01. Budget MessageCity of Kalispell
Post Office Box 1997 - Kalispell, Montana 59903-1997
Telephone (406) 758-7000 Fax - (406) 758-7758
Date: September 8, 2009
(Date adopted by Resolutions 5388 & 5389)
TO: Mayor Kennedy & City Council Members
Citizens of Kalispell
Re: Fiscal Year 2010 Budget Message
FY2009 Review
This last fiscal year has been both "...the best of times and the worst of times..." It has been the
best of times because of the many significant accomplishments completed under the policy
leadership of the council and flexibility and hard work of the city staff. Some of the more
prominent accomplishments were:
• Maintenance of essential services- despite budget issues, services to the citizens of
Kalispell were never compromised. We had one of the most difficult winters in recent
history but the entire staff put forth the extra effort needed to insure streets remained safe
and passable and water/wastewater flowed.
• Successful negotiation with the MDEQ- the public works staff negotiated agreements
with MDEQ that will enable the city to meet our growth responsibilities.
• Approval of the 911 Interlocal Agreement- approved an agreement between the other
local governments of the county that will significantly improve 911 dispatch procedures.
• Approval of transportation impact fees- the council approved impact fees that will
complete the impact fee objectives for the city. These fees will insure that growth pays its
share of future development costs and maintains the level of service that present residents
enjoy.
• Moved the Parks and Recreation Department into the Special Revenue category- this
change provides the department more flexibility in how the Parks and Rec. staff program
and administer their activities.
The difficult times have centered on the continuing decrease of general fund reserves. Due to the
very sharp drop in development activity general fund revenues associated with growth have
shrunk significantly. To meet this sudden decrease general fund expenditures last fiscal year
were over $400,000 less than the year before. For FY2010 they will be additional $150,000 less.
Despite these reductions the general fund reserve has fallen from a comfortable 15% in FY2007
to less than 4% projected in the FY2010 budget.
Last year's guidance from the council was to reduce general fund expenditures as much as
possible and not layoff any permanent employees. As a result of this guidance I instituted a
hiring freeze and reduced department budgets. While the city departments did as best they could
the results were not what I had hoped. We had few employees leave the general fund so the
hiring freeze had minimal effect. Unexpected increases in personnel expense took more of a toll
and revenues continued to fall. The end result was the continued degradation of general fund
reserves.
FY2010 Outlook
All department expenditure projections assume no salary increases except those that are already
obligated by contract (police contract).
General Fund (GF): _the general fund supports general services such as insurance and postage as
well as the council, city manager, city attorney, finance, human resources, clerk, court, planning,
police and fire.
Estimated revenues for FY2010 are conservatively estimated at $9,180,220. This based on a 3%
growth rate and 1.1 % inflation. It is significantly less than FY2009 because it does not include
the Parks and Recreation Department that was moved to the Special Revenue funds. Overall the
anticipated revenues are a slight increase from the previous year. Recommended expenditures
are $9,108,115 which will result in a year end reserve of $316,227 (3.47%). Despite the budget
cuts and hiring freeze the city is still operating at a level it cannot afford.
General Government- despite budget cuts the small departments in general government
have managed to sustain their operations.
Police- the police have the personnel for the basic needs of the city. The department does
need more resources for equipment specifically patrol vehicles. These resources are not
available in this budget.
Fire- the city cannot afford a fire department with the present level of
firefighter/paramedics. The department needs to change its operational model from stand
alone to emphasis on inter -operability with neighboring fire organizations as well as to
explore restructuring options.
Hiring needs to continue to be monitored closely.
Special Revenues: special revenue funds include parks and recreation, ambulance, TIF districts,
airport, gas tax and building.
Ambulance- the drop in collections placed this fund in the red in FY2009. The city has
increased the rates and offered special discounts to accounts in arrears. Our effort to do
non emergency transfers for the medical center appears to be successful. If this fund is
not self supporting the difference must be made up by the general fund. If economic
conditions do not improve it is likely this fund will fall short again in FY2010.
