City Commission takes first look at proposed budget
City Commissioners took their first look at the proposed budget during a June 26 special work session.
Typically, staff presented the proposed budget earlier in June and commissioners set the public hearing during their first meeting in July.
Melissa Kinzler, city finance director, said this is her 25th budget with the city and this was the first time commissioners weren’t setting the public hearing at the first July meeting.
City Manager Greg Doyon explained city budget factors to commissioners for about an hour before finance staff walked commissioners through an overview of the general fund.
They’ll have another budget work session on July 1 looking at the remainder of city funds.
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Staff also presented three scenarios in which the city didn’t raise property taxes, as requested by Commissioner Rick Tryon.
Those potential scenarios included essentially eliminating the Parks and Rec department, reducing positions in planning, closing neighborhood pools, or not filling four of five vacancies at the Great Falls Police Department.
None of those scenarios are being recommended by staff, who are recommending using the inflationary factor to generate an estimated $448,822, which would have an impact to taxpayers of:
- $2.58 on a $100,000 taxable value property
- $7.74 on a $300,000 taxable value property
- $17.80 on a $600,000 taxable value property
Local governments are only able to increase property taxes each year by half the average rate of inflation for the past three years.
That increase is known as the inflationary factor.
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Doyon asked commissioners to review the materials presented during the June 26 meeting before the next work session and before considering setting another work session.
By the end of the meeting, commissioners said they were fine with the scheduled July 1 budget work session and didn’t need to add meetings.
Tryon said the proposed budget is “pretty solid.”
A number of legislative changes from this year’s session will impact municipal budgets and in many ways, staff don’t yet know what those changes will look like.
The “legislative interference with local control is pretty profound,” Doyon said, limiting local government’s ability to control their own budgets. “There’s never enough money to cover the needs that I end up seeing through the budget proposals.”
Doyon said that’s particularly true in terms of capital needs such as maintaining facilities, which the community has seen in the catastrophic failures of the Natatorium, the Civic Center facade and fire station repairs.
“Typically a community doesn’t have the discipline to put away money” for those needs until it becomes dire, Doyon said.
Sometimes when the city is challenged with funding shortfalls, the mentality is to wait until it breaks before dealing with an issue. But when things break, Doyon said residents ask why the city waited so long or let it get so bad.
It’s “not an awesome way to do it,” Doyon said, but it highlights the decision on whether to fix the issue or do without and cut that particular service or program.
As a general rule, Doyon said, the city only makes bond or levy requests when absolutely needed.
In the two budget cycles since the public safety levy and bond failed, Doyon said it’s unclear whether the community feels there’s adequate public safety service as Great Falls Fire Rescue is relying on other fire departments to backfill stations when responding to structure fires and there’s a lack of investigative services and patrol at the Great Falls Police Department.
Sometimes commissioner react emotionally to complaints by addressing the need, but it shifts resources elsewhere.
A recent example has been downtown property owners concerned about transients and criminal behavior, requesting additional city resources downtown.
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“It has an impact on how they do their job,” Doyon said.
The proposed budget includes a $91,000 increase to the parks budget for watering due to the city’s utility increase that commissioners approved June 3.
The proposed budget includes general fund subsidies of:
- $100,000 for Aim High rec center
- $80,000 for swimming pools
- $100,000 for Civic Center events
Staff are proposing to use $647,845 of fund balance in the budget that begins July 1, which brings the general fund’s unreserved fund balance to 23.8 percent.
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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.
Kinzler said they want to maintain that fund balance since they believe there will be more tax protests and continued uncertainty from legislative changes.
The proposed budget includes some increases for police and fire, but does not include $346,588 requested to add three sworn police officers or additional funds to build an equipment fund for future replacements at GFFR.
The budget includes an estimated $9,77,659 from the state through the entitlement share, which includes a portion of vehicle, alcohol and gaming taxes, court fees and other payments collected by the state that are then returned to local governments through a formula established in 2001 based on the previous year’s allocation with a growth factor.
