Whitefish Property Taxes Expected to Increase Compared to Previous Year

Factors driving the expected change include the Montana Department of Revenue’s two-year reappraisal cycle, and a less drastic increase in property tax relief through the city’s resort tax

By Mike Kordenbrock
Whitefish City Hall on May 20, 2020. Hunter D’Antuono | Flathead Beacon

Property taxes collected by the City of Whitefish are expected to increase for residents in the coming year, according to budget discussions Tuesday night during a Whitefish City Council work session.

A May 15 transmittal letter given to the council by City Manager Dana Smith lays out the highlights of the proposed budget for fiscal year 2024, including the expected changes to property taxes and assessments. The preliminary budget has a total appropriated budget of $49 million, with $39 million in expenditures, which will mark an 8.6% decrease in expenditures from the previous fiscal year.

All told, a residential property with no improvements during the year 2022, and a market value of $526,440 could see an estimated increase of $80.31, or 10.78% on the portion of their property tax bill coming from the city. As Smith notes in her letter, that increase will offset the $98.59 or 11.68% decrease a similarly valued property saw last year.

Part of the anticipated increase is due to a drop off in property tax relief from the city’s resort tax compared to the previous year, according to Smith. Resort tax collections in excess of the city’s budget are required to be returned to taxpayers as additional property tax relief.

In fiscal year 2023, the city was able to use its resort tax for property tax relief equivalent to a reduction of 58.475 mills or $2.8 million. The amount of property tax relief for Fiscal Year 2024 from the resort tax is expected to be less, but still amounting to a reduction to the city’s levy of 46.086 mills, or about $2.5 million.

“This means that without a change in the number of mills levied, property taxes will increase in FY24 (Fiscal Year 2024), to cover the $384,201 decrease in additional property tax relief from the resort tax,” Smith wrote in her budget transmittal letter to the council, which also characterizes the smaller increase in resort tax collections expected for the coming fiscal year as more in line with historical growth, as compared to resort tax revenue from fiscal year 2022, which was abnormally high. Resort tax collections for fiscal year 2023 are estimated to increase about 7% over the previous year, compared to the 32% increase in resort tax collections seen in fiscal year 2022.

Another factor driving the expected increase in Whitefish property taxes for the coming fiscal year is the Montana Department of Revenue’s taxable property reappraisal cycle that delivers reappraisals every two years, with fiscal year 2024 being a reappraisal year. The city is expecting an updated estimated taxable valuation for the coming fiscal year to be shared by the DOR on or before Aug. 7. That valuation will be based on newly taxable property, and market value increases on currently taxable property as of the end of 2022. Smith told the council Tuesday night that forecasting the exact change is difficult, but in her preliminary budget she factored in a “conservative” estimate of the DOR’s reappraisal showing a 10% increase over FY 2022.

“One thing that’s really important to understand, what the DOR sends out, which shows your tax bill going up by what your property value goes up, is completely inaccurate,” Smith said. “Cities are limited to new taxable property and/or half the rate of inflation, which is determined by the state. So we don’t actually get to say ‘Oh your property value went up 20%, your property taxes are going up 20%.”

Smith told members of the council Tuesday night that in light of the potential increases it’s important to keep in mind the context of how the city has approached property taxes in recent years.

“We gave a 10 mill decrease in fiscal year ’21. Fiscal year ’22 we did an additional decrease of 14 mills. We actually did an even further decrease in fiscal year ’23 because of resort tax relief of 17 mills. So there was a significant decrease over time in our mills levied,” Smith said. “We obviously always try to keep property taxes low. That is our intent. We only increase what we absolutely need. Without changing our general mills levied or our permissive medical levy, with the additional resort tax relief going down, property taxes will automatically go up.”

The preliminary budget projects a $4.9 million decrease in capital improvement program spending, which typically goes towards infrastructure, facilities and equipment. The budget also calls for a combined pay increase of 5% for most city employees through a 3% cost of living (COLA) raise and a 2% STEP raise, compared to the 1.5% COLA and 2% step raise city employees might receive in a normal year. Smith’s letter to the council explains that increase as necessary given market conditions and the need to retain employees.

The preliminary budget also calls for adding two full-time positions to the city, including an additional school resource officer at a cost of $94,850 per year for the Whitefish Police Department so that there can be an SRO at the high school and elementary school, and one at the middle school. The cost of the additional SRO would be split with the school district.

The budget also calls for the hiring of a new street maintenance operator for the public works department to help with snow plowing, painting, and other street maintenance at a cost of $75,700 for fiscal year 2024.

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