Taxes or fees: How can county pay for services?

Is there any value in knowing that local government services are being managed appropriately?

Is there any value in knowing that local government services are being managed appropriately?

Is that worth something, knowing that current and long-term needs are being met, that problems aren't being ignored? Does this realization generate any peace of mind?

For the most part, these are purely philosophical questions in Flathead County.

The basic reason is money: Despite having almost the highest property tax levy allowed by state law, the county government doesn't bring in enough revenue to adequately address its future needs.

From building space to capital equipment, an overcrowded jail to parks and road maintenance, issues are being postponed until they reach crisis proportions.

The only exception is the county landfill.

It provides service, replaces equipment, and budgets for large future expenditures - even as it plans for a major expansion that will take care of the valley's landfill requirements for decades to come.

And it does all this without a dime in direct property tax revenue.

The difference is that the landfill is the county's only enterprise fund.

The department runs entirely off of fees for service. It charges $75 per household per year, plus a tipping fee of $28.75 per ton for waste that's brought straight to the dump.

Together, these fees bring in about $5 million per year - more than any county department receives in property tax revenue.

So if the landfill can operate so smoothly for $75 per year, why don't other departments eliminate their tax levies and convert to enterprise funds?

Various county officials expressed general support for this concept, although they questioned whether it would be legal and wondered what the financial impact would be for local residents.

Commissioner Bob Watne, for example, said being an enterprise fund "has worked super for the landfill."

"Nobody squawked when we raised fees a few years ago," said Watne, who sits on the landfill board. "We need something like that for other county departments - especially the road department - but I'd want to look it over and make sure it didn't hurt taxpayers."

The road and bridge budget for 2005-06 is $6.23 million. The department receives about $2.9 million per year in property tax revenue, or a little more than half what the landfill collects in fees.

If the road tax were eliminated and the county charged an annual fee instead, like an enterprise fund, what would it take to put the department on a sound financial basis?

The quick answer is more than $6.23 million, given that the current budget is inadequate. The county is struggling just to maintain its existing road system, and it's falling farther and farther behind on improvements such as new paving or reconstruction.

"Just to maintain a decent level of service, we [should be] looking at $12 million to $15 million per year," said Road Superintendent Charlie Johnson, although he cautioned that this was a rough estimate.

If the county wanted to pave 20 miles of gravel road each year, compared to the three miles it can now afford, that would bump the budget up another few million, he said.

Based on U.S. Census figures, it's estimated that a budget of $12 million would require an annual assessment of about $450 to $500 per household, assuming residents of Kalispell, Whitefish and Columbia Falls didn't pay the fee (as is the case with the road tax).

If all county residents paid the fee, it would be about $350.

By comparison, the average county homeowner currently pays less than $60 per year for roads - less than what they pay for the landfill.

Johnson did not advocate that his department convert to an enterprise fund. However, he felt more revenue was needed to adequately maintain the county's road assets.

"The longer we go doing nothing [to improve road conditions], the higher the cost will be to get anything done," he said. "I'm looking at all options for financing. We need to spread the burden; if we don't, it's going to be unbearable."

Similarly, County Administrator Mike Pence said he's looking at a "smorgasbord" of funding alternatives, including special improvement districts, impact fees, fee revenue and property taxes.

"Not everything is suitable to be an enterprise fund," Pence said. "I think they're justified when there's a direct benefit to the participants - like the landfill - but a lot of local government services are more general in nature. It would be difficult to come up with a fair and equitable enterprise system for them. We're trying to move towards using a combination of different funding mechanisms."

However, when a direct benefit can be demonstrated, he said, charging fees is appropriate.

For example, "we wanted to make the planning office as self-supporting as possible," Pence said. "That's the reason for the recent increase in application fees."

Deputy County Attorney Jonathan Smith said as far as he knows, it would be illegal for any department other than the landfill to operate as a straight enterprise fund.

"I think the philosophy behind enterprise funds is that they provide a service that can be measured and that has a fee attached to it," Smith said. "I don't know how you'd charge a fee for roads based on use, or how you'd measure what someone gets from the sheriff's office."

There apparently haven't been any legislative efforts to expand the number or type of departments that could operate as enterprise funds.

"I don't remember anything like that coming before the Senate Taxation Committee, or if it did, it wasn't very high on the radar screen," said former state Sen. Bob DePratu, who served eight years in the Legislature.

"My main concern with any proposal like that would be the lack of public oversight," he said. "I really think the public needs to have the opportunity to have input in what their taxes are going to be."

Rep. Mike Jopek, D-Whitefish, also was concerned that enterprise systems could be used to get around the legislative cap on property taxes.

"If all we're doing is raising fees and keeping property taxes the same, that isn't a solution," Jopek said. "Homeowners are smart enough to know that, whether it's a fee or a tax, it's still money out of their pocket."

Rather than pursue a "back-door" approach to raising revenue, several officials noted that the county already has the authority to approach voters directly with a bond proposal.

Whether it's roads or parks or other county services, Weed and Parks Director Jed Fisher recommended giving people an option.

"Tell them for $75 a year, here's what they'd get, and for $150 a year, here's what they'd get. Then let voters decide," Fisher said. "To me, that's an enterprise fund."

Reporter Bill Spence may be reached at 758-4459 or by e-mail at bspence@dailyinterlake.com