This year’s projected increase in the entitlement share is $87,666 over the previous year.
The budget will change over the year with regional and national shifts, and as legislative changes take effect.
The Legislature, “in its infinite wisdom,” Doyon said, decided to address things ranging from the number of parking spaces for development to establishing a complicated taxation formula, limiting local government’s ability to increase taxes.
The problem, Doyon said, is “I’m not sure how many people really understand what they passed.”
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The impact to the proposed budget remains to be seen, Doyon said, and the following year’s budget will be more difficult, so city staff are trying to maintain a strong undesignated fund balance to help buoy those changes.
Doyon said that while expressing concerns to a local state lawmaker about bills impacting the city, the legislator responded that they can just blame the Legislature, “so blame the Legislature we will.”
Tax protests and appeals, including current large industrial protests from Calumet Montana Refining and Montana Renewables, are impacting the budget.
Both city and county officials have said that in the past, tax settlements included language preventing Calumet or other similar parties from filing protests for three years.
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That language doesn’t appear to have been included in recent settlements, they said.
Doyon said it was likely that if those protests had been resolved, the city wouldn’t have to use as much reserve funding to balance the budget.
“I’m not being critical of an industry’s ability and right to do that, I’m just saying it has an impact,” on the city’s ability to budget and since they budget conservatively, there isn’t a lot of wiggle room to absorb those large protests, during which those tax revenues are held in escrow and aren’t available to the city or county until it’s resolved.
The city had about $1.1 million tied up in tax protests and appeals for last budget year, about $662,000 in the current budget year and that’s expected to continue into the next fiscal year, which begins July 1.
Public sentiment is a dislike of taxes and city officials often hear calls for less government, but rarely for less services, Doyon said.
Doyon said if he could, he’d waive parking for a while to remind everybody why we need enforcement, or just end it and people would adjust and the city could concentrate on the garages.
“People seem to have forgotten what it’s like not to have enforcement in the downtown,” Doyon said.
Other communities have parking enforcement and it takes an inordinate amount of staff time, he said, but there’s “no real immediate solution on the horizon.”
Additional TIF funds will likely be needed to help with repairs and earlier in June, the Parking Advisory Commission voted to recommend a $150,000 TIF request for operations.
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The city is currently on a month to month contract with its parking contractor and during the June PAC meeting, they discussed increased parking fines to make up a deficit, though the fund had nearly $80,000 in collected parking fines in the fall.
The Electric has requested how much has been collected since the city resumed booting vehicles over the winter, but has not yet received that information.
The bulk of the general fund goes toward public safety and ever since the city exited Electric City Power, staff has been working to create capacity in the general fund for public safety.
“Quite frankly, it didn’t work,” Doyon said, reiterating what he’s said in recent years about the city budget as taxable values have remained relatively flat, while needs increased and some growth has been in tax increment financing districts, where the increased tax revenue stays within the district for public infrastructure.
During the June 17 meeting, Commissioner Rick Tryon asked staff to draft a budget without increased property taxes to show the impact and potential cuts.
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Local governments are capped under state law to only increase property taxes by half the average rate of inflation for the past three years.
Doyon said that in November 2024, he’d emailed commissioners that they needed to start talking about budget priorities and use of general fund dollars. He said he told them they needed to consider whether a service, program or fund was considered essential or nice but not necessary.
“I know that is offensive,” Doyon said, as all departments add value, but some are absolutely essential for the city to function and commissioners needed to review whether other entities could provide those services or if the city could generate revenue in other ways, plus what criteria should be used in deciding general fund allocations to those services.
It “gets tough,” Doyon said.
Commissioners had some work sessions in the meantime, discussing nonperforming funds and staff outlined their efforts to bring those funds back into performance in a May 9 memo.
That memo includes nine city funds that have been called a number of things over the last decade, but essentially are not generating enough money to cover expenses and in some instances have required general fund subsidies.
