June 7, 2010

Livingston City Commission:

Transmitted herewith is the City Manager’s recommended Operating and Capital Budget for the City of Livingston, Montana for the fiscal year ending June 30, 2011 (FY 11).  A summary of the Final Budget follows.

Overview of Budgeted Resources 

The following table depicts the projected beginning balances, estimated revenues, recommended budgeted expenditures, and projected ending balances for FY 11.  All city funds are included in the foregoing budget.  The table reflects estimated revenues of $12,364,154 and budgeted expenditures of $12,047,427, resulting in a projected ending balance of $4,323,051 for all funds.  An explanation of the significant changes in fund and working capital balances (those greater than 10%) is provided on the following page.

SUMMARY OF MAJOR REVENUES, EXPENDITURES AND OTHER FINANCING SOURCES/USES - July 1, 2010 through June 30, 2011 (FY 2010-11)

Explanation of Changes in Fund and Working Capital Balances in Excess of 10%

Listed below are explanations of the changes in fund balance/working capital, for each of the major fund groups, which exceed 10%. 

Debt Service Funds 

• Fund balance in the Debt Service fund group is projected to decrease from $125,794 to $77,431 for a decrease of 38%.  While appearing to be a drastic decline in fund balance, this item is easily explained.  The city is obligated to call SID bonds whenever it has cash to do so.  Because of early payoffs of SID assessments by property owners, the city has cash beyond the amount to meet the scheduled bond call.  This cash will be used to call SID bonds early for SID’s 177 & 178, consistent with state law and the bond covenants.  This factor accounts for the substantial decline in fund balance in the debt service funds. 

Capital Projects Fund 

• Fund balance in the Capital Projects fund group is projected to decrease from $432,599 to $318,291 for a decrease of 26%.  City of Livingston voters approved a special mill levy for the purpose of assisting with the construction of a new Railroad Underpass.  Fiscal year 2011 represents the third year of the five year mill levy.  The current year budget includes spending authority for the majority of the accumulated fund balance, together with the anticipated revenue for the year.  Thus, fund balance in the Railroad Crossing levy fund is budgeted to decrease from a projected balance of $220,187 down to $92,755.  We are continuing to examine all funding options, including federal, state, and local funds, which will allow us to construct the new underpass with the least financial impact on the local community.  The projected drop in fund balance is planned and will not cause financial problems going forward. 

Enterprise Funds 

• Working capital levels in the Enterprise Funds are projected to increase from $899,144 to $1,471,303 for an increase of 65%.  This increase is attributable to three factors.  Consistent with the General Fund, we are making a concerted effort to rebuilding our reserve levels in the city’s primary operating funds, which include the city’s enterprise funds.  Due to the city’s historically low utility rate structure, a three-year rate increase plan was developed which allowed the City to take advantage of state grant programs as well as provide funding to continue with the city’s 10-year infrastructure replacement schedule.  This plan consisted of increases in the water fund of 14% and increases in the wastewater fund of 19% each year for three years.  Fiscal year 2011 represents the third year of the three-year plan.  Finally, we do not have any major scheduled infrastructure projects planned in fiscal year 2011.  Rather, we are accumulating balances in the water and sewer funds, which will allow us to complete scheduled infrastructure projects in fiscal year 2012.

Operational Budget Changes

The preceding information described the projected changes in fund and working capital balances in excess of 10%.  The forgoing information is more operational in nature.  This information provides an explanation of the more routine changes in the current year budget as compared to prior years. 

General Fund 

• General Fund Balance – The projected beginning balance for the General Fund was made prior to the city receiving the second half FY 10 property tax collections.  In addition, property tax collections which will be received in July and August of 2010 will be reflected in these balances, once the collections have been made and the amounts are known.  Thus, the actual beginning balance for the coming year is still largely an unknown.  Our estimate was based on historical property tax collections, however, we found that these vary widely. 
• All City Departments - A $75 per month charge per computer has been built into the budget.  The funds will be transferred to the county to support a joint City/County Information Technology department. 
• City Commission - Professional Services of $66,000 are included in the City Commission’s budget. 

