By increasing property taxes, but reducing storm water assessments, Whitefish city officials believe they have a found a way to increase the general fund’s cash reserve while offsetting some of the costs to property owners.
Solving the general fund’s low cash balance appears to be the last major question for the council as it prepares to adopt a fiscal year 2011 budget.
City Manager Chuck Stearns said council is expected to vote on the final budget at a public hearing at City Hall on Sept. 7, unless a special meeting is called instead.
At a July 20 meeting, council voted to make a number of changes to Stearns’ initial budget proposal, which was released in early June. Thanks to an anonymous donation, expense-cutting measures and the acceptance of pay freezes by the police and fire associations, council was able to avoid layoffs in the police and fire departments. Stearns had recommended cutting two police officers and a paramedic-firefighter.
Council also voted to cut projected building permit and license revenues for the fiscal year down from $242,000 to $200,000. Some councilors had argued that Stearns’ projections were too optimistic.
Another major change was the council’s vote to increase property taxes by five mills in 2011 and four mills in 2012, instead of a full nine mills at once, as proposed by Stearns. The five-mill increase would raise the total to 105.28. To offset that hike, council agreed to reduce the street maintenance district assessment by $100,000.
But questions remained following the late-July meeting, including the general fund’s depleted cash reserves. At an Aug. 16 meeting, council addressed this concern and discussed the proposal to raise property taxes – which provide revenue to the general fund – while reducing the storm water assessment. The storm water fund is not a property tax-supported fund.
Council discussed raising property taxes from 105.28 mills to 119.89 mills, providing about $300,000 that could be used for the general fund’s cash balance. To offset that increase, the storm water assessment – a flat fee paid on city lots – would be decreased by an amount equal to $300,000.
But Stearns said last week that a straight $300,000 to $300,000 swap might not achieve the effect desired by council. Stearns explained that, while the storm water assessment is a flat fee, property taxes are value-based, which means swapping between the two revenue sources isn’t completely straightforward.
Stearns said he planned to recommend a lesser, 9.79-mill increase, which is equal to $200,000. This would give the general fund a little over $200,000 in year-end cash reserves, considerably less than in recent years but far better than what the city had been facing.
Factoring in both the five-mill increase approved at the July 20 meeting and the 9.79-mill hike, the net impact on an annual property tax bill for a $200,000 property would be a $12.61 increase, according to Stearns’ figures. The additional cost would be $33.47 for a $250,000 property; $54.32 for a $300,000 property and $84.70 for a $400,000 property.
For properties valued at $168,000 and less, tax bills would actually be lowered. Those figures also include a proposed increase in park maintenance district assessments for residential lots.