One of those funds is the city golf fund, which has struggled for years, at one point owing the general fund about $1 million.
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The fund now owes the general fund $678,251, bringing the deficit down since CourseCo, a private company, assumed management of the two municipal courses in 2019.
In January, commissioners voted to extend their management agreement contract with CourseCo for another five years. That agreement includes a requirement to pay off the remaining debt to the general fund. It also sets aside funds annually for deferred maintenance and other capital improvements.
The fund currently has a cash balance of $356,412 due to proceeds from the Pasta Montana property sale, which staff is using to reduce the general fund debt to $321,839.
Other park and rec funds will be addressed in an operations and fee study, for which the city released a request for proposals on June 23.
The “project will establish a clear cost allocation framework, evaluate current fees and cost recovery practices, and develop a pricing philosophy aligned with community values and long-term financial sustainability. In addition, the consultant will review the department’s organizational structure, staffing model, and service delivery to identify opportunities for improved efficiency, coordination, and future planning. This marks the city’s first comprehensive review of both its fee structure and operational framework,” according to the request for proposals.
Proposals are due Aug. 12 and under the tentative schedule, the contract would be awarded in September with work beginning in October.
The city is planning to sell the former recreation center on 2nd Avenue North, which was closed last summer as the Aim High Big Sky Recreation Center opened and has been leased to a private operator.
Doyon said for years that he would close that facility when the new pool opened, consolidating it and the former Natatorium into one facility, and that the city may need to sell the building depending on finances.
A market appraisal was expected to be completed within a few days, Doyon said, and the city would then open public bidding with the sale awarded to the highest bidder, contingent on a four-fifths affirmative commission vote.
Proceeds from the sale would be used to pay off cash deficits of $115,031 in the recreation fund and $64,031 in the Multi-Sports fund.
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Any remaining funds could be used to replenish the swimming pool fund, “which took a significant hit after the opening of the Aim High Big Sky Recreation Center,” according to staff’s May 9 memo, since $180,000 was transferred from the pools fund to the new Aim High center for startup cash flow and a portion of the pool’s general fund subsidy was diverted to Aim High.
The proceeds from the old recreation center sale will be one time funds and should not be used for ongoing operations, staff wrote in their memo.
The Aim High center had a cash deficit of $155,910 as of March 31 and revenues were $335,154 under expenses.
Operation of the Aim High facility will be a primary focus of the park and rec operations and fee study, according to staff, but it won’t be completed in time for the budget that begins July 1 and additional general fund support will be required.
Doyon said during the June 26 budget meeting the study will be used to determine if the city can continue operating the pool or will need to hire a private contractor as it did for the golf courses.
Local governments are limited on how they can set user fees and the center was established to be accessible to residents, but the city is still evaluating whether it can support itself, Doyon said.
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The city was granted a $10 million Defense Department grant toward the facility that the city matched with $10 million.
The Multi-Sports complex has been a challenge for years, Doyon said, and external users will likely need to pay more or find alternate locations, or there may be a reduction in fields. One option could be an entity leases its own field.
The existing model isn’t working, Doyon said, and it is being reviewed through the park and rec operations study.
Civic Center events also has an unsustainable model, Doyon said, and the business model will need to shift.
“It’s a dated facility,” Doyon said of the Mansfield Theater and Convention Center.
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The theater is currently undergoing a roughly $1.5 million rehabilitation to restore the ceiling and replace the seats.
Commissioners awarded those contracts, which were over available funding, in December and earlier this year.
The city has issued a separate request for proposals to study that operation, as well as the commission chambers and the former children’s museum building.
“The purpose of this study is to assess current usage, physical condition, financial performance, and long-term viability of these facilities, and to develop strategic recommendations that enhance their value to the community. As part of the city’s broader commitment to fiscal sustainability and community enrichment, this project seeks to determine how these spaces can be better utilized, programmed, or reimagined to meet evolving community needs and market demands. The study will evaluate operational models—including city-operated, public-private partnerships, and full or partial privatization options—to identify the most effective and financially sustainable path forward,” according to the RFP.