These consist of:

• Nittany Grantworks                                       36,000
• Possible Sidewalk & Parks Studies                30,000

          Total                                                           $66,000 

• City Court - $4,000 of capital expenditures are included for office upgrades.
• Planning Department - City support of the county Geographical Information System (GIS) has been continued in the proposed budget.  The budget includes $32,064 for this purpose.
• Facilities Administration - City support for a building janitor (County employee) is continued in the proposed budget in the amount of $14,973. In FY 2010, the Administration completed the sale/donation of the East Side School to Crazy Mountain Productions for the purpose of rehabilitation/reuse of the building as a theatre and community arts center. Although the City will not receive direct cash payments for this arrangement, CMP will be obligated to make a minimum $420,000 investment over a three year period.
• Central Stores - Software maintenance on our Black Mountain Software is continued in the proposed budget in the amount of approximately $8,000.
• Police Department - One additional COPS grant funded police officer is included in the budget.  Fiscal year 2010-11 represents the 2^nd year of a three-year grant.
• Police Department - A federal Department of Justice grant is included for $3,750 for ½ the cost of 7 bullet proof vests.
• Police Department - A school resource officer is continued in the proposed budget.  One-half of the officer is paid by the school district.
• Police Department - One new police car is included in the proposed budget.  The funds may be used to purchase one new car or two used cars.
• Police/Dispatch -  A 2.5% increase was negotiated with the Police/Dispatch bargaining unit in addition to an additional $27 city contribution for health insurance.
• Police Department:  Tri-County Networks support of $5,000 was moved from the City Commission budget to the Police Department budget.
• Police Department:  The cost of the Missouri River Drug Task force support of $10,000 was moved from the City Commission budget to the Police Department.
• Building Department:  The budget includes $800 for the purchase of new tires for the inspector’s vehicle.
• Cemetery Department - The budget includes 2 weed eaters for $400 and a John Deere Gater & Plow for $6,400.
• Parks Department – A Summerfest account has been added within the Parks Department to separately account for Summerfest activities.  The budget for Summerfest amounts to $56,645.
• Parks Department – The overtime budget has been reduced from $20,000 to $17,000.
• Parks Department – The budget includes $22,000 for the removal and replacement of trees throughout the city.
• Parks Department – The budget includes $14,000 for the purchase of a tractor/mower/vac.
• Parks Department – The budget includes $3,000 for tree work and stump removal within Sacajawea Park.
• Parks Department – The budget includes $156,975 for an energy efficiency grant from the state Department of Environmental Quality for retrofitting of the Civic Center.
• Parks Department – The budget includes $6,000 for a heater for the West Wing of the Civic Center and $7,200 for security cameras.
• Parks Department – The budget includes $8,000 for roller skates & updating of balls, mats, & gym equipment.
• Animal Control – The Animal Control Officer has been increased from .50 FTE to .72 FTE.
• Recreation Department - The pool is budgeted to remain open for the coming year, despite on-going physical plant difficulties.

Special Revenue Fund 

• Liability Insurance - Our base liability rates remained unchanged from the prior year, although we did have a 121% mod factor increase, resulting in a net change to our rates of 4%.  All of the city’s liability costs have been budgeted within the liability insurance fund.  The enterprise funds’ share of these costs are transferred to the liability insurance fund.
• Soccer Fields – The total contract award for the Soccer fields amounted to $504,472.  These costs are expected to cross the fiscal year.  We have been conservative in our estimate as to how much will be incurred in fiscal year 2009-10, with the balance of the project being paid for in fiscal year 2010-11.  Soccer field costs will be supported by donations received by the Soccer Association and a $75,000 grant from the Department of Fish Wildlife & Parks.
• Library Department – The library is funded in part by three mill levies:  A levy on the residents of the City of Livingston and two County-Wide mill levies, one which is a fixed levy of 2.5 mills and a County-wide floating mill.  The three mill levies for the past four years are listed below.

