Cash problems continue to dog city budget

There were no great surprises in the city's financial report for the third quarter, Whitefish city manager Chuck Stearns told the city council on April 19.

"We've spent down a lot of our cash reserves," he said. "Reserves are intended to cushion downturns, but this has been a very long downturn. A lot of our reserves are gone now."

Stearns pointed out that the situation will improve — third quarter reports are typically out of synch with many of the city's revenue payments. Property tax receipts come in June and the fall, and parks department revenues are also seasonal.

Other explanations for all the red ink offered in city financial director Rich Knapp's third quarter report include:

¥ Last year's budget counted on a 3 percent increase in property mill values, but tax protests reduced the city's take by about 3 percent below the previous fiscal year. Instead of being $90,000 higher at this point, revenue is $81,000 less.

¥ Planning and zoning fees are down because of the recession. A combined shortfall of $106,000 is projected by the end of the next quarter, June 30.

¥ Some law enforcement grants haven't yet been received, and payroll overages for officers total $75,000.

¥ The $400,000 payment in the Walton critical areas ordinance lawsuit came out of cash reserves.

All told, the city anticipated spending down cash reserves by $320,492 in the current fiscal year, but by March 30 it had spent $703,423, Knapp reported.

While resort tax revenue is 8 percent less than last year, that is higher than was expected, Knapp said. On the other hand, that means the 25 percent allocated for property-tax rebate will be reduced by about $55,000, translating into about $18 more in taxes for a state-appraised $200,000 market value home.

Next year's budget will see several increases for payroll, including about $100,000 for the built-in 2 percent 'step" increase for all city workers, another $100,000 for the built-in 2.2 percent cost-of-living increase and about $60,000 for higher health insurance premiums.

On top of that is $110,000 for accrued sick time, comp time and vacation time for two police officers who will retire next year.

On the positive side, moving the planning and building department from Stampede Square to the former Park Side Federal Credit Union building in Depot Park will save the city about $53,000 per year.

One solution to the red ink is to collect the full 24 mills voters approved several years ago for 24/7 fire service. The council chose to reduce property taxes by 11 percent last year, so the city is only collecting 12.36 mills of the voter-approved levy and using a federal SAFER grant for the other half of the $446,000 cost of hiring six additional firefighters.

Levying the full 24 mills would eliminate the need to use the general fund money for firefighters, Knapp said. The full impact of 24 mills on a $200,000 home is about $100 per year in property taxes.

Another solution is borrowing money — either from local banks or internally from one city fund to another. Cash, for example, could be borrowed from the streets or water funds, Knapp said, but the idea of borrowing didn't sit well with the councilors.

"We need solutions now and not later," councilor Chris Hyatt said. "I'm not for borrowing."

"Borrowing is not an option," councilor Phil Mitchell said. "Voters are going through hard times. We're not over reacting."

In a novel proposal, councilor Turner Askew suggested consolidating planning and building services with Kalispell and Columbia Falls 'so we can lay off people."

"I really don't want to do bigger layoffs next year if we don't act now," he said.

Noting that talk of layoffs impacts staff morale, Stearns said he will present a preliminary budget review by the second week of May.

Councilor Ryan Friel supported waiting another month to see what Stearns and Knapp come up with in the way of solutions.