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That RFP was issued June 23 and proposals are due July 29, with the work tentatively starting in August or September.
Doyon said it would take six to eight months to complete that work and come to commissioners with options.
The city has also adjusted the split for health insurance with employee contributions being increased from 15 to 20 percent.
By doing so, the city doesn’t need to increase the permissive medical levy for the budget year that begins July 1.
Health insurance is a “rich benefit for employees,” but in recent years, employees have preferred higher wages over benefits, Doyon said.
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In the case of these troubled funds, Doyon said commissioners had agreed to muddle through for awhile as they weren’t prepared to eliminate those programs or services, and staff will adjust operations as best they can, but some services won’t ever meet resident expectations.
Eliminating services is a political decision, Doyon said, and he’d seen commission after commission wrestle with that idea when he’d recommended shuttering properties or services before, but commissioners didn’t do it, as “eliminating desired services is a tough balance to achieve,” and services, while expensive, are valued by the community.
Doyon mentioned that the city could look at selling underutilized parkland or parking lots, both discussions that have been had in various iterations over at least the last 12 years.
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He said he was quite certain he’d hear from community members about floating that idea.
Former Mayor Mike Winters suggested selling underutilized parkland roughly a decade ago and community members were strongly opposed to the move that went no further.
During a May work session, Mayor Cory Reeves said he was “really passionate about developing undeveloped parkland and getting some housing in there. People are gonna lose their marbles.”
City staff have said in numerous meetings and Doyon reiterated the point during the budget work session that housing is needed, but it typically doesn’t add much to the tax base.
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Doyon said during the June 26 meeting that if the city were to eliminate the Park and Recreation department to give more funding to public safety, it would have a significant impact to parks, facilities, programming and general quality of life.
“Can you imagine if we had non-maintained park areas of the city,” Doyon said.
It would invite vandalism, gophers, unmaintained open space and reduce recreational outlets for all ages, which would have an impact on recruiting employees to existing or potential businesses in the community, Doyon said, if those green spaces weren’t maintained and there were few desirable amenities.
Doyon said, “I can’t imagine the impact on law enforcement,” if city parks weren’t maintained, as they’d become attractive nuisances, increasing patrol’s workload and ability to effectively patrol.
Commissioner Tryon requested a look at the budget with no tax increases.
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Staff is already not proposing an increased permissive medical levy since the increased employee contributions cover the increased costs.
Municipalities are limited under current state law to raising taxes half the average rate of inflation for the previous three years, known as the inflationary factor.
The inflationary factor for the upcoming budget is $448,822, which equates to an estimated annual tax increase for local property owners of:
- $2.50 on a $100,000 taxable value property
- $7.74 on a $300,000 taxable value property
- $17.80 on a $600,000 taxable value property
Staff laid out three scenarios of what the budget would look like if commissioners cut costs.
In one scenario, the city would cut about $4.8 million from the budget, effectively eliminating the Park and Rec department, severely limiting natural resources, likely closing neighborhood pools and limiting other operations; it would also cut planning department positions and eliminate Civic Center events.
Staff is “not recommending that scenario in this budget,” Doyon said.
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In a second scenario, without the inflationary factor, a substantial portion of Park and Rec would be cut, including some trails, likely closing neighborhood pools, limiting other operations and impacting programming.
That scenario, without the inflationary factor, would include a $443,000 cut.
A third scenario would include a $457,000 reduction, cutting four of the five current patrol vacancies at the Great Falls Police Department.
Doyon is not recommending any of those budget scenarios.
Word of those potential budget scenarios got around and The Electric received several messages last week from city staff asking if their department was being cut or if rumors of cuts were true.
Tryon said he appreciated staff putting together the document showing how cuts would impact actual people and positions.