City Mill Levy Chart CLICK HERE

• Health & Sanitarian Department – The budget includes $29,522 for the city’s support of the county operated Health & Sanitarian department.  The funds are generated through a city property tax mill levy. 
• Dispatch Department – The budget includes $2,000 for the replacement of a 911 touch screen and computer.
• Tax Increment District – Downtown – Spending authority of $40,000 is included in the budget.  A request has been made to the Tax Increment Board to provide a detailed budget for the coming year.  We do not expect to expend any funds until a detailed budget is received and presented to the Commission.
• Tax Increment District – West End – A new West End Tax Increment Special Revenue Fund has been created.  Funds in excess of the amount necessary for debt service (funded out of the Tax Increment Debt Service fund) will be transferred to this Special Revenue Fund.  No expenditures are anticipated for the coming year.
• Health Insurance – The city’s share of employees’ health insurance is funded by two mill levies—one within the city’s mill levy cap and the other being a “Permissive Health Insurance Levy”.  The portion within the mill levy cap can be set at any level, however, any increase in this mill levy must be accompanied by a corresponding decrease in another levy.  The city’s Permissive Mill levy is allowed to increase over time as determined by a calculation we must perform each year.  The increase is essentially designed to allow increases in health insurance costs (as opposed to increasing employees) to be funded by increased property taxes.
• Impact Fees – (transportation, fire, parks, police).  The only budgeted expenditure is $14,000 for restroom improvements in Mike Webb Park.
• Street Light Maintenance – The budget includes spending authority of $181,100, for Park Street Improvements consisting of: 

• Residential Lights 1,825 X 23 = $41,975.
• 19 Heads for downtown $775 X 19 = $14,725
• 19 Historic Lights = $49,400
• Electrical Wirings = $75,000 

• Street Maintenance District – The budget includes $150,000 for street rehab and overlay.
• Park Improvement Trust – The budget includes: 

• Skateboard expenses $1,500
• Sacajawea Park Improvements $5,000
• Sacajawea Statute maintenance $2,000
• Miscellaneous $1,000 

• Gas Tax – The budget includes $154,100 of street materials. 

• $39,100 Chip Oil
• $7,500 Chips         
• $9,500 Ice Slicer
• $4,000 Dust Oil
• $7,000 Sign & Posts - Winans Safe Zone
• $6,000 Paint & Tap
• $11,000 Hole Patcher
• $30,000 Asphalt
• $30,000 Curb Works @ Montana & 11th and River Drive
• $10,000 Reclamite
  
• Stimulus Funds – The city was awarded $134,601 of Stimulus funds by the Legislature in HB 645.  The expenditure of these funds must be completed by September 30, 2010.  We are projecting we will spend $75,120 in fiscal year 2009-10, with the balance of $59,481 falling into next fiscal year.  Spending authority for $59,481 is included in the 2010-11 budget.  The projects funded with Stimulus funds include the following: 

• Installation of Sprinklers in Sacajawea Park
• Resurfacing of Tennis Courts in Sacajawea Park
• Rehabilitation of Civic Center
• Montana/Gallatin Walkway
• Sprinklers at Webb Park
• Mobile Speed Alert Sign

Debt Service Funds 

• SID Funds – Additional spending authority is included for debt service funds to allow us to call bonds whenever we have available cash to do so, as required by bond covenants. 

Capital Project Funds 

• Library Capital Improvement Fund – A contingency appropriation of $12,000, consistent with the Library’s request.
• Railroad Crossing Levy – Spending authority of $250,000 is budgeted for Phase I for preliminary engineering work for the underpass.  The projected expenditures is funded by a voted mill levy of 11.25 mills for a period of five years.  Fiscal year 2010-11 represents the third year of the mill levy.   

Enterprise Funds 

• Water Fund - The budget reflects the 14% increase in water rates, which will take effect in August 2010.
• Water Fund - The budget includes $25,000 for a water flow analysis as well as plan reviews by our new engineering firm.
• Water Fund – Capital Outlay – Improvements to Clarence & Warner Wells are included in the budget for $50,000.  This includes telemetry for Warner well.
• Water Fund – Capital Outlay – Engineering for the B through 3^rd Street Water Main Replacement is included in the budget for $50,000.  This will allow the City to go out to bid in the winter to secure a contractor for the Summer of FY 2012.  This project is scheduled to be paid for in cash.
• Water Fund – Debt Service payments include the following:

Water Fund Chart CLICK HERE

• Sewer Fund – Capital Outlay – Engineering for the B through 3^rd Street T-Alley Sewer Main replacement is included in the budget for $50,000.  This will allow the City to go out to bid in the winter to secure a contractor for the Summer of FY 2012.  This project is scheduled to be paid for in cash. 
• Sewer Fund – New Sewer Microbes & Distribution Controls are included in this budget for $10,000.
• Sewer Fund – Capital Outlay –The following  is a list of sewer capital outlay items that are included in the proposed budget:
  
