The city anticipates it will have to dip into its reserves in the coming fiscal year to balance its budget, Billing City Council members learned Monday night.
The 2020 general fund budget for Billings is projected to be $44.2 million; on the other side of the ledger the city anticipates bringing in $36.9 million in revenues.
Part of the reason for the gap is two cost-of-living increases folded into this year's budget, one for 2019 and another for 2020. Last year's cost-of-living increase wasn't included in the initial budget approved by city council as city leaders were still negotiating labor contracts with their employees.
Also reflected in the revenue drop is the city's elimination in 2018 of franchise fees it once charged city water users, a loss of $3 million annually.
"It's a significant shift on the revenue side," said city administrator Chris Kukulski.
City council members directed their questions to Kukulski and to finance director Andy Zoeller, asking specifically what they plan to do about balancing the city's budget in the future.
"Technically this is a balanced budget," Kukulski said.
But he acknowledged the goal of city staff is to even out the budget so that expenditures better match revenues.
The city maintains roughly $12 million in reserves, or 29% of its general fund budget, obligated by city policy for emergencies and to help it maintain a high bond credit rating, which allows the city to borrow money at a lower interest rate.
The city also maintains what's known as unobligated reserves on top of the required 29% to help shore up its budget during years when expenditures outstrip revenue.
Last year, the city had on hand $16 million in unobligated reserves; Kukulski has proposed the city use roughly $14 million of it to balance the budget. It won't be able to make a similar move next year.
"We'll need a plan going forward," Zoeller said.
The majority of the city's general fund is diverted into its public safety fund, and much of that is being spent this year on staffing and deferred maintenance projects at fire stations and other facilities.
Moving into the future, in order to close the gap between expenditures and revenues, the city may consider going out for a public safety mill levy. The city last placed a public safety mill levy on the ballot in 2014, where it was defeated by a 51.5 to 48.5% margin.
Leaders in the city and members of the city council have argued that it failed with voters because of the $16 million of unobligated reserves, money that residents believed the city should use before approaching voters asking for more.
With those reserves now potentially spent, the city believes it can make a better case to voters for the need of a public safety mill levy.
"Now we can go out and start talking to the public about a levy for public safety," said council member Shaun Brown.