Kalispell’s proposed budget impacted by inflation

The City of Kalispell’s preliminary budget looks to manage inflationary pressures by dipping into reserve funds but also calls for an overall increase in spending.

The proposed budget calls for reserves in the general fund ending balance to be 19.8% rather than the 20% outlined in city policy.

Cities are restricted in the amount that can be budgeted to deal with inflationary growth, City Manager Doug Russell noted in his budget memo to the Mayor and Council. When inflation is high, such as in the current environment, the inflationary factor does not keep up with rising costs.

“This year’s budget is presented with an approach of looking into the future by making decisions now that will mitigate further challenges in the next three to five years, as we are projecting expenditures exceeding revenues for the short term,” Russell said. “This gap, while handled this year with limiting personnel in our general fund operations, is something to watch over the next 12 months as the higher the inflation rate, the more challenging it becomes to keep up with services, fully recognizing that inflation impacts the community as well, not just the municipality.”

The general fund is expected to be $14.1 million, which is about $550,000 less than last year’s budget. The budget doesn’t contain as many capital expenditures as last year, which was influenced by the completion of the Parkline Trail, but also factors in using the city’s reserve fund.

Russell said the reduction in the reserves provides corresponding tax relief of about 1 mill, but expects this to be a discussion point for Council as it has historically strived to be 1 to 2 mills below the property tax limitation. One mill equals about $55,000.

Council will get a first look at the budget during a work session on Monday. The meeting starts at 7 p.m. in the City Council Chambers, 201 First Avenue East.

THE TOTAL preliminary budget for fiscal year 2023 is just over $111 million as compared with last fiscal year’s budget of $104 million.

“While the general fund is feeling the impacts of limited revenues, our utilities and enterprise funds grow in proportion to the growth we are experiencing,” Russell said. “Keeping up with the demand for services is a key component of these areas as we are recommending increases in staffing to aid in maintaining service levels in the Public Works and Development Services departments to address an increasing amount of construction review, added miles and utilities to maintain.”

Budget additions geared toward dealing with increased demands include personnel increases. The preliminary budget contemplates adding nearly five full-time city positions, and moving one part-time position to full-time to deal with records management.

Public Works is looking to add an engineer after reclassifying the senior engineer to a deputy director to aid in administration and management of the department. Public Works is also looking to add a streets operator, wastewater treatment operator and a solid waste operator.

“Our utilities are experiencing increased demands with the additional workloads from population increase, street miles coming on the system, and new accounts,” Russell notes.

The building department anticipates adding an inspector to assist with high workloads.

Capital expenditures in the budget also include the replacement of an ambulance at $290,000 and the replacement of a fire engine at $760,000. Capital projects are also planned in the water, sewer and stormwater departments in accordance with previously approved facility plans.

The budget also includes several planning updates. On the list are updating the Parks and Recreation master plan and workload analysis and evaluation for the emergency service departments.

Also recommended is a review of service and rate analysis for the solid waste department, which has not had a rate increase since 2011 while the department is facing a 15% to 20% increase in costs for trucks. The city has two trucks slated for replacement in the future and thus expects the need to plan for the inflationary increase.

Russell said the spending plan in the preliminary budget provides Kalispell with a foundation to withstand the challenges of the current economy and labor market yet continues to provide for the expected service levels of the community.

“The budgets over the last two years were presented amidst circumstances absent multi-year trends, marked by Covid uncertainty and the ensuing in-migration into the area,” Russell said. “This year’s budget also features uncertainty marked by inflationary pressures and disruption in the labor market that is compounding the inflation variable.”

The city starts its review of the budget for the upcoming fiscal year in May, but it won’t adopt the final budget until property valuations come in from the state. Those numbers typically arrive in mid-August.

For more information, visit the city’s website at https://www.kalispell.com/

Features Editor Heidi Desch may be reached at 758-4421 or hdesch@dailyinterlake.com.