• Electric Program & Electronics                        $  7,000
• Valves                                                               5,000
• New E-Coli Testing Unit                                      6,000
• Emergency Generator                                       35,000
• New Tub Grinder/Grinding Services                   100,000
• Roll Off Truck                                                   25,000
                                                                      _________
  Total                                                             $178,000
  
  
  Sewer Fund – Debt Service includes the following:

Sewer Fund Chart CLICK HERE

• Solid Waste –This budget includes a $4 per customer per month Recycling Surcharge.  This will be effective August of 2010.
• Solid Waste – Debt Service includes the following:

Solid Waste Chart CLICK HERE

• Ambulance – No rate increases are recommended, however, during the fiscal year, staff will be reviewing the Ambulance fund to determine whether or not existing rates will be sufficient to support future operations and projected capital needs.
• Ambulance – $5,000 has been added for Firefighter/Paramedic reserves in the ambulance fund.  The administration is hopeful that using the Paramedic reserves for more Critical Care Transfers will generate more revenue, as well as free up full time Paramedics for daily in-town calls and reduce overtime costs.
• Ambulance –The budget includes a decrease in overtime from 70,000 to $50,000.
• Ambulance –Capital Outlay – A new IV pump has been budgeted for $4,000.   

Planning Processes 

The City of Livingston conducts various planning processes (long-term, mid-term and short-term), to help guide the government and to insure that decisions are made in the context of the organization as a whole and with a long-term perspective.  Diligent efforts are made to insure each of these component planning processes are in concert with one another.  This so called “Linkage” is paramount to insure short-term decisions are consistent with the overriding values embodied in the mid-term and long-term planning processes adopted by the City Commission. 

Each element of the City’s planning process has a different purpose and timeframe.  The City’s Mission, Long-term Goals and Growth Policy are the most far-reaching in nature—20 to 25 years.  The Capital Improvement Program is mid-term in nature—5 years.  The Annual Budget and the Capital Budget are short-term—covering a 1 year timeframe. The most important requisite is that they are coordinated efforts. 

Shown below is a hierarchy chart of the City of Livingston’s layered planning processes, all which support one another and are designed with a common goal.  The chart depicts how the Annual Operating Budget and the Capital Budget fit within the City’s planning process hierarchy.

City of Livingston's Layered Planning Processes CLICK HERE

City of Livingston's Long-Term Direction Chart CLICK HERE

Priorities & Issues for the New Budget Year 

As part of the city’s planning processes, the Commission develops a series of priorities and issues to guide the development of the new budget.  Listed below are the Commission’s priorities and issues for the year followed by the budgetary response.  The budgetary response also includes a statement as to how these priorities and issues deviate from prior years and also the factors that led to those changes. 

1.  Increase and Maintain General Fund Reserve to 17% or higher.  

Budgetary Response:  The General Fund balance is budgeted to increase from a projected beginning balance of $512,929 to $517,741 as of June 30, 2011, which represents 14% of expenditures.  We have made significant progress in building our General Fund reserves over the course of the last two fiscal years.  The balance as of June 30, 2008 was $328,930 (10% of expenditures), as of June 30, 2009 the balance was $437,380 (14% of expenditures), and a projected balance of $512,929 (17% of expenditures) as of June 30, 2010.  Despite projecting a modest increase in the general fund balance from $512,929 to $517,741 in FY 11, fund balance as a percent of expenditures actually drops from 17% to 14%.  The reason for the reduction is due to an accounting change.  Beginning in FY 11, we started charging all administrative staff salaries (i.e. City Manager, Finance Director, Assistant Finance Director, etc.) entirely to the General Fund.  As a result, the base expenditures of the General Fund increased and the base expenditures of other funds decreased, resulting in the general fund balance being a smaller percentage of expenditures.  We will continue to budget increases in our general fund balance, but future increases will be relatively modest. 

