At its August 19 meeting, the Whitefish City Council unanimously approved a budget for fiscal year 2025 that includes, among other things, a property tax increase that would provide the city with a 21.31% increase in property tax revenue.
A preliminary budget approved earlier this summer included a property tax increase. City Manager Dana Smith attributed the change to a combination of factors.
The end result is a property tax increase of 8.75 per thousand, which for a residential property with a market value of $300,000 could equate to an increase of $35.45. For residential properties valued at $600,000 and $800,000, this increase would be $70.91 and $94.54, respectively.
The new balanced budget calls for $45 million in spending and $8.3 million in carryovers, bringing the total budget to $53.5 million. Spending is expected to increase by about 7.5 percent, primarily due to rising personnel costs and an increase in capital costs, according to a budget cover letter submitted to the council. The new budget is expected to end with a 40.14 percent fund balance for property tax-supported funds, which Smith said is above the recommended level of 20 to 25 percent.
Among the factors Smith cited was an increase in taxable value due to newly taxable land, which increased the value of a single mill from about $79,000 to about $81,000.
“You may hear that other communities are struggling with the tax values they’ve received. I’ve spoken to the Kalispell city manager, and he says the increase in value has been in line with expectations,” Smith said. “I think we’ve been the same, but some communities are seeing a decline in their tax values this year, even on newly taxable property, because the state made changes last year after the certified tax value for townhomes came out. Bozeman, Gallatin County, Billings, you name it, all have seen declines. We’re lucky that hasn’t happened to us. There will be more, I’m sure. The state hasn’t been able to get to all the newly taxable properties like it did to us a few years ago, but now they’re on track.”
Additionally, Smith’s budget, presented to the council, mentions the city’s efforts to reduce employee wages that are below market average. These, along with rising operating costs, account for 6.23 per thousand in the budget. Part of the per thousand set aside for these costs will be used to ensure that city employees receive at least 90% of their market wage. Most city employees will receive an 8.5% raise next year due to a 5% market wage adjustment, a 1.5% cost of living adjustment, and a 2% increase for seniority in the city’s pay scale.
The ten-year review of local governments, which was supported by 62% of Whitefish voters at the ballot box earlier this year, added another 0.27 percent of the cost to the new budget.
A decrease in property tax relief from the city’s tourist tax contributed to a 2.52 per thousand increase in the city’s property tax revenues in the coming fiscal year. Tourist tax revenues fell short of expectations by $44,682 in fiscal year 2024, and Smith’s budget calls for a 5.67%, or $144,643, decrease in the coming fiscal year. Despite the expected revenue decrease, the tourist tax is expected to provide $2.2 million in property tax relief in the coming fiscal year, or a 28.13 per thousand reduction.
The city also projects a $3.1 million increase in costs for the Capital Improvement Program, which funds improvements and expansions of infrastructure, facilities and equipment. Smith’s budget attributes this increase to the cost of the South Water Storage & Production project, which will increase water capacity and storage in South Whitefish, as well as road projects funded by the resort tax.
“Thanks to the city’s continued successful investment strategy and collaboration with our local banking partners, we have been able to generate significant additional revenue through projected investment returns,” Smith wrote in her budget. “But just as interest rates have risen rapidly in recent years, there may not be as many windfall gains in the coming years, and any significant increase in returns will require a property tax increase in the coming years.”
The city also expects a decrease of approximately $1 million in revenue and other funding sources, with a significant portion of that decrease due to the Whitefish Housing Authority not applying for a CDBG grant. Smith’s budget letter states that the lack of that grant “reduced not only revenues, but also expenses by an equal amount of $400,000.” The city also expects a decrease in revenue from the road fund, as the city received a one-time distribution of state funds for road maintenance in 2024.
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