Two Rivers: Small City Perspective on State-Local Finance Greg Buckley, Two Rivers City Manager Urban Alliance Policy Forum, Madison June 8, 2017

Two Rivers: Small City Perspective on State-Local Finance Two Rivers is a small, full-service city of 11,700 Located on the shore of Lake Michigan in Manitowoc County About 90 mi. north of Milwaukee Two Rivers

Two Rivers: Small City Perspective on State-Local Finance Commercial Fishing History Birthplace of the Ice Cream Sundae

Two Rivers: Small City Perspective on State-Local Finance Early Industries Grew Up Along Our River Corridors

Two Rivers: Small City Perspective on State-Local Finance

Two Rivers: Small City Perspective on State-Local Finance One of those early woodworking industries—Hamilton Mfg.—grew to be the City’s dominant employer, with over 2,000 employees at its peak and a 1.2 million SF complex that sprawled over the City’s waterfront

Two Rivers: Small City Perspective on State-Local Finance After 130 years of operation, Hamilton closed in 2012-13

Two Rivers: Small City Perspective on State-Local Finance

Two Rivers: Small City Perspective on State-Local Finance Two Rivers is now focused on “Turning Our Face Back to the Water,” to capitalize on the enormous resources of our river corridors and Lake Michigan.

Two Rivers: Small City Perspective on State-Local Finance

Two Rivers: Small City Perspective on State-Local Finance

Two Rivers: Small City Perspective on State-Local Finance

Two Rivers: Small City Perspective on State-Local Finance We have a great beach, too

Two Rivers: Small City Perspective on State-Local Finance But, from a municipal finance perspective, recent history has been no “day at the beach.” --From 2009 to 2014, the City’s equalized valuation dropped by 14 percent (rebounded by 2 percent in 2015) --City has been challenged to maintain quality services and continue to reinvest in infrastructure, while undergoing major economic changes

Two Rivers: Small City Perspective on State-Local Finance Police Department Budget, at $2.8 million, is 28.6% of GF Budget

Two Rivers: Small City Perspective on State-Local Finance Fire and EMS Budget, at $2.2 million, is 22.5% of GF Budget

Two Rivers: Small City Perspective on State-Local Finance In the remaining 50% of the GF Budget, we strive to provide all other City services

Two Rivers: Small City Perspective on State-Local Finance Two Rivers’ Operating Budget Has Been Flat-Lined for a Decade: 2007 General Fund Budget: $9,661,981 2017 General Fund Budget $9,824,443 Change Over 10 Years: + $ 162,452 + 1.68%

Two Rivers: Small City Perspective on State-Local Finance We have done a lot to hold the line on spending: --Changes to employee health insurance--increased employee premium co-pays, high deductible plan with HSA, wellness iniatives, have kept annual cost increases under 3 percent, on average --Benefitted from the “tools” provided by Act 10 and related legislation --Eliminated 13 FT positions, reducing workforce 10 percent, from 125 to 112, with no significant service impacts

Two Rivers: Small City Perspective on State-Local Finance State Funding has actually declined: 2007 State Funding $4,806,015 2017 State Funding $4,660,650 Change Over 10 Years: -$ 145,365 -3.02%

Two Rivers: Small City Perspective on State-Local Finance We’re one of those cities that is highly dependent on Shared Revenues; at $3.8 million, they account for 38 percent of our General Fund Budget Add in Expenditure Restraint and Road Aids, and State-source revenues fund 48 percent of that operating budget

Two Rivers: Small City Perspective on State-Local Finance Even with no increase in GF spending, the City has needed to increase its operating levy by 30 percent just to maintain a static spending level: 2007 General Fund Levy $1,562,998 2017 General Fund Levy $2,032,303 Change Over 10 Years: + $ 469,305 + 30.03%

Two Rivers: Small City Perspective on State-Local Finance What do we need? Greater flexibility to implement local user fees and charges to help finance municipal services. Problem is, we’re getting less flexibility --2013-15 State Budget provision added to levy limits calculation any new user fees, for services previously funded through the tax levy --Further constrained local flexibility to generate needed revenues --Created inequities among WI’s cities and villages --Recent Assembly GOP proposal on Wheel Tax would further limit local flexibility

Two Rivers: Small City Perspective on State-Local Finance What do we need? Greater flexibility to raise local tax rates --Get rid of levy caps for operating levies altogether --Or at at least: --Allow carrying forward “unused” levy capacity from year to year: --Continue to allow increases in operating levy if debt service levy for pre-2005 issues declines, or to offset ANY declines in debt service

Two Rivers: Small City Perspective on State-Local Finance What do we need? Re-affirmation of the Wisconsin’s historic commitment to using statewide revenue sources to support vital local services and infrastructure A commitment that began in 1911, is still the foundation for funding local services in WI cities and villages

Two Rivers: Small City Perspective on State-Local Finance What do we need? (cont’d) The League of Municipalities has advocated increasing funding for Shared Revenues in virtually every budget cycle in recent years --Responding to the Kettl Commission recommendations in 2001 --More recently, seeking in 2013-14 to “Restore Shared Revenue Funding to 2002 Levels” --Current session goal of increasing Shared Revenues funding by same % as growth in GPR

Two Rivers: Small City Perspective on State-Local Finance Conclusion: #1 Legislative goal should be a renewed commitment to Shared Revenues -- “First, Do No Harm” of all: maintain existing, historic funding commitments in place since 2002 --Then, build on that base, with a logical formula tied to GPR growth, regional economic growth, or other factors

Two Rivers: Small City Perspective on State-Local Finance Conclusion: #1 Legislative goal should be a renewed commitment to Shared Revenues (cont’d) Key to Any Changes: --Recognition by State Government leaders that local government is a PARTNER in providing vital public services and infrastructure, in pursuing economic development --Respect for LOCAL CONTROL, even as local units seek more funding support from State-level sources

Two Rivers: Small City Perspective on State-Local Finance