Commissioners review city budget, revenues trending down
City staff did a quarterly budget review with commissioners during their Dec. 6 work session.
Revenues have been stable since the city didn’t increase property taxes during COVID but expenses have continue increasing.
City finance officials said that at this point in the budget year, which began July 1, without the CARES Act funds, the general fund would be in the negative.
That’s in part based on the timing of property tax collections, which are typically sent to the city in December and June.
The general fund is the city’s main operating fund and includes public safety.
The bulk of the city’s revenues are through property taxes and another significant chunk is intergovernmental, which includes the entitlement share from the state.
The entitlement share includes monies from gaming taxes; aircraft registration fees; coal tax; Montana Department of Natural Resources and Conservation payments in lieu of taxes for counties having more than 6 percent state land; beer, liquor and wine taxes that the state collects and disperses to municipalities.
Melissa Kinzler, city finance director, said that the city general fund is running more negative than the two prior years, due to increased costs and less revenues.
She told commissioners that she believes they’ll end up using CARES Act money to offset the deficit in the general fund and have a lower unreserved fund balance.
City policy is to keep the fund balance at 22 percent to cover any unforeseen dips in revenues or unexpected expenses.
Kinzler reminded commissioners that they went into this year’s budget $1.2 million in the negative. Commissioners adopted a budget that includes CARES Act and reserve funds to make up that deficit.
She said that they’re projecting that they could be starting the next budget with as much as a $2 million deficit, so they need to use the CARES Act funds to offset the shortage until the city can generate more revenue for the general fund.
The city has $5.9 million of CARES funding left.
Kinzler told commissioners they’d be discussing options with commissioners in January to generate additional revenue.
City Manager Greg Doyon told commissioners that if the budget forecast doesn’t improve, the city make have to take other actions to buffer to negative fund balance, such as spending or hiring freezes, or other budget reductions.
He said those will be hard discussions and the CARES Act money won’t last so hopefully the forecast improves in the next few months.
During each budget review, city finance staff reviews funds needing attention, many of which have been the same for years.
Those funds are enterprise funds, meaning they are designed to be self supporting through fees for service.
One of those funds again this quarter is the golf fund.
At the end of fiscal year 2020, the fund had a $1.2 million deficit. That’s been reduced to just over half a million.
The fund is projected to reduce the deficit to $162,191 by the end of the current fiscal year, according to Melissa Kinzler, city finance director.
She said revenues have improved in recent years and staff are expecting that to continue.
The city’s two municipal golf courses are managed by CourseCo, a private company, under a contract that began in 2019 and in 2021, commissioners extended the contract through 2025.
Another fund staff are watching is the planning and community development fund.
That fund also has a negative fund balance. It received COVID recovery funds and increased general fund support.
Kinzler reminded commissioners that they discussed the need to increase planning fees during the budget process.
Doyon said he doesn’t see that general fund subsidy going away without other changes.
Craig Raymond, city planning director, said Doyon had directed his department to look at options for increasing planning fees to reduce the department’s reliance on the general fund.
If the commission wanted his department to charge for the actual cost of doing business, “our fees would be much much higher. Development is being subsidized currently by the general fund,” Raymond said.
Raymond said they’re pinched between the demands on general fund investment in development and subsidizing development.
In the first quarter of the current budget year, the general fund subsidized the planning fund with $94,000.
Commissioner Rick Tryon said if the city was charging for the actual cost of staff’s time and “doing it like we supposedly should be, those funds could stay in the general fund and support public safety.
“The community’s got to pay for services one way or another,” Tryon said, either through planning fees or for police, fire and court.
Tryon said there are other communities that charge impact fees, which the city has not pursued, and Raymond said those were typically for utilities and schools.
Raymond said he’s not aware of a community in Montana that’s actually charging for the cost of doing business.
Tryon said there’s “no question that we’re far lower” than other communities in terms of planning fees.
Raymond said his department is lookin at a new fee structure with a particular dollar amount in mind to generate and reduce the general fund subsidy, without losing competitiveness with other communities.
“We’ve never been expected to recover all of our costs…so it’s a whole new paradigm,” Raymond said.
Any new fee structure would be discussed at a public commission meeting and require a commission vote.