City Commissioners voted 4-1 during their July 16 meeting to approve their intent to increase property taxes.

Commissioner Shannon Wilson voted against the resolution saying she blamed the Montana Legislature for failing to take any action during the last session to address rising taxes for residential property owners even though the Montana Department of Revenue had warned that was coming.

During the July 16 meeting, city staff reviewed the budget process and information that they’ve been discussing with commissioners for several months in public meetings.

Michael Yegerlehner, a local resident who’s been working on addressing homelessness in the city for a few years, estimated that his tax increase for the year would be about $40.

City to consider budget, tax increase on July 16

He spoke in support of the tax increase, but joked it would likely make him unpopular.

“You pay for services. I like those services, other people benefit from those services,” he said. “I live in a society, if we need the taxes, I’ll pay the taxes.”

Sharon and Jim Thompson spoke in opposition saying their taxes had increased significantly in recent years and questioned why Benefis Health System is exempt from local property taxes as a nonprofit and why Calumet Montana Refining isn’t paying their taxes.

Benefis does pay the city street assessment.

Calumet is currently protesting some of their taxes and appealing a previous reappraisal from the DOR. The company does pay their taxes during that process, but the city, county and school district don’t receive the funds until the matter is settled and depending on the outcome, those entities may not receive as much as estimated.

Keith Duncan spoke in opposition telling commissioners to be creative and think outside the box to find solutions, such as consider privatizing some city services.

City to set assessment increase hearings for Aug. 20

“You have the power to bring other ideas to the table,” he said.

The city has in recent years considered privatizing some city services, determining in most cases the cost to local residents would increase.

The city has essentially privatized its two golf courses through a management contract with CourseCo, but it retains ownership of those properties.

Commissioner Susan Wolff said that a property tax bill also includes taxes from the state, county and school district.

She said that each city department has worked to keep their expenses down and “they’re incredibly fiscally conservative.”

Commissioner Rick Tryon, commenting on a resident saying the easy thing to do is to vote for the tax increase and budget as presented by staff, said “the easy and popular thing to do would be to vote no.”

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He said commissioners have taken deep dives into the budget over the last few months with staff and “I am satisfied that the small marginal increases in property tax are justified and they balance out with the expectation of this community for city services.”

Tryon said he understands that residents are feeling the pinch of tax increases, but they expect that the city provides services and the city needs revenue to provide those services.

He said that the city tax increase for the year on someone with a $300,000 home would be about $27.

Tryon suggested that those who are passionate about stopping tax increases should contact the Legislature since the city has few options for generating revenue and they’re controlled by state law.

He said the Legislature could take action to remove tax exemption from local taxes for nonprofits such as Benefis, could allow for a local option tax or tourism tax, or lower the tax factor on residential property.

Tryon again suggested taking seven mills of library funding that the city general fund provides annually through a 1993 management agreement with the library board and shifting that to public safety instead.

The city and library board are currently in discussions about potentially updating the 1993 agreement.

Tryon said the city should also look at eliminating general fund subsidies to nonperforming enterprise funds, which city finance staff did last year in several cases. In the case of the Civic Center events fund, the subsidy was returned as the fund couldn’t support itself over the last budget year.

He said the city should also consider sunsetting some tax increment financing districts, which was discussed during a commission work session earlier this summer.

Tryon said he’d like to see more public input and participation in the budget process earlier on as “we have been looking at this budget for months now.”

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He said he would vote for the tax increase this year and look at options for next budget year.

Commissioners also adopted the budget for the fiscal year that began July 1 and runs through June 30, 2025, which includes the property tax increase, as well as several assessment increases.

The 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 recommended a slightly higher fund balance at 24.5 percent, since they’re anticipating a continued significant tax protests.

In the 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 recommended taking the full property tax increases available to the city, which is a 4.38 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.

This year’s inflationary factor is 2.8 percent, which would generate $562,520 in new revenue for the city.

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

City staff recommended 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.

City finance staff are projecting about $400,000 in newly taxable property, based on the historical average.

That’s an increase of $1,280,064 of new revenue.

For comparison, the City Commission approved the purchase of three new sanitation vehicles in June, totaling $1,188,960.

