Bonus round for potholes!

Eau Claire St. 4 2016 GailWisconsin’s long road back to a well-maintained transportation system has begun. Yesterday the Wisconsin Department of Transportation announced the details of a one-time grant competition to invest $75 million repairing, rebuilding and/or upgrading Wisconsin’s local roads, bridges, bike trails and transit systems. The grant program is one part of a state transportation budget that acknowledged the need to beef up our transportation system, especially (but not exclusively) the local part of our system.

The League has a simple message for Wisconsin’s cities and villages: APPLY! Come on, you know you have a road that’s long overdue for reconstruction, a bus stop that should have been bulldozed years ago, or a pedestrian trail nobody uses because it has more weeds, mud puddles and broken concrete than it has walkers. This is their chance; it’s the bonus round! As they say on the commercial: “Send it in!”

I give Transportation Secretary Craig Thompson, Governor Tony Evers and the Wisconsin Legislature a serious “tip of the hat” on this one. It’s flexible, it’s responsive and it lets YOU at the LOCAL level make the call. Projects can be everything from “shovel ready” (can we hate that term yet??) to a gleam in your Public Works Director’s eye. As long as the project can be completed within six years, it’s eligible. Minimum project size is $250,000, and the maximum size is $3.5 million. You must have something that fits in between those two numbers. Every city and village does.

We won’t regurgitate all of the rules and regulations here; you can read them at the WisDOT’s web site. Just remember the deadline: December 6.

We also have a request: Send us pictures. The League would love to see the critical projects that our members want to work on. Send us an ugly “before” picture.

Potholes, your days are numbered.

 

A life or death conversation

One of my mentors is Clarence Anthony, the Executive Director of the National League of Cities. A week ago, Clarence posted this item as he reflected on the most recent round of pointless and tragic mass shootings. Like many of us, Clarence is struggling to understand why these things happen. But like many of us in the arena of local government, he asks an even more important and immediate question: What’s our role? What’s our role in response to tragedies such as those that have occurred in El Paso, Dayton, and Oak Creek? What’s our role in averting and avoiding these acts of deadly outrage? What’s our role as citizens?

Democracy in America is not a spectator sport. It is nothing more and nothing less than  every one of us acting together for the common good. What’s the role of democracy in the face of domestic terrorism? This will be a difficult conversation. It may be a painful conversation. But it’s a conversation we need to have if we are ever going to find a solution to this violence.

To quote Clarence Anthony: No more, no more, no more.

212 Roads to Somewhere

The Wisconsin Legislature is deciding this spring whether or not to delay main street in 212 Wisconsin Cities, Villages and Towns. There are 212 state highway rehabilitation projects included in a $320 million state highway rehabilitation program budget request. The request is being considered this month by the Legislature’s Joint Committee on Finance. Each of those projects is a vital piece of a community’s economic success. We hope the vote is “Green” for go.

We admit that the “State Highway Rehabilitation Program” is a name only a bureaucratic mother could love. And $320 million is a lot of money, even within a multi-billion dollar state budget. What’s the connection to downtown Wisconsin? It’s not local transportation aids. Why should we care?

We do care, because all roads in Wisconsin lead somewhere. For example, one of those 212 projects would resurface Highway 172 in the Green Bay Area; the highway that leads to the Brown County Airport. Another project would replace a critical bridge on Highways 59 and 18 in the City of Waukesha. One more resurfaces the road that runs through the Village of Athens in Marathon County. Project after project affects city after city, village after village and town after town. It’s all connected; connected to you and I.

State highways are the links between Wisconsin’s 602 cities and villages; they are also often the main thoroughfares through those communities. They carry farm products, manufacturing equipment, school buses, ambulances and the tens of thousands of family vehicles traveling back and forth every day. Without a quality network of these roads linking local roads and the highway system, it gets harder to get to work, to get to school, and to get emergency services to people who need them.

A few days ago, the Wisconsin DOT released the list of road rehabilitation projects that would be delayed or deferred (deferred is bureaucratic word that means something worse than delayed) if we cannot find consensus on how to pay for them. Take a look at the list; it’s long but organized by county. Chances are you’ll find a road that you drive on listed there. Think about that particular stretch of road. What happens to your village if that project doesn’t get done next year; or the year after; or maybe just doesn’t get done? Whose job is affected; whose school is affected; which ambulance has to be rerouted?

