The city of Polson is not living within its means, due to increases in spending and decreases in revenue. This marks the third consecutive year that the city has faced a budget shortfall.

City manager Ed Meece said the city staff’s original wish list, compiled during departmental meetings in July, came in at $394,000 above expected revenues. By the time the budget was passed in August, the projected general fund deficit had been pared back to around $45,000.

At least that’s a significant reduction from last year’s deficit of around $100,000.

“To just keep doing $100,000 a year is not sustainable,” Meece said. “It was just time to bite the bullet and say, ‘we're going to have to go as lean and mean as we can get and just know that anything beyond this means less people and service reductions.’”

Items that were cut include a new police car, permitting software for community development and a cloud-based email back-up system. The budget for street maintenance projects started at $160,000 and ended up at around $30,000 – an amount that pays for “very, very minor work.”

What remained is staff “because quite honestly, we don’t have enough people as it is.”

Meece explained that the general fund has two main sources of revenue: property taxes (which are dropping on primary residences and long-term rentals) and so-called entitlement funds, paid by the state to make up for lost revenue, particularly from personal property tax reductions and other local fees such as those assessed for gaming, vehicles or alcohol sales that are paid directly to the state.

On the income side of the equation, the city anticipates receiving $1,715,355 in the general fund revenue, which includes $45,000 in marijuana taxes. A permissive medical levy of $211,417 pays for employee health insurance and a police municipal levy of $297,902 helps fund public safety.

The Department of Commerce will continue to collect Tax Increment Finance District funds. Like everything else, Meece says the voter-approved TIF district, set to expire this year, has taken a revenue hit and wraps up with a budget of about $300,000 for four specific projects. These include way-finding signs that help point visitors to important destinations (such as schools, pedestrian paths, the library and hospital), and paving First Street East north from Hwy. 93, the road into Sacajawea Park, and the parking lot at Salish Point.

The city will maintain a reserve of 28%, considerably more than the industry standard of 16%. That’s where the anticipated deficit will come from.

At this point, Meece doesn’t think the revenue horizon looks much brighter in the future, in part because the state has significantly lowered property tax rates in 2026 for primary residences and long-term rentals – the bulk of Polson’s property – while dramatically upping the rate for second homes and short-term vacation rentals, most of which he believes lie beyond the city limits.

“I personally think this is the worst budget in 30-plus years of local government that I've ever had to do,” Meece said. “Typically, once the budget gets done, like internally, we do a little, happy dance. And this year, for me, it's been more like a dirge.”