League of Wisconsin Municipalities Urban Policy Forum June 8, 2017 State and Local Government Finances in Wisconsin Background and Perspectives League of Wisconsin Municipalities Urban Policy Forum June 8, 2017

Reliance on Fees Varies by State

Wisconsin Experience Lower Reliance on User Fees

Variation between Two Largest Cities Madison Milwaukee

Key Revenue and Spending Facts (2017) Net Taxable Property = $23.1 billion Net Taxable Property with TIF = $23.9 billion City Tax Rate = .09495% of assessed value (9.495 mills) Total tax rate = 24 mills Average Value Home (2016/2017) = $254,693 City Taxes on Average Value Home = $2,418 City Tax Levy = $219.7 million General Fund Revenues = $80.1 million State Aid (excludes transit) = $35.8 million General Fund Expenditures = $284 million Library Fund Expenditures = $17 million

Key Financial Condition Facts (through 2015) Highest rated bonds possible (Moody’s – Aaa) Rapidly retire debt (typically 10 years) Solid reserves ($38.4 million / 14% of expenditures) General obligation debt = $382 million – 32.3% of constitutional limit. Total debt = $596 million Total debt per capita = $2,589 (up 88% since 2004)

Calculating Property Tax Impacts Levy = Expenditures less Revenues (e.g., State aid) Taxable value = value of all property that can be taxed in the City, less amount of property value in tax increment districts (TIDs). Tax Rate / Levy Rate / Mill Rate = Levy divided by Taxable Value Average value home = value of residential property divided by number of parcels Taxes on average value home = tax rate multiplied by average value home

Wisconsin Local Government Finance: Comparative View Limited “home rule” revenue authority => local finance a matter of “statewide concern” WI local governments: disproportionate reliance on property taxes and state aids WI uniformity clause allows virtually no differential treatment based on property class Total per capita revenue is ~ 38% less than US average (2007 US Census Bureau) WI local per capita taxes & state aids combined total is ~ 31% less than US average State Shared Revenue program Established 1976: redistributes state revenues in equalizing fashion to municipal and county governments Serves as “offset” to absence of local revenue options Steady growth: 1976-1995 1996-2003: frozen most years 2004-2012: Municipal aid component has declined 14.5% in nominal terms

Broad-based Revenue Options for Wisconsin Cities Motor vehicle registration fee (“wheel tax”) Room Tax Exposition District – room, food and beverage, and car rental taxes Stadium-related sales taxes – Milwaukee and Green Bay Premier Resort Area Tax – 40% or more of property value related to tourism

User Fees and Special Charges Municipalities have broad authority to levy special charges for current services. Services include, but are not limited to: Snow and ice removal Weed elimination Street sprinkling, oiling and tarring Repair of sidewalks, curb and gutter Garbage and refuse disposal Recycling Storm water management Tree care Snow removal on private roads and driveways Fees must bear a reasonable relationship to the cost of the service. A service must actually be provided.

Madison Revenue Sources Room tax – rate of 9% (highest in state due to state law provisions regarding convention centers) Ambulance fee – rates increased 50% in proposed 2013 budget; much of the cost paid by private insurers and Medicaid/Medicare. Utility PILOTs -- Water and Parking Utilities Special Charges – Urban Forestry Special Charge -- $5 million in 2017 Municipal Services Fee (based on fixed cost allocation and usage) – revenues estimated to be collected in 2017: Water -- $42 million Sewer -- $35 million Stormwater -- $16 million

City General Fund Revenues -- $300 million

Trends – City Property Tax Levy

Trends – Taxes on Average Value Home

Greater Reliance on Property Taxes and Other Local Revenue (e. g Greater Reliance on Property Taxes and Other Local Revenue (e.g., Room Tax) as State Aid has Not Kept Pace with Costs

History of State Aid

Shared Revenue and Expenditure Restraint Payments Have Not Kept Pace with Inflation

Residential Sector Share of Property Tax Burden

State-Mandated Levy Limits Municipalities and counties cannot increase local property tax levy, excluding debt service on general obligations, by more than the amount of net new construction in the community. Increases in fees for “covered services” (snow plowing, refuse collection, stormwater management, fire protection, and street sweeping) for costs currently covered by the General Fund result in a reduction in the levy limit. 50% of closed TID value as share of equalized value added to allowable rate of growth in levy. Net new construction = new construction less property removed due to destruction or replacement. Net new construction does not include property value appreciation due to market changes. Madison net new construction for 2014/15 levy = 1.7% Highest share of net new construction in last 15 years = 3.7% Limits can be exceeded through voter referendum.

Expenditure Restraint Payment Communities with tax rates of 5 mills or higher are eligible. Qualify for payment if increase in general fund expenditures, excluding debt service, is less than inflation plus 60% of net new construction. Madison receives $6.5 million annually.