Blaine County Budget: What is essential?

For three weeks the Blaine County Commissioners have been asking county departments “What is essential?” Declining non-tax revenues, sources of funding over which the county has no control, resulted in a $1.4 million shortfall that made putting together the 2016-2017 county budget a challenge for the commissioners and county departments.

After budget meetings with every county department and providing an opportunity for citizens to view and comment on the proposed budget, the commissioners officially approved the final budget on Wednesday of this week (September 7). The total county budget for 2016-2017 is $8.92 million, last year’s total budget was $9.25 million.

Why the shortfall this year?

County governments have basically two sources of income—property taxes and non-tax revenues. Property taxes are set each year based on a rather elaborate formula of property value and mill levies. The amount of property taxes a county will receive each year is fairly predictable. It’s the non-tax revenues that can vary greatly.

The $1.4 million shortfall basically came from the decline of the values on these major non-tax revenues. The ‘local government severance tax’ is revenue generated when oil and gas are taken off federal lands—all over the country, not just in one county. Last year Blaine County’s share of that was just over $1.1 million. This year the amount will be just over $500,000, resulting in a shortfall of $600,000 in that one source. This reduction reflects the dip in the oil and gas industry that is widely reported.

Another federal severance-type tax that the county receives is based on income from sale of minerals on federal lands, again nationwide. That payment has been as high as $200,000 in a year, but will be $32,000 this year. Declining coal production could be a cause of that much smaller payment.

A major non-tax revenue for counties with large amounts of federally owned land is PILT—Payment in Lieu of Taxes. It’s a direct payment to counties for services from the federal government since federal lands generate no property tax income. The amount of PILT varies each year but tends to average about $850,000 a year. The commissioners try to keep PILT money as an ‘emergency reserve’ for unexpected large expenditures. According to commissioners, some PILT money has been used the last two years to supplement the county’s annual budget.

Asked how the remodel of the third floor of the courthouse and the purchase of the old National Guard Armory as a shop for the road and bridge department affected the shortfall, the commissioners said those projects did not affect the new budget and did not cause the county’s shortfall for the upcoming year. The third floor remodel was funded with money that had been set aside in an improvement fund for a number of years. The funds were earmarked to be used for courthouse improvements and could not be spent any other way.

The availability of the National Guard Armory was anticipated and $350,000 was budgeted the year before the anticipated sale. The total selling price of $385,000 was met with the budgeted amount plus a three-year loan through Montana’s INTERCAP program which makes low interest loans to local governments.

What this means to Blaine County property owners for 2016-2017

After every county department dealt with “what is essential?” and cuts were incorporated into the new budget, the commissioners still had to implement a small property tax increase. Perhaps the best way to explain the effects of the increase is to use a couple of examples to show a comparison between last year’s and this year’s property taxes. Please understand these are still ESTIMATES and only include the COUNTY PORTION OF THE PROPERTY TAX.

Property 1 is located in a town in Blaine County. In 2015 it had a market value of $147,000 and the county part of the property tax was $414. Under the new 2016-2017 budget the county property tax on that location will be $476—an increase over last year of $62. This is an estimate and does not include city, school or special property tax levies that might also be included in the final tax bill.

Property 2 is a rural tract with mixed tillable and grazing land, is non-irrigated and has buildings. The market value was $587,000 and the county property taxes were $2830 in 2015. For the new budget, the county property tax will be $3220, an increase of $389. Readers can do the math to get a rough idea of their own tax liability. But, keep in mind these examples are estimates and do not include other property taxes that could apply.

Reflecting on the

budget process

Commissioners Frank DePriest and Dolores Plumage were in their office last Friday to be available for questions from the public or county departments. DePriest and Plumage had conducted most of the budget meetings with each county department as the new budget was formulated. They both said while it was a difficult time as budgets were being trimmed, they felt the collaboration between their office and the various departments was healthy and useful.

County Commissioners are concerned that the continued spiral of non-tax revenues could be a problem that will have to be dealt with in future budgets. And if diminished commodity prices continue for farm country, that could present additional challenges for local governments and schools to provide necessary, and often legally required, services.