“If you’re not going to take a little bit of an inflationary increase on property,” Tryon said. “There’s a price for that.”
He said looking at cuts to Park and Rec, “I sort of doubt that people want that. Does the public want that, I don’t think they do.”
The scenarios laid out the costs and it was “good to just see it,” Tryon said.
Commissioner Joe McKenney said that he often hears that the city should run like a business, but the city “can’t necessarily do that.”
Doyon said that they’ll continue discussing the budget, cutting costs and potentially services, starting the budget process earlier next year.
Staff has avoided cuts in public safety since it wouldn’t make sense to have to hire those positions back in the case of a future public safety levy, he said.
In the proposed budget, police is $18,448,895 and fire is $12,318,105, totalling $30,767,000.
Property tax revenue is estimated at $27,878,486, meaning those revenues are short $2,888,504 covering public safety alone.
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Doyon said staff is also hoping that some pending tax appeals, mainly from Calumet, will be resolved over the next year, but staff is anticipating more protests and appeals with the new tax structure passed by lawmakers earlier this year.
“There is no doubt we will get more tax protests,” Doyon said. “I really think Montana is experiencing some growing pains, absolutely as a state,” and the Legislature is reacting.
More development is happening in Great Falls, but, “be careful what you wish for,” Doyon said, since growth comes with side effects.
Doyon sent commissioners a memo in April detailing some potential changes to address development. That memo was not included in staff packets about the utility rate increases that commissioners approved on June 3 and Doyon said during the budget work session that he owed commissioners and the community a work session on that memo.
The memo included the suggestion of a strategic development officer.
Of the priorities commissioners set in January, they’ve made some progress and are looking at hosting a town hall in the fall on city services, Doyon said.
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Kirsten Wavra, deputy finance director, said that several bills passed in this year’s Legislature that will have significant impact to the city budget.
One is SB 117, which has changes to the inflationary factor and newly taxable property.
Under that law, the city could start taking up to 4 percent of inflation as an annual property tax increase starting in 2027, she said.
But, the bill will also change newly taxable property, of which historically the city has been able to take 100 percent.
Under the law change, local governments will only be able to take 75 percent of residential and commercial and 40 percent for industrial. Municipalities could take another 10 percent of industrial to put in a reserve account, but Wavra said that’s complicated on how the reserve account will work.
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Kinzler, city finance director, said the city has never been able to get a breakdown of newly taxable property from the Montana Department of Revenue, despite asking for that information.
She said that means city officials don’t know what particular properties or projects are driving newly taxable property every year, though they’ve often attributed major spikes to Calumet or other large industrial projects.
Tryon asked if staff could run those new tax formulas against the current year’s budget to get an estimate of the impact.
Kinzler said no, because there are tax abatements and protests factored in, as well as no information regarding the breakdown of where the newly taxable property is coming from.
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Doyon said those calculations might be fun, “but I think it would be misleading,” since lawmakers have changed the overall tax structure under HB 231 and SB 542.
Kinzler said before the legislative changes, staff could predict a lot going into each budget, but “now there’s a lot of unknowns.”
She said they know most of their newly taxable property is usually industrial.
“The uncertainty of the whole situation,” Kinzler said, is “frightening.”
Commissioner Susan Wolff said no other municipality in the state understood what the legislative changes will do and the state budget isn’t done since the governor was vetoing portions and that might be litigated.
“The level of anxiety and angst of these unknowns is very very high,” Wolff said.
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Wavra said the city keeps the floating mill, meaning it can still mill what it milled last year, but the new tiered tax structure will be changing how DOR calculates property taxes.
The city and county will have to reset publicly voted levies.
All the changes are heavily dependent on how DOR implements the new laws and it’s unclear how they’ll do it by August when the certified taxable values are due to local governments.
The “long term implementation of this has us nervous,” Wavra said.
In resetting levies, Kinzler said “it’s as clear as mud” and staff is looking at their options under the new law.
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