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The tax increase for this budget year 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

The total impact for a $200,000 home would be $18.02; for a $300,000 home, it would be $27.03 and for a $600,000 home, it would be $54.06.

The city won’t receive its certified taxable values until August from the Montana Department of Revenue, so those estimates are based on last year’s valuations and could change.

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.

When Calumet protested in 2018, it took several years for that protest to be resolved and the city did not receive all of the tax revenue originally assessed to the refinery, Kinzler said.

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 during the July 2 work session that 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.

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“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 in the budget.

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Staff is projecting about $400,000 in newly taxable property, based on the 23-year average of $444,054.

In the budget year that ended June 30, the city was set to receive $1.5 million in newly taxable property revenue, but due to the Calumet protest, had only received about $400,000, close to the typical amount annually, Kinzler said in June.

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 during the July 2 meeting 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.”

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Doyon said during the July 2 meeting 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.

City to set assessment increase hearings for Aug. 20

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.

Doyon said during a June work session that the city has often been unable to fund needs until the situation is dire or there’s a catastrophic failure of public infrastructure.

That’s also been evident in the city’s inability to make major investments in public safety, Doyon said.

To illustrate that disparity, Doyon and Kinzler said that the police budget for the proposed budget is $17,612,949 and the fire budget is $11,575,536 for a combined public safety budget of $29,188,485.

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The city is projecting $26,018,186 in tax revenue for the general fund, leaving a $3,170,299 shortfall between property tax revenue and those two budgets alone, they said.

The city has multiple other funding sources, including enterprise funds, which are those operations supported by fees for service such as the water and sewer systems and street assessments, among others.

City departments are asked to present level funded budgets most years and then make requests for additional budget items in what’s known as above and beyond requests.

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In this year’s above and beyond requests, Great Falls Fire Rescue asked for $217,614 in additional funding for a new deputy fire marshal and associated office costs, certification pay for two additional paramedics, a 10 percent market adjustment for administrative staff to address compression issues, office furniture to replace hand me downs, a concrete pad for burn cells at the training center and proximity dispatching.

Doyon’s budget funds none of those requests.

The Great Falls Police Department requested $386,874 in additional funding to include three sworn officers for the investigations bureau and associated training and equipment costs for $346,588. Doyon’s budget does not funds those additional positions but does fund $40,286 for recruiting and increasing costs for the state law enforcement academy tuition costs, additional funds for towing of abandoned and recreational vehicles, more funding for an online investigative tool, and additional funds for travel for training needed due to turnover.

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The budget funds $40,000 for a case management software in the city prosecutor’s office and $1,000 for office supplies in Municipal Court.

Doyon’s budget doesn’t fund the jury clerk or court office clerk for Municipal Court, that was requested in the public safety levy.

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The budget does include funding to keep the three GFPD officer positions added with a federal grant that the city accepted in December 2021.

The city received a $375,000 grant that covered 38 percent of the total cost of hiring those three officers the first year, requiring city match of $607,645, or 62 percent of the total cost.

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The grant has a four year timeframe to allocate all funding requirements. The grant further specifies the matching funds are spread over the first three years of the grant, with the fourth year being the responsibility of the city. The four year breakdown includes:

Doyon said in June that public safety was a top priority set by commissioners earlier this year, followed by housing, economic development, the growth plan and discussing ties between economic development to infrastructure and public safety.

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Doyon said that in recent years, the commission had approved 869 units of housing and during a future work session will again discuss how to address the city’s tricky soils in a way that promotes growth.

Doyon said city officials are awaiting recommendations from the public safety advisory committee that’s set to meet twice a month through August, but in the meantime will continue working on other needs and efforts to address public safety with available resources.

He said that there’s been some discussion of cutting other city services or programs to move funding to public safety but wanted the commission and community to understand the impact those changes could have.

Commissioner Rick Tryon asked in June what the process was for earmarking marijuana tax money for public safety.

Kinzler said commissioners could “just tell us” that they wanted to do so, “but it isn’t even enough to cover the three officers” from the federal COPS grant.

Doyon said there’s already a shortfall for public safety since the city can’t generate enough in property taxes to cover police and fire needs.