A slowly improving economy and increased revenue from building permits has given the city of Whitefish more breathing room in this year’s proposed budget.

The rosier financial picture means the city plans to set aside a salary reserve of 4.7 percent for pay raises for city employees. A building inspector laid off two years ago amid the economic downtown may be rehired and property taxes won’t be raised.

Those are the high points of a budget transmittal message presented Monday to the Whitefish City Council by City Manager Chuck Stearns. The council will hold its first budget meeting at 6 p.m. Tuesday, May 22, at Whitefish City Hall, and is on track to approve a final budget by Aug. 20.

The proposed budget for fiscal year 2013, which begins July 1, totals $36.99 million of transfers and expenditures for all funds. That’s a 2.3 percent or $869,644 decrease from last year’s $37.86 million budget.

While there are many factors that affect the overall figure, the main changes are caused by almost $1.5 million more in expenditures in tax increment revenue, Stearns said, including $1 million of the city’s contribution for the high school reconstruction project.

The biggest net decrease in the proposed budget is due to the federal TIGER grant project for U.S. 93 reconstruction. That grant accounted for $3.37 million in last year’s budget, while it’s estimated at $1.5 million in this year’s budget, Stearns said.

The city is estimating a modest increase in its property tax base of about 4.3 percent for a couple of reasons.

Revenue from building permits for the current budget year is projected at $245,902, up from $203,188 the previous year. Further improvement is anticipated in the coming year, with a $311,000 projection for revenue from building licenses and permits.

The $19 million high school reconstruction figures into the increased building permit revenue. Because of the extra workload in plan review and inspections for that project, the city has proposed rehiring a building inspector who was laid off two years ago. That inspector would be used 60 percent for building inspections and 40 percent for code enforcement.

The city also annexed four properties last year that had fairly high valuations, Stearns said.

“Overall, I believe that the property tax base will increase by more than 4.3 percent, but we decided to estimate at a fairly conservative level for the budget,” Stearns said.

If the actual valuation announced in August is higher than projected, the council would decide whether the increase would increase year-end reserves or be used to decrease the property tax levy.

An increased property tax base is good news for property owners because it means the city intends to keep the tax mill levy rate at the current level of 120.4 mills. In his budget message, Stearns reminds city residents that Whitefish historically has had very low property tax rates because of the city’s resort tax, which provides a rebate to property owners.

Though the proposed budget sets aside money for pay raises, the city still has to negotiate with the three unions serving various segments of city employees. The city has proposed a 2.7 percent cost of living increase and a 2 percent matrix step increase for those who are not topped out in the pay matrix, Stearns said.

The council also needs to decide whether pay increases are warranted for the municipal judge and city manager. A contractual $10,000 pay increase already is budgeted for the city attorney.

Capital outlays in the coming year largely focus on the Whitefish Fire Department for new fire apparatus and an ambulance, and repairs at the Stumptown Ice Den. Cash balances in some funds could be used for capital expenditures such as architectural work on a new City Hall.

The proposed fiscal 2013 budget would decrease the year-end cash reserve in property-tax supported funds to $929,221 or 11.1 percent of expenditures from $990,339 estimated in cash reserves at the beginning of the coming fiscal year.

Further reiterating a strengthened local economy, Stearns noted that just two years ago, the year-end cash balance was $169,789, or 2.4 percent of expenditures.

Features editor Lynnette Hintze may be reached at 758-4421 or by e-mail at lhintze@dailyinterlake.com.