City Commissioners continued their budget discussion during their July 2 work session.

The fiscal year began July 1 and runs through June 30, 2025.

The proposed budget is $40,370,294 in revenue and $40,814,699 in expenses, using $444,405 of fund balance, according to staff.

City policy is to have a 22 percent fund balance in the general fund, which equates to about a two and a half month’s worth of operating expenses so the city can ensure cash flow in the event of a major unanticipated expense.

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In the upcoming budget, city staff is recommending a slightly higher fund balance at 24.5 percent, since they’re anticipating a continued significant tax protests.

In the proposed budget, the city would end the next budget year with a $9,912,051 fund balance, above what would be a 22 percent fund balance of $8,979,234.

City takes first look at proposed budget, with tax increases

Staff is proposing taking the full property tax increases available to the city, which is a 7.59 percent increase between the inflationary factor and permissive medical levy.

Under state law, counties and municipalities can only raise property taxes by half the average rate of inflation for the previous three years.

Taking that full increase will generate $562,520 in new revenue for the city.

City beginning budget process

State law also allows municipalities to use the permissive medical levy, which helps offset the cost of employee health insurance premiums.

City staff are recommending using that levy to generate $317,544 in additional revenue for the upcoming budget.

During the July 2 work session, Melissa Kinzler, city finance director, told commissioners that the majority of that levy funds health insurance for police and fire.

That’s a total increase of $1,599,586 of new revenue over the current budget year.

For comparison, the City Commission approved the purchase of three new sanitation vehicles earlier this month, totaling $1,188,960.

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If approved, the tax increase would have the following impact on homeowners:

• $5.76 increase per $100,000 taxable value for inflationary increase
• $3.25 increase per $100,000 for permissive medical levy
• $9.01 total increase per $100,000 taxable value total

City staff is estimating $220,000 in marijuana tax revenue for the upcoming budget year, as well as an additional $319,511 in the entitlement share from the state, which is funds from alcohol and casino revenues, among other revenues collected by the state.

That brings the total of new revenue for the upcoming city budget to $1,819,586, according to city documents.

Kinzler said during the June 18 work session that she was recommending the higher fund balance in this budget due to “a lot of uncertainty” with the tax protests, primarily the large protests from Calumet Montana Refining and Montana Renewables appealing the Montana Department of Revenue determination that their entire facility was not tax exempt under state law.

Montana Renewables, Calumet have pending tax appeals before state board

Kinzler said most of the tax increases were to fund public safety needs.

City Manager Greg Doyon said city officials understand that people are concerned about tax increases, but “we’re trying to maintain the minimum service level that we have,” with the exception of adding the new aquatics facility.

He said the city is facing tax appeals, deficit recovery from COVID, collective bargaining agreements, inflation and rising costs.

“What we don’t want to do, we don’t want to put the city in a worse position next fiscal year,” Doyon said, and that the city is taking a strategic approach this year hoping that the tax appeal will be settled by next year.

“We wouldn’t ask for it if we didn’t need it,” he said of the tax increase proposed in the budget.

Kinzler told commissioners that if they don’t take the permissive medical levy increase the city is required under collective bargaining agreements to pay 80 percent of insurance premiums for employees, who pay the other 20 percent.

“There is no option as I understand it on the surface to not take that permissive medical levy,” she said, and if they didn’t commissioners would either need to look for cuts or take more of the fund balance.

Commissioner Rick Tryon asked Kinzler where they’d look first to make cuts.

Kinzler said they’d likely look at operations first, “but then it’s going to be a political decision about where you would like us to look.”

Doyon said other expenses in the general fund are administration, commissioners, Civic Center events, the animal shelter and some park and recreation activities.

An option could be to reduce park maintenance through personnel cuts or changing watering and mowing operations, but that the public would likely have a negative response to those changes.

“In all fairness, I appreciate the hypothetical,” Doyon said, but department heads would need the opportunity to discuss the impact of those potential cuts.

Tryon said he wasn’t suggesting going through the budget with a fine tooth comb looking for cuts, but, “I don’t think a lot of people understand what the alternative is.”

He said that cutting personnel would be an alternative to tax increases, but that he wasn’t suggesting doing that.

Kinzler said that public safety wages make up about 74 percent of operational expenses in the general fund.

Commissioners previously approved utility rate increases and staff is proposing the same percentage increases for streets, Boulevard District and Portage Meadows assessments this year, which are:

• streets assessment: 10 percent
• Boulevard District assessment: 6 percent
• Portage Meadows assessment: 5 percent

Some lighting districts will also see an increase this year.