City Commissioners unanimously approved their annual budget resolution and intent to raise property taxes during their Aug. 5 meeting.

The full proposed general budget was presented to commissioners during a June 26 special work session and the full proposed budget was presented during the July 1 work session.

Typically, staff presented the proposed budget earlier in June and commissioners set the public hearing during their first meeting in July.

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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.

In June, 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 annual 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.

City staff are not recommending increasing the permissive medical levy since they’ve increased how much city employees contribute to their health insurance premiums. The city will take the same inflationary factor as the previous fiscal year, which ended June 30.

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City staff anticipated about $400,000 in newly taxable property revenue this year, which is consistent with their estimates over the the last several budget years, but won’t be known until the city receives its certified taxable values from the Montana Department of Revenue.

Kinzler said the city received their certified values this week and were reviewing the numbers, but it looked like the newly taxable property would total about $330,000.

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 city’s landfill costs increased $275,000, a portion of which the city is disputing.

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 in June that staff 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.

Tax protests and appeals, including current large industrial protests from Calumet Montana Refining and Montana Renewables, are impacting the budget.

“The settlement percentage for these protests is unpredictable and a resolve date is unknown,” according to the city staff report for the Aug. 5 meeting.

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.

City Manager Greg Doyon said in June that 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.

The budget must be approved and adopted no later than the first Thursday after the first Tuesday in September or within 30 calendar days of receiving certified taxable values from the DOR, under state law.

The budget isn’t finalized until commissioners set the tax levies, but that can’t be done until the city receives its certified tax values from DOR, which is typically in August.

If commissioners don’t hold the public hearing on the budget or intent to increase property taxes, they can’t adopt the budget and wouldn’t be able to use the inflationary factor, meaning it would lose $448,822 in tax revenue and have to reduce expenditures accordingly, according to the staff report.

City staff has already used $647,845 of the fund balance to balance the general fund.

During the Aug. 5 hearing, Kinzler, city finance director, said she expects more dramatic impacts to the budget next year due to legislative changes adopted earlier this year, including a tiered tax rate and reductions in what municipalities collect in tax revenue from industrial properties.

Kinzler said that new property valuations from the Montana Department of Revenue had been issued and she’s anticipating more tax protests as a result.

The Calumet protests have yet to be settled.

There’s “a lot of uncertainties right now in the general fund and the overall legislative impacts that are going to happen,” Kinzler said.

During the Aug. 19 meeting, she said they’ll look at resetting the library levy and set public hearings on the streets, lighting, boulevard and Portage Meadows assessments as well as the park maintenance district.

John Hubbard, who goes by “Johnny Angry,” was the only member of the public to speak during the Aug. 5 hearing on either the budget or tax increase. He’s opposed to increasing taxes.

Commissioner Joe McKenney said, “we are set up to financially fail. Our state legislature has just set up local government to fail.”

He’s referring to the property tax cap on local governments of half the rate of inflation over the last three years, which this year is 2.11 percent.

That’s why the city is having a hard time funding public safety, parks and recreation, administration and other city functions.

He said it’s no longer a matter of cutting the fat, “now we’re cutting the bone, year after year after year.”

Commissioner Shannon Wilson said the tax increase for the year was less than rising costs of McDonald’s Happy Meals.

Commissioner Rick Tryon said that city staff “are very fiscally responsible people. We are one of the most fiscally conservative and fiscally responsible cities in Montana.”

He said that commissioners don’t take pleasure in raising taxes, but as costs to the city, everybody has to pitch in.

“I’m sorry that that’s the reality of life, but it is,” Tryon said.