CITY OF PLATTEVILLE 2017 PROPOSED BUDGET

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1 2017 Proposed City Budget Summary The Problem Estimated shortfall for 2017 $210,000 in the General Fund $159,000 in TID 6 $369,000 TOTAL The shortfall exists due to increased debt service (repayments on existing loans), ambulance service payments, and storm water management mandates. Not Included in shortfall An additional deficit of $504,000 is expected in 2018 due to increasing debt service in both the general fund and TID 6 1. Salary increases for staff, contingency funds or funding for equipment or capital projects. Proposed Revenue Increases 5% Property Tax $200,000 Increase Ambulance Fee $118,000 Total $318,000 Wheel Tax $100,000 This money can only be used for transportation and will go to the CIP for street overlays. Proposed Expense Reductions 2017 Additional for 2018 City Council Salary Elimination $15,000 - Rountree Gallery Support Elimination $16,000 - Museum Reduction $20,000 $105,000 Senior Center Reduction $10,000 $30,000 Administrative Support Reduction $10,000 - No Salary Increase for Non-Union Staff $10,000 - Public Works Reduction - $50,000 TOTAL $81,000 $185,000 Implications for Capital Expenditures What are Capital Expenditures? Capital items are large (over $10,000) one-time expenses. The City needs approximately $750,000 each year for basic capital items (equipment replacement, vehicle replacement, and street overlays and striping) 2017 Under the proposed budget, the City will have $266,500 of property tax levy for capital expenditures and an additional 1 Assumes the City borrows for street projects in Page /17/2016

2 $100,000 from the wheel tax to dedicate to street overlays. $333,500 of expenses will need to be deferred The projections for 2018 are to have levy support between $215,000 and $335,000 for capital expenditures (depending on the amount of property tax increase) and $100,000 from the wheel tax to dedicate to street overlays Implications Even with the proposed revenue increases and reductions in expenses, the City s most basic capital needs will be underfunded by between $650,000 and $750,000 during the two-year period. Over the long term, this is unsustainable. Estimated Resident Impact in 2017 Annual Monthly Property Taxes 2 $41.00 $3.42 Ambulance Fee $19.68 $1.64 Wheel Tax 3 $20.00 $1.66 Total $80.68 $ Property tax impact depends on a number of factors, including the value of the home. As a result, an exact number cannot be provided. The rough estimate above assumes a $150,000 house. 3 Assumes one registered car. Page /17/2016

3 Question and Answer Why are significant shortfalls expected for the 2017 and 2018 budgets? There are three significant drivers for the anticipated budget shortfalls in the 2017 and 2018 budgets: 1) an increase in the City s payments for loans for capital projects (debt service) 2) the start of full ambulance payments to Southwest Health Center and 3) costs associated with complying with storm water management mandates. Of these three, debt service is the most significant. What are tax increment districts? How are they impacting the shortfall? Tax increment districts (TIDs) are an economic development tool used to stimulate growth. TIDs exist as separate funds, meaning that their revenues and expenses are calculated separately from the City s general fund. If the TID has a positive fund balance, the TID has no impact on the budget. If the TID has a negative fund balance and doesn t have a donor TID, the City s general fund must cover the difference. TID 6 has a projected shortfall of $159,000 in 2017 and $247,000 in 2018 that will need to be covered by the general fund. TID 6 roughly covers the area from Ubersox Chrysler to Southwest Health, including the new addition to the industry park. Does this shortfall exist because of the library block project? Financial projections were done on the library block project prior to approving the development agreement. With TID 5 (Wal-Mart area) serving as a donor district to TID 7 (downtown), TID 7 is projected to cover all the expenses assigned to the district, including expenses associated with the library block project. Those expenses include a two-million-dollar incentive, which will be offset by guaranteed tax payments from the developer, and approximately 1.5 million in lease payments over the next seven years. It should be noted that under current law, TID 5 can donate to TID 7 only because TID 7 was classified as a blighted district. TID 5 cannot donate to any of the City s other TIDs. What has led to the budget shortfall? There are a variety of factors that have led to the financial conditions that exist today. A few of those factors include: Actions taken to address resident desires for better streets and a stronger employment base, Decreased funding from the State, Adhering to an artificially low levy limit for the past several years, Past actions that reduced budget line items intended to support the City s long-term equipment and infrastructure needs, Inadequate information sharing with decision-makers about the impact of future loan payments on the City s debt service at the time of borrowing, and Back loaded debt that results in higher loan payments over time. In summary, no one person or factor brought the City to this point. It is, however, important that we learn from this experience. Page /17/2016

4 Why are an ambulance fee, wheel tax and a property tax increase being proposed? Due to the magnitude of the shortfall, it was important that that several types of revenue sources were considered. Even with the new revenue and spending reductions proposed, the City will not be able to fully fund all equipment and street repairs outlined in the proposed Capital Improvement Plan (CIP). Establishing an ambulance fee has the advantage of gaining revenue from properties that do not normally pay taxes. The wheel tax will go directly to the CIP to pay for street overlays. How will these changes impact homeowners? The ambulance fee would be approximately $1.64/month for single family properties. The wheel tax will result in an additional annual payment of $20 for each registered vehicle. The direct impact of the tax increase on an individual home is determined by a variety of factors so it is impossible to give a precise number. A rough estimate for a house valued at $150,000 is $41/year. With levy limits, how is the City able to raise taxes by 5%? Levy limits are based on net new construction. However, adjustments are allowed for debt service. Unlike almost every other Wisconsin city, Platteville has never applied this adjustment. This year we will be using the debt service adjustment to raise our levy above net new construction. Why can t we just do a short-term fix like furlough staff to cover the shortfall? If the budget shortfall was short term in nature, considering short-term fixes would have been appropriate. Unfortunately, our debt service payments will continue to rise for the next four years, assuming no additional borrowing is done. Given the long-term nature of the problem, more sustainable solutions were necessary. Why cut valued services like the senior center, museum and gallery? What does it mean to reinvent these services? Reductions are happening in several areas of the City budget, including the elimination of stipends for City Council members. The museum, senior center and gallery are important but not essential City services. With that said, they do add tremendous value to our community. The majority of proposed reductions for the senior center and museum are delayed until During the next year, the challenge for staff and their respective advisory boards will be to design a model of service delivery that preserves what is most valued about these services but at a significantly lower cost. If we were facing this type of shortfall, why did the City spend money on (name the project)? In hindsight it s easy to second-guess any given project. It is important to understand that capital projects (park, street and building improvements and equipment) involve one-time expenditures using one-time funds (e.g. a carryover Page /17/2016

5 from the previous year budget or borrowed money). One time funds are not an ongoing revenue source that can be used to cover ongoing operational expenses or debt service. At best, not doing a capital project in 2016 would have allowed for a slight increase in capital expenditures in In addition, some capital projects are funded with monies that cannot be used for other purposes. For example, park impact fees were used to cover some expenses associated with the Rountree Branch Trail. These monies can only be used for new park/recreation features and cannot be used to purchase equipment, make building improvements or repair streets. What steps are being taken to ensure that we are well-prepared for financial challenges in the future? The City Council and staff are committed to working with the City s financial advisor to complete a long-range financial plan that will move the City to a more sustainable financial future. In addition, staff will be preparing a budget document that reflects best practices as established by the Government Finance Officers Association (GFOA). Page /17/2016