Think about that. Then call your area legislator. It’s all connected.

Another Dark Store Attempt Fails

Once again, the traveling troupe of Dark Store tax attorneys and appraisers-for-hire has failed to persuade a local judge. On April 4, 2019, Portage County Circuit Judge Thomas Flugaur dismissed a national chain store’s attempt to have its property tax bill cut in half. Lowe’s Home Centers, LLC claimed that the Village of Plover was charging them property taxes based on twice the actual value of their property. Judge Flugaur wouldn’t bite. The Judge’s decision is here.

Although the village “won” this case, it wasn’t free nor was it easy. It cost the village more than $80,000 to hire the expert attorneys and appraisal specialists that were needed to win a four-day trial. As with other Wisconsin Dark Store challenges, the cost of defending the assessment plays a practical and significant role in deciding whether or not to negotiate a settlement. Many times the municipality chooses to settle, rather than incur the cost and risk of a trial. Other Dark Store appeals have cost even more than Plover’s to defend against.

The Plover case played out similarly to other Dark Store road show performances. The property owner offered up a smorgasbord of vacant, boarded-up properties as “comparables,” including one former department store that had been vacant for four years. The Village countered that the property in question was in the middle of a popular shopping district that had a very low vacancy rate; by no means was it comparable to a dark property. In the end, the judge decreed that none of the properties offered by the paid experts were truly comparable. Under Wisconsin law, that finding next leads to an assessment of the cost of the property; what it would cost to build a comparable store.

Under the cost approach, it seemed that the two sides were in agreement. The Village’s cost-approach figure was $8.5 million; the property owner’s expert came up with $8.9 million. (Both figures exceed the building’s actual assessment value.) But then, the property owner’s hired expert took his estimate one step further, claiming that the property had to be devalued by 50% due to “functional depreciation” of the property. The judge tossed that discount out, pointing out that the $8.5 million and $8.9 million figures both already accounted for depreciation. (The Lowe’s building has been standing for 10 years.)

In his decision, Judge Flugaur repeatedly quoted from the Wisconsin Property Assessment Manual, which states, among other things, that “The assessor should avoid using sales of improved properties that are vacant (‘dark’) or distressed as comparable sales unless the subject property is similarly dark or distressed.” So, once again, despite a local tax assessment that was done “by the book,” treating the property owner fairly, a major retailer sued the village, forcing it to incur tens of thousands of dollars to defend other taxpayers from a tax shift. On behalf of taxpayers in Plover and dozens of other cities, villages and towns that are under similar assault, we respectfully but urgently ask that the Wisconsin Legislature take up and pass the Dark Store legislation to make it clear once and for all that the Dark Store Road Show is over.

Wisconsin is Over-Reliant on the Property Tax

This week’s Local Perspective blog post is by Sharon Eveland, City Administrator, City of Clintonville

If you ask someone in my community what they think about their local government, one of the first things they will likely say is “our property taxes are too high” and they would be right. When I first moved here from Georgia, I was shocked by how high property taxes were here, and by here, I mean all over the state.  The house I currently live in is assessed at about $10,000 higher than the house I owned in Georgia and yet my property tax is twice as high!  I got curious and started looking in to why that might be and I quickly realized how local governments in Wisconsin are forced to rely almost exclusively on the property tax for raising revenue.  Well of course our property taxes are high! When you throw in the fact that the second largest portion of many municipalities’ revenue is state aid and consider that municipalities have no control over that revenue stream, it’s a recipe for disaster.  If the State decides to decrease what it gives us, we are left with one of two options: reduce services or increase our property tax levy.

