The city of Whitefish proposes a 63 percent budget increase for the coming fiscal year and expects to significantly raise property taxes for the first time since 2009.

Whitefish also anticipates adding the equivalent of five full-time employees to its payroll and proposes a 2.3 percent pay increase for city workers.

All of the increases — including the hefty spike in the overall budget — are explained in a memorandum sent by City Manager Chuck Stearns to Whitefish City Council members.

“The proposed fiscal-year 2016 budget was probably the most difficult budget in over five years,” Stearns said in the memo. “Resumption of growth has put additional demands on staff resources and there were many proposals for new staff. Some I could recommend in this budget and some I could not.”

The overall budget of $65.9 million — up $25.4 million over last year — is so much higher largely because the forthcoming $14.4 million City Hall and parking structure complex is included.

The tax-increment debt service fund also is $2.2 million higher because of higher tax-increment bond payments for the new City Hall/parking complex to be built on the site where the existing City Hall is located.

The proposed budget also adds revenues of $8.5 million tied to a state revolving fund loan to provide funding of about $8 million for the Haskill Basin conservation easement purchase from F.H. Stoltze Land and Lumber Co., Stearns said. Whitefish voters recently approved a 1 percent increase in the city’s resort tax to pay for the easement aimed at protecting the city’s water source.

A proposed increase in property taxes is the first sizable tax increase since Whitefish boosted its mill levy by 24 mills in 2009 when the city converted to a round-the-clock fire and ambulance department.

Complicating this year’s expected property tax increase, Stearns said, is the Montana Department of Revenue’s six-year reappraisal of property-tax valuations that takes effect in the coming fiscal year.

Whitefish is projecting a 10 percent drop in the city’s tax base in the wake of six years of depressed tax value growth from a prolonged economic downturn in Northwest Montana

“This projected loss of value meant that we had to increase property tax mills by 13.4 mills just to raise the same amount of property tax revenue as in the current year,” Stearns said. “The Montana Department of Revenue is actually projecting that our tax base might go down by 13.75 percent, however, their projections do not account for new construction and other newly taxable property.”

Stearns said he hopes normal appreciation and newly added taxable property will bring the net change down by about 3.75 percent to just a 10 percent loss in value.

When property loses value, the city has to compensate by increasing its mill levy, the assessed property tax rate used to raise money to cover the city’s expenses.

One mill is equivalent to one-tenth of a cent. In general terms, property tax is figured by multiplying the assessed property value and the mill rate and dividing by 1,000.

The proposed budget calls for a 18.57 percent increase in the number of mills levied.

“Because of reappraisal, not all of that [mill] increase translates to increased property taxes on citizens,” Stearns noted.

The crucial information for Whitefish homeowners boils down to this: The owner a $275,000 residential home in Whitefish — considered an average-priced home — would pay $97.61 more per year in the proposed budget scenario.

Stearns provided a breakdown of the mill levy numbers.

The city needs a 3.96-mill increase just to balance the budget, even after cutting roughly $538,000 from departmental requests and lowering the city’s cash reserves to 8.1 percent. Cash reserves of 15 to 20 percent are considered desirable for local governments.

Then, Whitefish needs 5 more mills to raise the amount of property tax revenue to handle a normal tax base growth rate of 3.75 percent.

Add to that 13.4 more mills because of the reappraisal, just to raise the same amount of revenue as last year, and the overall total jumps to 22.39 mills.

The city’s work force figures prominently into the proposed budget. Stearns said one of the budget cuts he had to make was dropping the normal pay increase from 3.3 percent to 2.3 percent.

By comparison, he speculated, Flathead County likely will propose a 2.1 to 2.6 percent pay increase with longevity. Kalispell  likely will propose a 2.9 percent pay increase for its employees and Columbia Falls could go as high as 3.5 percent.

Stearns acknowledged in his memo that Whitefish has given bigger pay raises to its employees than other local governments in recent years.

Whitefish faces collective bargaining negotiations with the police/fire and public works unions this year.

Proposed in the preliminary budget are the following new positions:

o A deputy city attorney/prosecutor to take over prosecution duties from a private law firm. This city staff addition will cost $93,949 for wages and benefits annually, but is offset by a $90,000 savings in the city’s contract for prosecution services.

o Assistant operator in the Public Works Department, dedicated mostly to street work: $57,927 in wages and benefits.

o Customer service clerk for utility billing in Public Works: $54,172 in annual wages and benefits.

o Park maintenance technician: $57,313 in wages and benefits.

o An administrative assistant position in the building inspection office: a three-quarter time position, $39,751 in wages and benefits.

o Secretary/paralegal/legal assistant for the City Attorney’s office: a half-time position budgeted at $22,741.

o A summer intern for Public Works: $6,824 for 480 hours of work.

o Human resource director: the position was added midyear during the current fiscal year and will be budgeted for a full year this year at $47,726 for wages and benefits.

Stearns said other staffing requests included Planning and Building Department office help, a half-time fire administrative assistant, and increasing hours for the current legal secretary. Those requests were turned down.

On the revenue side of the budget, Whitefish estimates an increase in building permit fees and licenses as the economy continues to improve. The city expects to finish the current fiscal year that ends June 30 with about $469,000 in fee revenue once the permit fees from two new hotels under construction are added. A total of about $525,000 is expected in building fee revenue for the coming year.

Although the preliminary budget doesn’t include water or sewer rate increases, both utility fees still could be raised in the coming year.

The City Council usually makes utility rate increase decisions in the fall as the city considers inflationary increases, Stearns said.

And although a sewer rate increase hasn’t been included in the budget, Stearns noted the city will need to discuss “a significant rate increase” when it determines the cost and financing for the required expansion and improvement of the wastewater treatment plant later this year.

Acknowledging the council may want to make cuts to lessen the projected property tax increase, Stearns offered a few suggestions. The half-time legal secretary position could be eliminated; the proposed 2.3 percent pay increase could be reduced; and some Parks and Recreation Department programs that are not self-supporting could be axed.

Stearns further suggested the city could try to get out of its contract with the Northwest Drug Task Force and reassign its drug officer to the police patrol for a savings of $54,000. But, he added, that move would affect the city’s ability to repay a $172,817 loan the drug forfeiture fund owes to the general fund.

The City Council tentatively has scheduled budget work sessions on May 26 and June 8. A public hearing and approval of the preliminary budget is planned either June 1 or June 15, with final budget approval on Aug. 17.

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