Parks and Recreation- for the first time the Parks and Recreation Department is in a
separate fund. This change was made to encourage more entrepreneurial activity by the
department to maximize their revenues and control costs. This department is stand alone.
If they cannot financially support their operations they alone will suffer the cuts.
Urban Forestry- this small fund is being stressed by the cost of treating the Dutch elm
disease prevalent in the city. The modest increase in the assessment that supports this
fund should assist in reducing this stress.
Tax Increment Districts (TIF): we have one large TIF district- Westside, one medium
sized- Airport and two small districts associated with Old School Station.
Westside TIF- we are using some of these Westside funds to do the design for 3
Mile Drive to make this needed street project "shovel ready" for anticipated
stimulus funds.
Airport/Airport TIF- most of the projects associated with the airport are on hold
until we resolve the issue with the radio towers. When this issue is resolved the
city will be in a position to make major improvements to the airport.
Old School Station TIF's- the Old School Station industrial park has suffered
from the current recession. Despite the economic downturn the park has several
important projects in their pipeline.
Building- the building fund reserves are low reflecting the decrease in building activity.
Community Development: community development writes/administers grants and heads the
economic development efforts of the city. This department is funded by various loan and
development funds that have been used by the city for years. Unfortunately the revenue from
these funds is dropping and this department will need to be supplemented by the general fund or
other revenues in FY2011.
Public Works: public works is a major part of city services. This department constructs,
maintains and administers the water system, sewer collection system, wastewater treatment plant,
street maintenance, lighting, storm sewer and solid waste collection. The department also
supports all city departments with vehicle repair services.
The city council has done an outstanding job of supporting the key infrastructure services of
water, sewer, storm sewer and streets. Assessments, which include impact fees, have been
properly designed and implemented to keep user fees reasonable while the city underwent
unprecedented growth. This has been a major accomplishment.
Water System- besides providing potable water to residents the water system is also the
most important single component in fire fighting. Presently the water fund is in very
strong financial condition and will complete several projects in FY2010 to keep the
system in good condition.
Sewer System- the sewer system, to include collection and treatment, is in a marginal
financial condition. A large amount of the cash flow is going to debt service so cash for
operations is lower than we would like. A major improvement will be completed that will
upgrade the Grandview lift station to better serve the north area of the city. The multi
million upgrade of the treatment plant will also be complete. This very complex project
is on time and budget.
Streets- we are anticipating over $300,000 of stimulus funds to help our streets. These
funds will be used for both overlaying and chip sealing of city streets.
Storm Sewer- the city has been saving storm sewer assessments and this year we are
ready for some major projects.
Solid Waste- our solid waste user fees are well below market rates while the cost of
equipment rises quickly. We will be asking for modest increase in rates to meet
anticipated increases in capital expense.
Rate Study- public works will complete a rate study this year that will make appropriate
recommendations on rate changes to keep our utilities financially healthy.
Special Notes
Stimulus Funds- we are pursuing stimulus funds in the following areas:
• Street funds- $342,000 in a bill passed by the recent legislature.
Energy Conservation- we have a reported $96,700 coming to the city for energy
conservation projects. We plan on using these funds for the police/fire annex.
• 3 Mile Drive- we are using Westside TIF funds to complete the street design for
the section of 3 Mile Drive in the TIF district. This will make the reconstruction
of 3 Mile Drive a "shovel ready" project if further stimulus funds become
available. If enough funds come down we can quickly extend the design and
reconstruction project all the way to West Spring Creek Road.
iv
Revenue Requests- we made two revenue requests in this year's budget:
• Urban Forestry- an increase of $2.87/year in the urban forestry assessment to pay
for the costs associated with the Dutch ehn disease was approved
• Solid Waste rate increase of $3.00 was not implemented.
The Preliminary Budget was prepared under the guidance of Interim City Manager Myrt Webb.
We thank him for his assistance in formulating and presenting the budget adopted by Council in
September. This budget message, prepared by Mr. Webb, has been updated to reflect the final
budget numbers.
Respectfully submitted,
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City Manager