As shown by a ten-year graph of the city’s General Fund balance toward the end of this Budget Message, we have steadily increased our General Fund balance over the course of the last two fiscal years and we are projecting an increase for fiscal year 2011. The primary contributing factor accounting for the decline we experienced in prior years was due to a transfer out of the General Fund of $293,551 to the Building Inspection fund to eliminate a deficit that occurred in that fund.  Another contributing factor accounting for the decline in prior years were General Fund costs associated with a floodway mapping study.  Both of these were one-time items.  After experiencing these declines, the city is committed to rebuilding its General Fund reserve levels. 

2.  Develop 'Master Plan' for Parks & Recreation Facilities. 

Budgetary Response:  The City Commission budget includes $30,000 under professional services for possible sidewalks and parks studies.  These funds will be used to develop a Parks & Recreation facilities master plan.  Steps in the process will include appointment of a steering committee; develop, advertise, and award a request for qualifications; complete the study process, including public engagement; and submit final report to the City Commission.

3.  Prepare and recommend new methods for inventory, installation, replacement, and funding, of both public trees and sidewalks, to City Commission. 

Budgetary Response:  The city’s tree board has been reviewing possible alternatives, including a city-wide tree district.  Draft recommendations include the creation of a ten-year district with assessments against all properties in the city limits.  The funds generated would be used for tree maintenance, tree and stump removals, tree replacement, and to hire a certified forester.  The forester would monitor all public trees and enforce infrastructure conflicts like sidewalk work and careful selection of replacement trees. 

Once the tree board’s recommendations have been finalized, these will be forwarded on to the City Commission for discussion and possible action.

4.  Implementation of 'Ten Year' Infrastructure Plan. 

Budgetary Response:  A key element in our ability to implement the ten-year infrastructure plan has been the water and wastewater rate changes.  The proposed budget includes the third year of the three year rate increase, consisting of a rate increase of 14% in water and 19% for wastewater.  This three-year rate increase plan has been necessary for several reasons. 

In order for the city to qualify for state grant and loan funds, the city was required to increase its water and wastewater rates to the state-wide average.  Without the rate increases, the city would not have been able to qualify for the $1.3 million in grant and loan funds we recently received for the $1.6 million upgrade to the city’s wastewater plant improvements currently in progress. 

In prior years, in an effort to continue with necessary infrastructure projects without increasing rates, the city drew down reserve levels in its water and wastewater funds to the point where all reserves in these two funds were fully depleted.  The three year rate change plan has allowed us to rebuild our reserves to an acceptable level. 

Without the rate increases, the city would have been unable to borrow additional funds, particularly in the wastewater fund.  Whenever the city borrows money, it must demonstrate that sufficient funds will be available to make principal and interest payments in a timely manner. This is done by offering a promise (or covenant) to maintain system rates and charges at a level that will generate a certain level of revenues—generally consisting of net revenues (gross revenues less operating and maintenance costs) available for debt service equal to at least 125 percent of annual debt service requirements.  Without the rate increases, the city would not have been able to borrow additional funds because of our inability to comply with the bond covenants.  Thus, the city would not have been able to continue with its 10-year infrastructure plan. 

Finally, the three-year rate plan has allowed the city to make great strides in our ability to finance recurring infrastructure projects with cash, rather than incurring debt.  While we are not yet able to fully finance all recurring infrastructure projects with cash, we are well on our way of doing so.  If we are required to borrow funds in the future, the amount of the borrowing will be reduced significantly. 

We have made some preliminary budget projections for the next five year period, incorporating our anticipated infrastructure needs together with our operational budgets.  Our projections for both water and wastewater include modest inflationary increases (1% – 2%) as the minimum rate change.  We were pleased to find that in the wastewater fund, we will be able to finance our recurring infrastructure projects with just modest inflationary increases.  In the water fund, a relatively minor annual rate adjustment of approximately 2%, beyond the inflationary adjustment would be necessary.

5.  Continue work toward completion of FEMA Flood Mapping process. 

Budgetary Response:  The administration will facilitate as much progress as possible with FEMA to complete the Flood Mapping process.  At this point, FEMA has accepted the results of the City’s flood study and maps.  Initiation of the Preliminary Map Approval process has not been started.  The administration will continue to apply pressure toward the completion of these processes.

6.  Help facilitate a 'local business environment' that is ready to create jobs, prepare for expansion and recruitment related eco dev activities, propose local regulations that encourage investment in local economy. 

