Local cities raise concerns about lost revenue

Replacing revenue from the state business equipment tax — if it’s eliminated— is a concern of Flathead Valley cities.

Area legislators heard that message during a meeting Wednesday with Columbia Falls, Kalispell and Whitefish officials.

Many Republican legislators have listed elimination of the business equipment tax as a top priority for the new session, which begins in January. Republicans control the state House 68-32 and have a 28-22 majority in the state Senate.

Democratic Gov. Brian Schweitzer’s budget proposal includes elimination of the tax.

The tax represents 5 percent of the tax base in Columbia Falls, city Finance Director Susan Nicosia said. “We get a little nervous when we talk about elimination of the business equipment tax.”

Nicosia said that making cities “whole” for this revenue traditionally has been done.

Kalispell doesn’t rely as much on the tax as Columbia Falls percentage-wise, Kalispell City Manager Jane Howington said. Kalispell gets somewhere between $260,000 and $280,000 from it.

State Sen. Bruce Tutvedt, R-Kalispell, said that “backfilling” to cities 50 percent of revenue is a possibility.

There was some agreement that eliminating the tax would result in more economic growth.

State Rep.-elect Derek Skees, R-Whitefish, asked Nicosia if Columbia Falls has cut much from its budget.

“We cut 33 percent from finance and administrative staff,” she said. “We’ve made significant cuts.”

Skees mentioned the possibility of cities saving money by privatizing services.

Howington said cities can’t do that “willy-nilly.”

Kalispell made a request for proposals for private ambulance services. “We caught a lot of flak last year when we came out with that idea,” she said.

Whitefish City Manager Chuck Stearns said the city privatized its garbage collection.

The city currently spends $120,000 for private prosecution services. “We can probably do that for $50,000 to $70,000 in house,” he said.

Howington said Kalispell is going through a major transition in public works.

After 13 years with the city, Public Works Director Jim Hansz is retiring at the end of the year, Howington said. That transition might lend itself to some cost savings. Howington said she will fill in for Hansz in the interim, but that could be permanent. 

The Montana League of Cities and Towns also is concerned about talk of changing the state revenue-sharing formula.

Howington said the cities’ message is: Leave the formula like it is.

If the formula changes and that results in less revenue, cities likely would have to increase tax rates to meet mill levy responsibilities, she said.

Providing property tax relief to area homeowners was a big issue on the campaign trail in the fall.

Tutvedt said he will sponsor a bill to enact a new appraisal on Jan. 1, 2012.

“There’s going to be some lawsuits that haven’t come to light yet,” said State Sen. Verdell Jackson, R-Kalispell. “I’m not sure we’ve got the votes from Eastern Montana to straighten our problem out.”

Jackson said that 7,000 property owners in Flathead County contested their assessed values. Three thousand of these aren’t complete yet, he said.

Nicosia said that home appraisal values often are determined based on other homes that are not in the neighborhood, citing one home that was assessed in part based on another located “halfway across the valley.”

“We’re going to have to put in statute what the Department of Revenue can use for ‘neighborhood,’” Tutvedt said.

On the subject of retirement benefits, the Senate President Pro Tempore said halting defined benefit plans for new state, city and county employees is critical. “We need a defined contribution” plan, said Tutvedt, who will be chairman of the Taxation Committee. “We’re $3.5 billion under water.”

State Sen. Ryan Zinke, R-Whitefish, likened defined benefit plans to a pyramid scheme and said the pyramid now is inverted.

“We’re going to try to take a whack at it [pension reform], and we’re going to need some partners,” Tutvedt said.

The Legislature convenes Monday, Jan.  3, in Helena.

Reporter Caleb Soptelean may be reached at 758-4483 or by e-mail at csoptelean@dailyinterlake.com.