During their July 5 meeting, City Commissioners will be asked to set public hearings for July 18 on the budget and intent to raise taxes.

Staff presented the proposed budget for the general fund during the commission’s June 20 work session and will discuss the remainder of the budget again during their July 5 work session.

Commissioners typically meet the first and third Tuesday of the month but due to the holiday, the meeting moves to July 5.

City officials look at proposed budget, includes tax increases

The budget process begins every year with a commission meeting to determine priorities and from there, city departments develop their requested budgets, which the city manager and finance office use to develop the proposed budget.

The proposed budget includes all available tax increases, which are the inflationary factor and permissive medical levy.

The city is still recovering from COVID and did not take any tax increases during fiscal years 2021 and 2022, using $552,502 and $1,300,466, respectively, of fund balance.

The city used the full tax increases during the fiscal year that ended June 30, but did not recoup all the lost tax revenue from the previous two years and used $1,205,000 of CARES Act funds to balance the budget.

City officials begin budget discussion

For the proposed budget, the city is using the full allowable tax increase and $998,064 of CARES to balance the budget, according to city staff.

State law limits annual tax increases to the inflationary factor, which is one-half the average rate of inflation over the prior three years.

This year, that is set by the Montana Department of Administration at 2.46 percent and equates to $451,129 of new tax revenue for the city.

City beginning budget process

Staff is also recommending using a 1.92 percent increase in the permissive medical levy, which will add $353,042 in new revenue for the city. The permissive medical levy is only used to cover city employee health insurance premium costs and is calculated under state law.

Health insurance premiums increased 8 percent for the city for the new fiscal year, which began July 1.

Those two options would raise about $804,171 in additional revenue for the city.

City hosts public safety forum, discusses November levy question

For comparison, a new firefighter costs the city about $100,000 and a new police officer costs about $110,000, according to the figures in the proposed public safety levy.

The total proposed allowable property tax levy increase is 4.38 percent.

The proposed tax increases would equate to an additional $10.51 annually on a $100,000 home and $21.02 on a $200,000 home, according to the city finance department.

The increase in the city’s entitlement share from the state is about $311,446 and the city is estimating about $9.73 million and that captures revenues from gambling and alcohol.

The city is also anticipating about $400,000 from newly taxable property, but that figure won’t be known until the city receives its certified taxable values from the Montana Department of Revenue, usually in August.

Montana Department of Revenue beginning to issue tax rebates July 3

The proposed budget leaves an unreserved ending fund balance of $6,845,473, or 17.6 percent, below the city policy of 22 percent, which equates to about two or 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.

State law requires the city to adopt the budget by the later of the first Thursday after the first Tuesday in September or within 30 calendar days of receiving certified taxable values from DoR.

Montana Department Revenue mailing appraisal notices, public meetings planned

The budget isn’t considered final until tax levies are set, which is typically during an August commission meeting once the city receives the certified taxable values.

Commissioners could opt not to use the tax increases, or reduce expenditures by $804,171, or use undesignated fund balance.

Commissioners could also choose to use more CARES funds to balance the budget.

To balance the general fund, city staff already used $998,064 from the CARES Act to offset the use of undesignated fund balance in the proposed budget.