Budgetary Response:  In the coming year, the city’s Business License Ordinance will be modified—moving to a system whereby business license fees will be based on the square feet of the business—providing a nexus between the fees charged and the city’s regulatory efforts.  Also during the year, we will compile a comprehensive economic development resource inventory.  Finally, we will provide a written assessment of the city’s regulatory practices (opportunity for improvement, Best Practices, etc.). 

7.  Reduce Gross Recycling Costs by 15%. 

Budgetary Response:  This goal would require a reduction of $39,750 in the coming year.  The vast majority of this reduction will be able to be made with the elimination of the concrete recycling program ($31,760).  The remaining reductions will be much harder to achieve, without impacting our recycling efforts, however, we will continue to examine all remaining areas for possible reductions.

8.  Continue work toward completion of new Separated Grade Rail Road Crossing. 

Budgetary Response:  The budget includes an appropriation of $250,000 for the completion of "Phase One -- Environmental Assessment & Preliminary Design” as well as continued lobbying efforts at both the state and federal level for additional appropriations  If the environmental assessment changes from a 'categorical exclusion', there will likely be substantive budget and timing impacts for completion of this goal.

Capital Improvement Plan 

The City is developing a Capital Improvement Program (CIP).  The CIP will be summarized within the Annual Operating Budget.  The CIP is a multi-year capital improvement plan that forecasts, but does not obligate, future spending for all anticipated capital projects. The CIP will be developed and updated periodically.  The proposed five-year CIP will conservative financial forecasts and reflect only those projects with the highest priority and most realistic expectation for completion during the next five years.  This approach will avoid raising expectations for projects that are not well defined or that the operating budget will not support. 

The Annual Budget Process includes a re-evaluation of the capital projects included in the CIP for the coming year as well as the anticipated funding sources for the projects.  If approved in the Annual Budget Process, the capital items appear in the Annual Operating Budget, which constitutes the formal spending authority.  The capital items included in the Annual Operating Budget, represent the “Capital Budget”. 

A summary of the significant capital projects included in the FY 11 Operating Budget is included in the Appendix of the budget on page I-1. 

STAFFING CHANGES 

The proposed budget includes a net overall increase of .95 full-time equivalent employees (FTE).  The chart on the following page shows the change in FTE for the budget year for each department.  Also included in the appendix on page J-1, is a chart that shows the city’s FTE over the last four years.

Staffing Changes (FTE) Chart CLICK HERE 

BUDGETARY TRENDS

Shown below are a series of key financial indicators and budgetary trends that affect the ability of the city to sustain current service levels, while maintaining financial stability.

General Fund Balance Chart CLICK HERE  

Fund balance measures the net financial resources available to finance expenditures of future periods. Rating agencies examine fund balance when considering the credit quality of the City.  The general fund balance represents the best indicator of the city’s overall financial health.  Shown by the graph on the left is the city’s actual general fund balance from FY 01 – FY 09.  The FY 10 balance is a projection of the current year.  FY 11 is the budgeted ending fund balance for the coming year. 

The large reduction in FY 08 resulted from a transfer of $293,551 from the city’s general fund to the building inspection fund to eliminate a deficit in the building inspection fund.  Also contributing to this decline are one-time costs associated with floodway mapping.  After experiencing the declines from prior years, the city is committed to rebuilding its general fund balance. 

As a general rule, all real and personal property in the State of Montana is subject to taxation by the State and its counties, municipalities and other political subdivisions.  This rule is subject to exceptions in the case of specified classes of exempt property.  Property is classified according to its use and character, and the different classes of property are taxed at different percentages of their market valuation.

Property valuations are based on comprehensive appraisals of all taxable property performed by the Department of Revenue each year.  The Department of Revenue is required to certify market and taxable values to each county on or before the 1^st Monday in August.  The trend of the City of Livingston market value is shown by the graph below.  As shown by the graph, the City’s market value has increased from $228 million in fiscal year 2001-2002 to $346 million in fiscal year 2009-2010, for a 51% increase over this period.  The market value of property in the City reflects the steady growth the City is experiencing.

