Whitefish property owners will likely see a reduction in their city tax bill this year as a result of the increase in the city’s resort tax, which went into effect last summer.

The city of Whitefish recently released its preliminary budget, which shows a decrease in property taxes of 5 percent.

City Manager Chuck Stearns explained the budget in a memorandum sent out to Whitefish City Council members saying the increase from 2 to 3 percent for the resort tax with 25 percent of the increase going to additional property tax reduction has led to the decrease in property tax collections. The budget shows the mill levy with a reduction of 7 mills over last year.

“If our resort tax collections this year had been higher than we are currently occurring, the property tax reduction would have been more,” Stearn noted.

Stearns points out that Whitefish’ property tax mills were the second lowest in the state in 2015 when compared with other Montana cities with a population over 4,500.

“Whitefish has historically had very low property tax mill levy rates because of our resort tax rebate for property tax reductions, high property valuations, and maintenance district assessments,” Stearns said.

In addition to the tax decrease, the preliminary budget calls for a reduction in spending of 23 percent or $14.7 million less than last year’s budget. The proposed overall budget totals $48.6 million. Last year’s budget at $63.3 million was more than 60 percent higher than normal.

The decrease this year is because of the completion or partial completion of some of the projects that bumped last year’s so high.

The Haskill Basin conservation easement acquisition was finalized last year for about $8 million, removing that from the budget. Seventy percent of the revenue from the extra 1 percent of the resort tax goes toward the cost of the easement.

In addition, the $16 million City Hall and parking structure construction project will be about 50 percent complete by the end of the fiscal year in June. That results in an appropriation of $5 million less this fiscal year.

Also no longer a part of the city budget is the operation of the Stumptown Ice Den, which is now being privately managed. That removes about $464,000 from the budget.

Complicating the proposed budget this year, according to Stearns, is the state Legislature adopting a two-year reappraisal cycle, which creates no general increase to the city’s tax base.

“This budget is the first in probably over 20 years that there will not be a phase-in of property value increases from a reappraisal,” Stearns said. “The only property valuation or mill value increase available will be from new construction going on the tax rolls and some other classes of valuation like centrally assessed property.”

Stearns is projecting an increase of 3 percent in the city’s tax base.

Last year’s budget, because of the uneven effects of reappraisal, forced the city to draw down cash reserves by $310,000. In order to balance the fiscal year 2017 budget and keep a tax decrease, Stearns has proposed a drawdown of reserves by $131,000, which would leave only a 10 percent end-of-year cash balance.

“Unless the use of the cash balance is for one-time type of expenditures like a non-recurring capital project, that drawdown can’t be repeated each year,” Stearns said. “Last year’s budget proposed a year-end cash balance of 12 percent, but I just couldn’t keep it at 12 percent [this year] and not cut back departments further.”

Stearns said if Council wants to increase year-end cash reserves or reallocate spending to another area, it could increase property taxes or make cuts in areas that he considered, but did not end up recommending.

Those potential cuts, include eliminating the lifeguards at City Beach for a savings up to $45,000, eliminate the municipal court receptionist position for savings up to $14,600, or cut the purchase of a police car at $33,500.

As part of the budget, the city anticipates adding a few new staff members and proposes a 3.8 percent pay increase for city workers.

Stearns said last year’s pay increase of 2.3 percent for workers was the lowest among Flathead County cities and the county, so he believes this year’s increase is justified.

The increase in staffing calls for increasing a three-quarter time receptionist in the planning and building department to a full-time position to help with increased workload. A seasonal worker in the parks and recreation department will also increase to full-time.

Two new positions are also proposed to be added to city staff. A full-time maintenance facility technician to do maintenance of the new City Hall and parking structure and to administer leased parking. A new information technology position would deal with an increased demand by all city departments for technology assistance.

Under revenue, the budget anticipates a 38 percent decrease in revenue at $29 million. Stearns said this is also caused by the completion of the Haskill Basin conservation easement and partial completion of the City Hall and parking structure project.

Council will hold budget workshops on May 31 and June 13 both at 5:30 p.m. to discuss the specifics of the budget. During its regular meetings, Council will hold a public hearing on the preliminary budget on June 20 and adopt the final budget on Aug. 15. All meetings are at interim City Hall.