Verona residents would get their first city tax increase in four years under the proposed 2019 budget.
Though there’s plenty that could be changed in the plan the Finance committee has sent to a Nov. 19 public hearing, the 2.7 percent tax hike appears unlikely to diminish. Staff and the committee have been working for weeks to pare down department requests, cutting dozens of items as large as $100,000 and as small as $500.
The result would be an increase of about $40 on an average home, estimated this year to again have an assessed value of $272,000. City taxes are about 30 percent of the total property tax bill.
With construction at Epic slowing, the city’s tax base doubling in the past decade and debt a big concern among elected officials, this year’s budget is tighter than it’s been since 2014, when the city was working to staff the fire station it was building for its newly reformed fire department.
The proposal published in this week’s Verona Press would increase the mill rate by an amount that was considered typical a decade ago, before the recession and the closure of the Epic tax-increment financing district threw conventions aside. In doing so, it starts a new convention – aiming to fund its more than $1 million road repairs with as little debt as possible.
That’s had a bigger effect on the proposal than any other factor.
A new city policy this year directs excess funds beyond the cushion recommended by the city’s financial adviser – the fund balance – to be used for one-time expenses to keep debt down. And Mayor Luke Diaz, in his first year, has preached frequently about the city’s growing debt burden, going back to his years as an alder.
“I’ve always felt the city borrows too much money,” Diaz said at one of the Finance committee meetings last month. “We need to think long-term and be in good financial shape 10 years from now. It’s a perspective shift.”
With a $15 million public works station coming in the next few years and the city having borrowed $10 million for a new fire station and the massive upgrades of County Hwys. M and PD in the past five years, there’s a lot of new debt and there aren’t many other large targets to chip away at it.
Discretionary spending increases in this proposal are far smaller than in the past few years, when it seemed every major request was granted. This year, the entirely new Finance committee – working with a second-year finance director and third-year administrator – agonized over how to fit a handful of notable items under a non-mandatory but incentivized cap known as expenditure restraint.
Those included required increases for the library and debt service and a carryover increase from a recently hired human resources coordinator, plus such high-priority items as a third ambulance crew, an additional patrol officer and a 2 percent cost-of-living increase for all non-union staff.
The city has statutory authority to increase its spending further, but were it to blow past its expenditure restraint cap for a second year in a row, it would cost the city in the 2020 budget. This year’s payout will be about $34,000; in 2016, it was over $200,000 because the city’s tax rate was higher.
Alders will review the budget Nov. 12 in a committee-of-the-whole gathering and can offer amendments that week to could restore requests or make additional cuts. The Common Council then will hold its Nov. 19 public hearing, and it plans to vote on amendments and possibly approve the budget that night.
The proposed budget takes a conservative view toward using the city’s fund balance and taking on new debt, with about $3 million less in capital spending than last year and a higher proportion of it coming from the levy.
The city’s financial adviser had warned the council as it was holding a bond sale in June about the potential effects of increasing debt on its bond rating. But striking that balance with the city’s increasing obligations and requests has presented some challenges this year.
The city has already taken steps to reduce its reliance on debt. Last year, it used the closure of the Epic TIF district to return to a pre-recession policy of splitting the cost of the mill and overlay road program 50-50 between municipal bonds (debt) and the tax levy, and it’s been establishing revolving funds for such regular items as police and public works vehicles and building maintenance.
This year, Diaz asked city staff to go further, expanding those funds and attempting to fund mill and overlay through levy only, while the Finance committee asked staff to try to keep taxes level. It became clear early on both wouldn’t be possible.
“We all live here and want our services to stay the same,” Finance chair Chad Kemp acknowledged after discussing the tax increase with staff Oct. 22.
The proposal the committee sent to a public hearing includes an additional police patrol officer to help offset a lengthy training process for new employees and a third front-line ambulance for the multi-jurisdictional Fitch-Rona EMS district. Both would take effect halfway through the year, splitting the full budget effect between the 2019 and 2020 budgets.
Two other significant increases in this proposal are for a new human resources coordinator – which the council amended its budget in June to hire – and for various part-time additions at the library, which is guaranteed an increase of more than $118,000 to keep the city from having to pay a library tax to the county and will use some of the money to make Sunday hours permanent.
Another mandatory increase is about $450,000 in debt service, mostly owed to capital projects borrowed for this year, such as Fireman’s Park and the County Hwys. M and PD projects.
The proposal also includes a 2 percent across-the-board cost-of-living increase for all non-union staff. Last year’s was 3 percent, and this year, the police department had argued for a 3 percent raise for its supervisory staff, for an additional $5,500 total, to prevent “compression” of the wage gap with patrol officers (who are getting 3 percent per their union contract). But the Finance committee did not want to pick one department ahead of others and didn’t see the roughly $50,000 cost of going to 3 percent for all departments as reasonable this year.
“Given how tight things are with the budget … I’m not really prepared to say we should be looking at that right now,” Kemp said.
With no easy target to cut to counter much of the discretionary levy funds going toward roads, the committee and city staff pulled out a scalpel to trim budget requests this year.
A list of more than 50 cuts from department requests provided to the Finance committee last month includes delaying pavement markings and line painting on roads ($20,000) and furniture and computer purchases at various departments ($9,829), skipping some professional conferences and training ($11,475), cutting some economic development marketing ideas ($9,000), reducing uniform allowance and awards recognition for firefighters ($5,400) and eliminating an employee wellness plan ($500).
Fire chief Joe Giver lamented that the awards recognition banquet is inexpensive and one of the few perks the department offers its volunteers. He also argued against the idea of trying too hard to save money, comparing it to problems with the fire station that resulted from “value engineering” that reduced costs.
“We went cheap on front end, and now we’re replacing them with better things,” he said.
Mikorski said the proposed cuts were in the interest of fairness, so the burden wasn’t carried by any one department. And Ald. Christine Posey (Dist. 3) defended the concept.
“I don’t think any of us are looking to make the staff feel like we’re trying to nickel and dime them,” she said. “We’re just kind of trying to keep an eye on the reality.”
One reality Verona can’t predict is whether the third ambulance will be purchased, given similar budget struggles in Fitchburg and three of its alders’ proposal that the mayor’s budget be changed to delay its purchase. But Verona alders decided it was important to fund the ambulance and leave the decision to Fitchburg.
“This says the money will be there whenever you get on board,” Kemp explained at the Oct. 22 Finance meeting.
At that meeting, committee members searched vainly for more room to work with, wondering whether they could find more to cut from capital expenses.
“If you keep reducing capital budgets, you’re going to end up borrowing more,” finance director Brian Lamers pointed out.
Many other changes in the proposal are moving numbers around, such as removing an EMS equipment replacement fund ($100,000) and paying half of the senior center’s roof replacement from a maintenance fund ($31,500), or changing assumptions, such as adjusting overtime at the public works department ($10,197) and reducing fuel estimates for motor pools ($3,000).
City administrator Jeff Mikorski noted that the $15 million public works building has already been “pushed back” in the five-year capital improvement budget for design and functionality reasons.
“Looking at debt service, we may need to extend that back a little bit further,” he acknowledged.