Owing to a decrease in resort tax collections and a need to increase employee wages, Whitefish’s proposed budget calls for an increase in property taxes.

The budget calls for a 19.71% increase in property revenue in the city. This equates to an increase of 7.75 mills — 2.75 mills are due to the decrease in property tax relief from the resort tax and 5 mills are to provide funding to increase the city’s wages. 

If approved, the fiscal year 2025 budget would result in a home with a taxable value of about $600,000 seeing an increase of $62.75 in taxes. With the exception of one year, the city has provided a reduction in property taxes over the past five years. 

City Manager Dana Smith said the ability to provide significant reductions in property taxes and assessments over the past five years was due to considerable increases in additional property tax relief from resort tax collections, the sunset of the city’s tax increment finance district and an increase in the city’s taxable value due to newly developed property. 

“The [fiscal year] 2025 budget presents some challenges as the city works to address lagging wages compared to the market and a decrease in additional property tax relief from resort tax,” Smith said in her budget memo. 

Council holds a work session on the budget on June 10 at 5:30 p.m. at City Hall, 418 E. Second St. 

The total proposed budget is $50.85 million, compared to last year’s approved budget of $51 million. 

A decrease of just under $300,000 in property tax relief from the resort tax is anticipated. This is simply a function of the market and spending in Whitefish, the budget memo notes. 

Inflationary impacts to the resort tax appear to be subsiding as growth in collections has slowed in fiscal year 2024, which is far different than the 32% increase in resort tax collections in fiscal year 2022, Smith notes. 

A wage study conducted for the city by Communication and Management Services, a human resources firm in Helena, found that when compared to other cities in Montana wages in Whitefish were, on average, at 84% of the market rate suggesting wages be increased to assist with employee recruitment and retention. 

The proposed budget calls for a pay increase of 8.5% for most employees. In most years employees would receive a 3.5% increase consisting of a cost of living adjustment and longevity increase. No new positions are proposed in the budget as a way to keep costs down, Smith notes.

“The increase to address wages is lower than the worst case presented to the City Council due to continued success in the city’s investment strategy and working with our local banking partners,” Smith said. “We have secured a significant amount of additional revenues through projected investment earnings.” 

The city is also absorbing a portion of an increase in health insurance costs. While increases in wages and insurance would normally increase personnel costs higher than the expected 5%, the city has seen the retirements of several long-term employees, which has resulted in lower wages paid for those positions. 

Expenditures are set to increase by 1.8% or $760,000 due to a significant increase in capital expenditures and personnel costs while being offset by a reduction in operating materials and services and debt service costs. 

Total appropriations for property tax-supported funds increased by $2.3 million due to a one-time contribution of $2 million to the Whitefish Housing Authority for the Depot Park Townhome Project. 

Overall capital improvement project spending is projected to increase by $978,000 compared to the prior year mostly due to project costs for the South Water Storage and Production project. In property tax supported funds, capital spending is set to decrease by $223,000 due to the completion of equipment purchases in the law enforcement and fire and ambulance funds. 

The proposed budget reserves for property tax supported funds are projected to total $5.9 million representing about 36% of the total budgeted expenditures. A proposed spend down of cash reserves of $3 million is planned for large capital equipment purchases and the city’s contribution to the Depot Park Townhomes. 

This not only eliminates an increased burden on taxpayers but also reduces financing costs for the city, Smith notes, while still maintaining strong reserves. 

“During an economic downturn or recession having adequate fund balance and cash reserves for each fund is essential to maintaining expected levels of service for our citizens and ensuring a timely response to emergencies,” she said. 

The Montana Department of Revenue reappraises taxable property on a two-year cycle and thus as fiscal year 2025 is a non-reappraisal year the city’s taxable value will only be adjusted to account for newly taxable property. The city is anticipating a 2.5% increase in value.

The final budget won’t be adopted until property values are released by the state in August. 

Deputy Editor Heidi Desch may be reached at 758-4421 or hdesch@dailyinterlake.com.