WHITEFISH – City Manager Chuck Stearns recently announced four layoffs and a series of cost-cutting measures to salvage the city’s beleaguered budget, but he is still unsure if Whitefish can survive this fiscal year with a positive cash balance in the general fund. And if building doesn’t pick up, next fiscal year could be shaky as well.
In a memo to city councilors and staff, and then again at a public meeting on Feb. 1, Stearns attributed the worrisome mid-year financial report to three main factors: the payment of nearly $400,000 in losses stemming a Montana Supreme Court decision against the city; a higher number of property tax protests and delinquencies; and the continued decline in revenue from planning and building permits.
Finance Director Rich Knapp gave his mid-year report, which details Whitefish’s finances through the end of December, to Stearns in mid-January. Then on Jan. 26, Stearns sent out his memo.
Calling the situation “dire,” Stearns said it appears the city will finish the 2010 fiscal year, which ends on June 30, with a negative cash balance in the general fund. The general fund is the city’s primary operating fund. The cash balance, as of Dec. 31, was $295,746. At the same time the year before, it was $966,660, and in 2007 the balance was $1,030,247.
Stearns took responsibility for the shortfalls, acknowledging that “building and planning revenue estimates were very aggressive and optimistic last summer.” He said the purpose of the optimistic estimates was to save service levels until the spring construction season, but added: “We cannot wait any longer.”
While avoiding across-the-board budget reductions, Stearns has drawn up a list of specific actions to cut costs, along with a proposal to spur revenue from increased construction. Stearns indefinitely laid off four employees, including three from the planning and building department.
The three laid-off planning and building department employees were planner Nikki Bond, building inspector Phil Holmes and permit technician/clerk Marion McLeary. Connie Morrison, a customer service clerk, was the fourth employee. The layoffs have gone into effect but are considered indefinite, with Stearns hoping to re-hire the employees again if future finances allow.
Stearns has also asked the city’s full-time and part-time employees who work more than 20 hours a week to take one unpaid furlough day before June 30. Stearns is taking two. He ordered an immediate freeze on hiring, though the parks and recreation department can fill seasononal positions.
Also, Stearns imposed a freeze on all out-of-state travel and training unless arrangements are already made, as well as a freeze on capital outlay equipment, except for ongoing construction projects. Lastly, Stearns has asked all department directors to be “extremely frugal in discretionary purchases.” Even with these measures, he said the city needs to do inter-fund and short-term borrowing.
“These decisions are very difficult and we have, wisely or unwisely, tried to delay their implementation in the hopes that the economy would turn around,” Stearns said.
He acknowledged that the layoffs and expense cuts will affect productivity within city government.
“Waits for service will be long, less will get done, and everyone should adjust their expectations of what to expect from city services,” he said.
Stearns has devised a proposal to stimulate construction – and thus permit revenue – in Whitefish. Under his proposal, the city would reimburse impact fees for construction projects between March 1 and June 30. The council questioned whether a longer period would be more effective. Stearns also said that municipal revenue streams ebb and flow, with an expected spike coming after the second round of property tax collections in May.
At the Feb. 1 meeting, Councilor Phil Mitchell commended Stearns for making the difficult decision of laying off employees but suggested more could be in order.
“I don’t want to be dealing with it in May, then we’re out of time,” Mitchell said, adding that if the proper actions aren’t taken now, “we’ll pay for this next year.”
Mitchell was also critical of city officials for the $400,000 litigation loss. The large payment stems from a Montana Supreme Court decision, which upheld a district court ruling that the city unfairly denied a couple a permit to build a home on Whitefish Lake. Mitchell was unhappy that he has “inherited this.”
Mayor Mike Jenson told Mitchell: “You know Phil, you’re talking about something you were not privy to and you’re not correct.” Mitchell disagreed.
Bill Kahle, who took office in January along with Mitchell and Chris Hyatt, questioned if the Montana Municipal Insurance Authority will cover the litigation losses. City Attorney John Phelps said the city is appealing to MMIA, but he doesn’t expect a favorable decision.
Councilor John Muhlfeld said he is uncomfortable relying on inter-fund borrowing, while Hyatt asked staff how much is available to be borrowed. Knapp said he doesn’t have an exact amount, but could provide one later.