City approves max preliminary budget, schedules public workshop and hearing

By Zach Hagadone
Reader Staff

The city of Sandpoint is moving into its budget season after City Council members voted July 21 to adopt maximum preliminary expenditures of almost $40.6 million for fiscal year 2022. 

Scheduled for a public workshop on Wednesday, Aug. 4, and going back before the council for a public hearing and vote at its regular Wednesday, Aug. 18 meeting, the preliminary maximum budget represents an increase of nearly $6 million, or 17.33% over FY2021.

“It’s important to note, I know there’s a lot of public perception when we have increases in our budget every year that it’s a reflection of excess of spending and an impact on their tax dollars and how they’re spent,” said City Council President Shannon Sherman, adding that, “a lot of it is due to significant grant funding,” as well as the recently approved joint-powers agreement between the city of Sandpoint and area fire departments.

Sandpoint City Administrator Jennifer Stapleton led the budget presentation, showing a general fund increase of about $5.4 million — $1.4 million of which is due to the JPA between Sandpoint and the Sagle and Westside fire districts. 

According to the agreement, firefighters in those districts became employees of the city of Sandpoint, while their respective administrative costs were rolled into the city’s budget to be reimbursed on a monthly basis.

Meanwhile, Sandpoint received a grant of $2 million from the American Rescue Plan Act — about half of which it has already received, with the other half to be disbursed next year.

Those grant dollars could go toward stormwater and facility improvements for both public and employee safety, including a proposed remodel of the police department space at City Hall. The latter project is estimated to cost $960,000, not including the ARPA portion.

Stormwater projects eligible under the federal grant include one planned for Dub’s Field, adjacent to the Sandpoint Events Center (a.k.a. “Old 9th Grade Center”) at Highway 2 and Boyer Avenue, as well as design and engineering for stormwater treatment at Farmin’s Landing on the downtown Sand Creek waterfront.

Other items in the budget included $525,000 — paid for by the Sandpoint Urban Renewal Agency — for improvements on Great Northern Road, as well as $600,000 drawn from past years’ savings to fund emergency repairs on a section of North Boyer Avenue immediately north of the Bonner County Fairgrounds.

“We are so reliant on grant funds to make those projects happen — we simply don’t have the general fund for those projects,” Stapleton said, adding that the city is pursuing more applications for grant dollars in the coming months, especially as a combination of state legislation and rapid local growth are posing new challenges to the city’s ability to raise revenue.

Stapleton said that the city’s special revenue fund for FY2022 has decreased by almost $1 million, reflecting the sunset of the five-year 1% local option sales tax approved by voters in 2015 to fund the reconstruction projects at War Memorial Field. 

To make up for that loss of revenue, Stapleton told council members that they will likely be asked to consider another round of local option tax in the next month, possibly related to the parks capital improvement projects outlined in the Parks, Recreation and Open Spaces Master Plan approved in September 2020.

“We do rely on a revenue source in order to make those [projects] happen,” she said, adding that they have not been included in the preliminary maximum budget. “It’s a real issue that we will be facing as a city moving forward.”

Another budgetary challenge may come with the release of new population figures from the U.S. Census Bureau, which are expected to be released in the next month or two. If those numbers show that Sandpoint’s population has grown past 10,000 it will mean the loss of its ability to collect revenue from the resort city tax, which is levied on hotel-motel beds and goes primarily toward funding public safety services.

“We’re pretty anxiously waiting for the Census numbers to come in,” Stapleton said, though she added, “we believe we’re going to be a hair under 10,000.”

Council member Andy Groat expressed his support for the local option tax, saying he is “fully prepared for the pay-to-play,” meaning visitors to the area should be contributing to paying for expenses incurred by the “wear and tear on our shoulder seasons that our citizens should not bear the full burden of.”

Stapleton stressed that the preliminary budget does not include a local option tax, “but I do anticipate we’ll be having discussions about that.”

Further complicating the budgetary picture is House Bill 389, which the Legislature passed and Gov. Brad Little signed into law in May. The bill imposed a number of caps on how much municipalities and taxing districts can collect from a range of revenue sources.

For instance, the new law only allows jurisdictions to collect up to 90% of the value of new construction rolls. Sandpoint has experienced between $13 million and $14 million in new construction, which has translated into about $63,500 added to the tax base for FY2022. 

“[T]hat $63,500 that we are getting in new construction rolls, moving forward we would get 90% of the new construction rolls — so our new construction rolls would go down,” Stapleton said.

“It will have a significant negative effect on a city’s ability to levy for future property tax revenue,” she added, and those negative effects will only increase as there are 800 housing units that are currently moving through the pipeline. 

“It’s when actual occupancy permits are issued and people are getting ready to move into the residences, that’s when we really start to see the impacts on our construction rolls,” Stapleton said.

In addition to construction rolls, the legislation also caps annexations at 90% of their value, urban renewal districts are capped at 80% of their value when they sunset (which will affect Sandpoint in 2029) and total property tax increases are capped at 8%.

Making up for those limitations will likely include a range of fee increases — which will also be taken up at the Aug. 18 meeting of the City Council — as well as grant funds.

“It’s going to be challenging times,” Stapleton said.

Both the Aug. 4 budget workshop and Aug. 18 public hearing will take place at 5:30 p.m. in the City Council chambers at City Hall (1123 Lake St.). Budget and fee documents are posted on sandpointidaho.gov.