Whitefish’s proposed budget is calling for an increase in property taxes after the previous year’s budget relied on an increase in resort tax collections to provide a property tax rebate.

The preliminary budget for fiscal year 2024 includes an increase in collections to cover the roughly $380,000 decrease in additional property tax relief from the resort tax.

If approved, the budget would result in a home with a market value of about $526,000 seeing an estimated increase of about $80 or 10% on the city’s portion of the tax bill. Property tax owners last year saw a roughly $98 decrease in their bills.

“While intentions are to always keep property tax increases to a minimum, FY24 presents a challenge with the change in additional property tax relief from the resort tax,” City Manager Dana Smith said in her budget memo. “With increasing costs, a reduction in anticipated revenues, and the decrease in additional property tax relief from the resort tax, the proposed budget assumes a reduction in the city’s general levy.”

City Council holds a budget work session on Tuesday, May 30 at 5:30 p.m. at City Hall, 418 E. Second St.

The total proposed budget for FY24 is $49.3 million compared with last year’s approved budget of $53.4 million. Compared to the prior fiscal year, expenditures this year are set to decrease by $3.7 million or about 8%.

“The decrease in expenditures is mostly due to a significant decrease in capital expenditures that is offset by increased personnel, materials and service costs,” Smith said.

Overall spending for capital improvements is projected to decrease by $4.9 million as the city wraps up upgrades to its wastewater treatment plant.

A pay increase of 5% for most employees is included in the budget, which is made up of a 3% cost of living adjustment and a 2% longevity increase. The budget includes two new positions, a new police officer and a new street maintenance operator position.

RESORT TAX collections for FY23, which determine the amount of tax relief for this year’s budget are projected to decrease by 13% over the prior year providing for tax relief of $2.5 million. The total reduction in mills estimated for this year’s budget is 46 mills compared to 58 mills in FY23.

A 32% increase in resort tax collections in FY22 mostly due to inflationary factors had a significant impact on city revenues, but also on property tax relief last year, Smith notes.

“The property tax relief projected for FY24, however, is more in-line with historical growth,” she said.

In FY21 total resort tax collections were $4.79 million, while in FY22 they jumped to $6.3 million and the preliminary budget for FY24 sets them at $6.79 million.

Resort tax collections have an impact on the city budget in terms of providing funding for certain areas like streets, parks and the Haskill Basin Conservation Easement, and also offer a tax rebate to property owners. The resort tax is a 3% tax collected on lodging stays, retail purchases and at restaurants and bars.

As required by the resort tax regulations, the collections in excess of the budget must be returned to property taxpayers as additional tax relief in the following year.

The budget calls for a spend down of cash reserves of $950,000 for large capital equipment purchases. Using cash reserves minimizes the burden on taxpayers and reduces financing costs for the city, Smith notes.

Still, the budget reserves for property tax-supported funds at the end of FY24 total $5 million and represent 36% of total budgeted expenditures. The Coronavirus Aid, Relief, and Economic Security Act of 2020 provided a significant source of unexpected federal funding for the fire and police departments, which helped move the city into a strong position, Smith notes.

The city starts its review of the budget in May, but it won’t adopt the final budget until property valuations come in from the state in August.

The Montana Department of Revenue reappraises taxable property on a two-year cycle. Since FY24 is a reappraisal year, the city’s taxable value will be adjusted by both newly taxable property including new construction and additions, and increases in the market value of the current taxable property as of Dec. 31, 2022.

For the preliminary budget, the taxable value is estimated to grow by 10%. The city for its general mill levy authority is limited to newly taxable property plus one-half the rate of inflation as determined by the state.

“It is important to understand that just because current taxable property will see an increase in values to more closely match the market, the taxes assessed on those properties does not necessarily increase by the same percentage,” Smith said.

Features Editor Heidi Desch may be reached at 758-4421 or [email protected].