City of West Bend Deciding Budget & Levy

Since we’re in the budget season all over, this story in the Washington County Daily News slipped past me earlier this week. It’s an interesting debate:

The city’s Finance Committee met Monday, and heard a presentation on the preliminary budget for 2020. City Administrator Jay Shambeau presented a balanced budget, totaling $24.25 million in revenues and operating budget expenses. Of that total, preliminary budget documents showed $15.88 million would come from taxes.

“No fund balance is applied to make this budget balanced,” Shambeau told the Finance Committee, explaining all expenses were covered by revenues without needing to dip into reserves. Shambeau’s presentation projected a $7.85 tax rate for 2020, which is the amount a property owner pays in city taxes per $1,000 property value. That would have been a 6-cent increase from the current $7.79 rate.

However, the Finance Committee meeting ended with Shambeau directed to rework the budget numbers to use a flat tax rate, held at $7.79, by using about $160,000 in carry-over funds.

Mayor Kraig Sadownikow said during the budget discussion that last year, there was about $500,000 left over in the budget – money that was budgeted for various expenses, but ended up not being needed for those items. He said his rough math showed that the 6-cent increase would produce about $160,000 in additional tax revenue.

Sadownikow asked if it was reasonable to expect that this year’s budget would have at least $160,000 in leftover money to carry over to next year, which Shambeau said would be likely, as the current budget as a whole was tracking similarly to last year’s budget.

“We did a good job of running the county, we have some dollars left over. Let’s not raise taxes when we already have the money,” Sadownikow said.

Sadownikow clarified that he was not asking for any expenditures or budgets to be cut. He only felt that the tax rate should be held steady when the city has leftover funds to cover some expenses, rather than bringing in additional taxes, given that the city also has healthy reserves.

“We’re basically taxing people to put money in a savings account. We encouraged that for a long time because it (the fund balance) was painfully low,” Sadownikow said.

He said that seven or eight years ago, the city’s fund balance was around $2 million. Now, budget documents show the reserve funds are at almost $8.8 million.

Here’s the deal… The city budget has a 2.99% spending increase in it. The vast majority of that increase is coming from Public Safety – fire and police. That’s because the new contracts are kicking in that includes a pay increase. The pay increase was negotiated because they deserve it, but also because the city is no longer paying the healthcare for retirees for new employees. The city traded predictable, budgeted pay increases to get the taxpayers out of a massive, long-term unfunded liability. It’s good policy.

Anyway, the increased spending along with less state aid than the city expected is pressing a property tax levy increase of 1.68%. As the budget was proposed, the city would simply raise the levy to meet expenses and be done with it.

The mayor, on the other hand, pushed back and advised that the city use some of its unspent money from last year’s budget to lessen the tax increase. For years, the city has been run well and put surpluses into a reserve fund. The reserve fund is used to keep the city’s bond rating up, but as a practical matter is there for emergencies and unexpected expenses. The mayor is saying that the reserve fund is sufficient now, so we can just push some of the surplus money into the next budget instead of taxing the citizens more.

I agree with the mayor on this one. The money is sitting there in the city’s coffers and the city has sufficient reserves. Instead of raising taxes, the city should take advantage of its good fiscal management to minimize the tax increase. There will still need to be a tax increase of about 1%, but that’s better than 1.68%.