Market Value Chart CLICK HERE 

The graph of taxable values shown below reflects the City’s ability to raise general tax revenue necessary to support the growing demand for government services.   The taxable value for property is determined by applying a statutorily established percentage ratio to the market value of the property, according to its property classification.   The applicable ratio for most commercial and residential real properties is currently 3.01%.   Shown below is a history of the City’s actual taxable value since 2002.  The increase in taxable values does not coincide with the increase in market values because of adjustments to the percentage ratio by the Montana Legislature and by changes in tax policy implemented through property tax amendments.  The adjustments by the Legislature were designed to prevent local taxes from increasing at the same rate as property values.  As shown in the graph, Livingston had a taxable value of $8.47 million in FY 02.  The taxable value has since increased each year, reaching the current taxable value of $10.5 million in FY 10, a 24.1% increase.

Taxable Value Chart CLICK HERE 

ECONOMIC FACTORS 

The Bureau of Business and Economic Research (BBER) is the research and public service branch of the University of Montana’s School of Business Administration.  The Bureau is regularly involved in a wide variety of activities, including economic analysis and forecasting.  The Bureau only provides detailed research on the state’s largest cities and counties.  Excerpts from the Bureau’s forecasts contained in the Spring 2010 issue of the Montana Business Quarterly relating to Gallatin County are restated below.  Gallatin County is adjacent to Park County and due to its proximity influences our local economy. 

There is almost no place in Montana that escaped this recession, but the recession impacts do vary from city to city.   As shown in Figure 1, statewide economic growth averaged about 3.2 percent per year from 2001 to 2007. From 2004 to 2006, Montana experienced some of the fastest statewide growth since the 1970s.  Figure 1 also presents the average annual growth for Montana’s communities, arranged from the slowest to the fastest. These counties may be roughly categorized into three groups. The slowest growing were Missoula and Cascade counties. Five counties were growing at about the statewide average, including Butte-Silver Bow, Fergus, Hill, Lewis and Clark, and Yellowstone. The fastest growing areas of the state were Flathead and Gallatin counties. For the most part, this rapid growth was due to the construction/real estate bubble, which was most pronounced in these two counties.  

Figure 2 examines the impacts of the recession on Montana communities.   It presents the percent change in wage and salary employment from March 2008 to March 2009.  It takes only a quick glance to see what happened in Gallatin and Flathead counties.  They were the fastest growing during the recovery phase and experienced the largest declines during this recession.  Nonfarm wage and salary employment declined 11.1 percent in Gallatin County and 8.4 percent in Flathead County between March 2008 and March 2009.

Annual Percent Changes Figures 1 & 2 CLICK HERE

Figure 3 presents the change in construction employment between June 2007 and June 2009. As expected, the greatest decreases were in the areas where the housing bubble was the largest. Construction employment declined by 35 to 40 percent in both Flathead and Gallatin counties. The changes in retail trade employment between March 2008 and March 2009 are pictured in Figure 4. As expected, Flathead and Gallatin counties suffered most, with declines of about 11 percent.

Annual Percent Changes Figures 3 & 4 CLICK HERE

Gallatin County's Economic Base Chart CLICK HERE

Closing 

We had many goals in mind when we decided to create this new performance budget—the most important of which were improved financial planning and the improvement of city services through Performance Budgeting.  It takes most governments several years to develop a true Performance Budget.  This is our second year of preparing the city’s performance budget.   Department managers did an outstanding job of describing their programs, laying out goals and objectives for their departments, establishing quantifiable performance measures and identifying and quantifying workload indicators.  The focus of this budget is not the traditional approach of describing of how the city intends to spend taxpayer dollars, but rather the more progressive approach using a Performance Budget which describes what the city departments intend to accomplish and what services will be provided to Livingston citizens.  Furthermore, our focus will be on continual improvement and efficiency in the provision of these public services.  There are obvious improvements we can make in this document and we are challenging ourselves to do just that as it continues to develop in future years. 

It is my honor and privilege to serve the great citizens of Livingston.  In compiling the recommended budget document in this new format one of the goals was to be transparent and make it easier for the reader to understand City operations and finances.  To this end, my belief is that we have achieved some measure of success.  My pledge is to strive for continual improvement in the future.  Feel free to contact my office with feedback regarding this document or any of the figures, or processes described herein. 

Respectfully,                                                                                               

Edwin Meece
City Manager

To view/print a copy of the FY 2010-11 Annual Budget CLICK HERE

To view/print a copy of the City Manager's Budget Recommendation FY 2010-11 CLICK HERE