This article was reprinted from the FlatHead Beacon. ITs an interesting example of what happens when a city is counting on development to be the economic driver of growth.
It was early 2009 when, following the tragic death of its finance director and departure of its city manager, Whitefish began to get its finances in order. Amid a recession that had hammered budgets elsewhere, the municipality remained quite optimistic. It reported having robust cash reserves and officials there were confident building permits would pick up again.
Meanwhile, in Kalispell, the situation was dire. The finance director estimated that the city’s cash reserve could fall to a dismal $171,700. Department budgets had already been gutted and more cuts were considered. An already bleak outlook had only worsened.
Since then, however, the two cities’ finances have taken opposite routes.
By early 2010, Whitefish began bleeding money. Its city manager, Chuck Stearns, announced four layoffs, three from the building department, and said it appeared the city would finish the fiscal year in the red. He asked employees to take furloughs, ordered a hiring freeze and barred out-of-state travel.
It was hard to fathom. The fastest-growing city in the state, one that had a reportedly stable budget just a year prior, was going broke. While $400,000 was lost to a Montana Supreme Court ruling against the city and property tax money was coming in more slowly due to the number of protests in an appraisal year, Whitefish’s biggest mistake was betting on growth. It lost badly.
Revenue from planning and building permits plummeted and Stearns acknowledged that revenue estimates for each were “very aggressive and optimistic.” The municipality had banked on building to finance government and, like Kalispell before it, had lost its cash cow. The difference is Whitefish waited even longer to face this new reality, and is paying dearly because of it.
Departments there are now bracing for a second round of layoffs, this one even deeper than the first. Police and fire departments, with jobs on the line, are warning of the public safety risks that would accompany lost personnel. The proposal hopes to increase budget reserves to $287,759, but the government parings would have been less shocking had the city acted earlier.
Since early 2009, the city of Kalispell has been functioning as a bare bones operation. Interim City Manager Myrt Webb, and his successor Jane Howington, have been refreshingly blunt with city officials about its finances and the city council has slashed expenses accordingly.
As 2010 approached, Kalispell’s reserves remained dangerously low, but appeared to be stabilizing. And at its most recent preliminary budget meeting, the city projected that its cash reserves will double, from $244,122 to $556,457.
That number is still far from ideal for a city its size and has come at a steep cost. Howington acknowledged as much. “Our capital plan is pretty abysmal,” she said. “But we’re able to provide good basic services without having our residents suffer.”
Anymore, that’s about all people can expect unless they want to pay more for services. In many cash-strapped cities, tax hikes have accompanied budget cuts, which is an especially raw deal.
Many cities across the country face similar fates as those in the Flathead Valley: Growth that once helped subsidize government expenses has all but disappeared. Few could foresee the economy getting this bad and the housing and construction market experiencing such a drawn-out lull. But moving forward, city officials should stop counting on building dollars they previously relied on.
All budget projections are arbitrary, but erring on the side of stagnant to little growth – even in burgeoning communities – just may prevent future layoffs and tax hikes.
Kellyn Brown
Flathead Beacon
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