And let’s be clear.  Increasing our levy is not as easy as it sounds because the State restricts our ability to do that as well.  Under current State law, we can only increase our levy be the rate at which we experience new development, specifically our net new construction rate.  What this means is that if you are a municipality that doesn’t experience growth, as is the case in Clintonville, you cannot increase your levy unless you meet one of the allowance requirements.  The most common of those allowances is for debt, which allows a municipality to increase its levy by the amount it needs for its debt payment.  Seems legit, right?  Wrong.  What this structure has done is forced municipalities to rely on borrowing for its major capital projects, rather than levy for them year to year.  As Appleton Mayor Tim Hanna has said, “Levy limits are making us debt junkies.”  It’s great for the banks and investors, but not so much for the taxpayers.  We are making future generations pay for the purchases of today, and even worse, making them pay more for it because of interest.  And to cap it all off, the State limits a municipality’s ability to borrow by restricting its debt capacity to five percent of its assessed value.  For the City of Clintonville, that’s roughly $10 million and we are currently at approximately $6 million.  Now, I want our taxpayers to know that the Council is firmly committed to reducing its debt and we have been working very hard to secure grant funds and find creative ways to make do with what we have, but it is a long process and one that is constrained in many ways by the State.

Recently, the Wisconsin Policy Forum, a non-profit engaged in nonpartisan, independent research on fiscal and policy issues affecting governments in Wisconsin, issued a report called Dollars and Sense: Is it time for a new municipal financing framework in Wisconsin?WPF Midwest reliance on prop tax chart 2019, which was funded by the League of Wisconsin Municipalities, Wisconsin REALTORS Association, and Greater Milwaukee Committee, to look at Wisconsin’s reliance on the property tax and whether a different revenue generation structure was needed.  The report found that of the twelve states in the Midwest region, Wisconsin had the highest reliance on the property tax of all twelve states and was ranked seventh nationally.  Wisconsin also has the lowest sales tax average of all twelve Midwest region states.  In Georgia, I lived in a county with a sales tax rate of 8% and according to the Georgia Department of Revenue, only two counties in the entire state have a rate of less than 7% as of April 1, 2019 and a couple were just shy of 9%.  The State sales and use tax is only 4%, meaning anything above that stayed in the county where the purchase was made and is apportioned between the municipalities and the county government based on an agreed upon formula.  So the money stayed where it was spent.  More importantly, the residents have to vote to approve these sale tax increases so it’s not forced upon them.  In addition, the sales tax is able to help offset the cost providing services to visitors and commuters who do not reside in a particular municipality but utilizes its services.

On average, Wisconsin municipalities receive about 42% of their revenue from the property tax and in Georgia it’s about 27%.  This is why my property tax bill in Georgia was significantly less than my tax bill here for a home of roughly the same assessed value.  While some would argue that the State should just increase its state aid, which, by the way, when it was originally implemented was supposed to have 90% disbursement to local governments, I don’t believe that’s the right move.  Yes, I think there should be more distribution to local governments but I don’t want Clintonville to be any more reliant on the what the State decides to dole out than it has to be.  And just like an investment advisor would say, we need to diversify.  Municipalities and county governments shouldn’t be forced to put all their eggs in one proverbial basket.  The voters should have a say and by not even allowing that option, the State is telling the people it doesn’t matter if you want this, we’re not going to let you decide for yourselves.

Waupaca County, which has the half percent sales tax, collected a little more than $3.7 million in sales tax revenue in 2018 and has averaged $3.5 million over the last five years.  Just half a percent!  Assuming the sales tax revenue trends here continue, an 8% sales tax would generate about $22 million a year.  I’m not saying we should jump straight to that rate but I think it’s important to understand the potential financial benefit that could be derived from a sales tax, which could include property tax relief.  The total 2018 tax rate for a parcel in Clintonville is $27.13 and the City’s portion of that is $10.08, but we’re not alone.  What we are doing to raise revenue at the local level clearly isn’t working and we can’t continue.  Wouldn’t it be nice if we could finally find a way forward that doesn’t put so much emphasis on the property tax and puts more control in the hands of the voters?

 

Sharon Eveland
Clintonville City Administrator

Budgeting in Eden is No Paradise

Eden

Imagine being faced with a $460,000 tab for street repairs knowing your tax levy will total just $34,000? Welcome to budgeting in the Village of Eden.

Wisconsin’s small villages are often caught in this financial trap, with levy limits on one side and old infrastructure on the other. Communities that for years prided themselves on keeping property taxes low now find that when it’s time to replace main street or a sewer main, the levy limit law is a barrier. The only way around the barrier is to borrow money; effectively putting today’s problems in the laps of tomorrow’s residents.

