar year, the City Commission meets with staff for their priority setting meeting.

The city manager uses those commission priorities to craft the budget each year.

Departments submit their budgets and make requests for additional funds over the existing funding in what’s called “above and beyond requests.” Those are submitted to the city manager’s office, which works with the finance department to develop the overall budget. The city manager makes recommendations on whether to fund those above and beyond requests.

The city manager and finance staff present the budget proposal to commissioners in June or July annually. Commissioners can direct staff to make changes to the budget and are then asked to vote on whether to adopt the budget.

The budget is the commission’s largest policy decision each year as it funds the city’s priorities, or makes cuts. In the past, the budget discussions have cut fireworks, the Christmas tree and closed the Natatorium or added public safety staff and made major facility improvements.

Once the budget is adopted, amendments can be made throughout the year as necessary and those changes are typically also discussed in public meetings.

How are employee wages determined?

Most city employees fall under a labor union and the city has collective bargaining agreements with six labor unions. Wages and raises are negotiated through those agreements, typically every two years.