2017 Urban Policy Forum Revenue Sources for Wisconsin Municipalities Curt Witynski Assistant Director League of Wisconsin Municipalities

Current Revenue Options for Wisconsin Municipalities Wisconsin Municipalities have a narrow revenue base compared to local governments in other states.

Revenue Options Wisconsin Municipalities Don’t have Local Income Tax Local Sales Tax (except for premier resort areas) Local Gas Tax Local Telecommunication Taxes

Revenue Options Available to Wisconsin Municipalities Wisconsin municipalities pay for public services and capital assets through a combination of property taxes, fees for services (i.e., utility charges), state aids, and borrowing.

Abbreviated List of Municipal Revenue Sources Property taxes Utility charges Fees for public services GREEN – Limited by State Law State aids and grants Yellow – Threatened by State Water Utility PILOT Special assessments Impact fees Interest income Room tax Borrowing Payment in lieu of taxes (PILOT) from tax exempts Local vehicle registration fee (wheel tax) Forfeitures

Source: Informational Paper 16, Municipal and County Finance, Wisconsin Legislative Fiscal Bureau, January 2017.

Property Tax Property tax largest source of revenue for cities and villages. Of the $4.8 billion in city-village revenue in 2014, 57% came from property taxes, averaging 29% of total for cities and 38% of total for villages. Levy limits in place since 2005. Limits became severely restrictive in 2011, allowing levies to increase annually by net new construction only. Statewide net new construction number in 2015 was 1.43%, the highest it’s been since 2011.

Property Tax Since levy limits went into effect in 2006, only 35 cities, villages, counties and towns have passed referendums allowing the community to exceed its allowable levy. (21 towns, 13 cities and villages, and 1 county.) Residential sector pays 68% of levy. Uniformity clause disallows differential treatment between classes.

Property Tax Wisconsin’s property tax burden currently stands at 3.6% of personal income, the lowest since 1946. It was 4.2% of income in 2010-11. Source: Wisconsin Taxpayers Alliance

State Aids as a Municipal Source of Revenue Wisconsin provides more dollars to municipalities through programs like shared revenue, general transportation aids, ERP, PMS, recycling grants, than most other states do for their local governments.

State Aids as a Municipal Source of Revenue Shared revenue funding cut three times in the last 14 years. Funding level today is $197 million less than it was in 2003. A 21% reduction. Shared revenue distribution formula shut off since 2000. ERP Funding stagnant for 15 years. PMS funding less today than six years ago. Payments cover less than 38% of costs.

State Aids as a Municipal Source of Revenue General Transportation Aids funding for cities and villages was cut by $20 million in 2012. None of that cut has been restored. Urban Transit Operating Assistance was cut by 10% in 2012. Some of that cut was restored in the next budget. Recycling grant program cut in half in 2012.

Local Option Taxes Used by Municipalities Room tax 282 local governments impose 70% of revenue must be used for tourism promotion and development Prior to 1994 no limits on tax rate or use of revenue

Local Option Taxes Used by Municipalities Local Vehicle Registration Fee (Wheel Tax) 21 local governments currently impose 18 adopted within last two years Fees range from $10 - $30 Legislation pending to require referendum

Local Option Taxes Used by Municipalities Premier Resort Area Sales Tax Only available if 40% of equalized value of taxable property is used by tourism related retailers. Lake Delton, Wisconsin Dells, Eagle River, Stockholm, Bayfield (Sister Bay and Ephraim allowed, but haven’t enacted)

User Fees and Special Charges Municipalities have broad authority to levy special charges for current services, but service must actually be provided and fees may not exceed cost of service or administration of program. In 2013 Legislature added service fees to levy limits for 5 services – snow plowing, stormwater, garbage collection, fire protection, and street sweeping.

Less Common Fees Snow Plow Fee –Eau Claire and other communities have considered in the past Street Light Fees – Rice Lake has a street light fee. River Falls has considered in the past. Urban Forestry Fee – Madison

Less Common Utilities Stormwater Utilities – over 85 communities have created Transportation Utilities – At least one community has used – Village of Weston

Trends: Revenues Increase Little With state aids flat or falling and strict levy limits in place, municipal revenues rose only a total of 2.1% during 2011-2014. Meanwhile, state general fund revenues increased four times faster (8.0%) during same time period.