The Village of Eden is a small community just Southeast of Fond du Lac with a population of around 900. According to Census bureau estimates, it’s growing, which is unusual for a small village in rural Wisconsin. In fact, the village’s slogan is “A place to grow.” Unfortunately, that “growth” doesn’t extend to the village budget. Under Wisconsin levy limits, Eden will see an allowable levy increase in 2019 of zero. According to the Wisconsin Department of Revenue, Eden’s “net new construction” growth in 2018 was a negative 0.26-percent, meaning it would not be allowed to increase its tax levy in 2019. The village will rely on borrowing and a small wheel tax for any funding increases. Efforts to attract grants have failed, due in significant part to the village’s small population.

Unfortunately for Eden, costs will not remain at zero. The state is rebuilding Highway 45 and village must pay $460,000 for its share of the work (Highway 45 is one of Eden’s main streets). In addition, for the past two years, Eden has been forced to borrow money to operate. The village has over $1.7 million in outstanding debt and will be required to pay for the replacement of a seventy-year-old water main. There is no money to pay for new hiring or other costs. The village’s sole computer was ten years old before it finally acted up once too often and had to be replaced.

Eden is a typical small Wisconsin community. It serves an area that is primarily agricultural, with some suburban influences owing to the short 20-minute drive to Fond du Lac or 30-minute drive to West Bend. You can rent the village park for a family reunion and the village president has been known to shovel sidewalks in the winter when needed. It embodies the values that Wisconsin points to with pride: small town, strong work ethic, conservative when it comes to spending. But there are limits.

In a report submitted to the League and posted on our website, the village pleads with state policy makers to, “PLEASE FIND A WAY TO HELP THE SMALL COMMUNITIES THAT HAVE BEEN TRYING TO KEEP TAXES LOW.”

Columbus makes the levy limit case

The City of Columbus is a typical Wisconsin community. It’s an attractive, small-but-not-too-small city of 5,000 people straddling the Columbia-Dodge county line. They have an interesting downtown, a great library, an Amtrak station, the Christopher Columbus Museum, an aquatic center and a river (the Crawfish). They’re also being strangled slowly by state-imposed levy limits.

In 2018, the state granted Columbus permission to increase its levy by the percentage of “net new construction” that took place the year before. In this case, the allowable increase was 1.861 percent (inflation in 2018 was 2.44%). That translates into an additional $45,000 in spending authority for the City’s $4 million budget. Put another way, it’s almost enough to pay just about half of the increased health insurance premium for city staff and nothing more. And 2018 was a typical year.

Columbus, like most Wisconsin cities, villages and towns, has not seen a levy increase equal to inflation in over six years. As a result, the city has been slowly but surely reducing its long-term maintenance and services to residents. The changes have been subtle, but they’re starting to show.

“We are running our Public Works Department with equipment we purchased in the 1990’s,” says Kim Manley, the City’s Director of Finance and Treasurer. “It should be replaced, but there’s just no budget for that. We are, however, spending thousands of dollars each year on maintenance to keep that out-of-date equipment working.”

The city’s street repair budget is almost non-existent, and the roof over the Senior Center should have been replaced years ago. As for personnel, the city hasn’t been able to offer meaningful raises to its employees for years, and all of its salary ranges are lagging behind the already-competitive labor market.

“In the real world, we should be setting aside a little money each year so that larger purchases or projects can be funded, or at least partially funded without the city going deeper into debt. But with levy limits, I can’t set aside any dollars for needed new police squad cars, the roof or that old equipment. We scrimp and save every penny.”

Manley told us that the problem is building on itself. “Every year we have to say we can’t afford to do something or maintain something – then another year goes by and we are still trying to maintain the core services at our minimum levels. Our debt continues to grow and it’s concerning to me as a Finance Director to know that we’re putting our community in this type of situation.”

In the Governor’s proposed budget, cities, villages, towns and counties would be able to come closer to keeping up with inflation. The budget proposes restoring a 2% “floor” for property tax levies.  The League supports that change for the sake of cities like Columbus.

You can read more stories about the many communities in Wisconsin that are in Columbus’s shoes (or worse) on our web site https://www.lwm-info.org/1552/Levy-Limits-Time-for-a-Change.