Times are tough everywhere lately, and despite its continued growth, the City of Verona is feeling the financial squeeze, too.
After years of double-digit percentage increases in net new construction - corresponding to how much the city can receive in property taxes - this year it's under the kind of tight levy limits that other, ordinary cities deal with each year.
But there is some good news, such as a second straight year of zero tax increases, if the 2009 budget is approved Nov. 24 as recommended last month by the Finance committee. And unlike last year, when some people might have experienced tax drops and others tax hikes because of a citywide property revaluation, residential property taxes should stay the same, dollar for dollar, for almost everyone.
"The council gave us that directive," city administrator Shawn Murphy said of the tax rate. "We went to some additional lengths to achieve that goal."
One of the big steps was to draw a big chunk from the city's fund balance, leftover money that acts as sort of a rainy-day fund and is also used for one-time contingencies. It also had to cut the originally proposed budget by more than $400,000, used some proceeds from a 16-year-old loan that had finally matured, diverted some street work to debt and continued to see growing income from impact fees on police and library services.
"I was really scared about this budget," finance director Cindy Engelke said, explaining that the city had never faced a situation like the 3.96 percent maximum increase in total taxes this year. "The last time there were no levy limits."
That's a reference to Verona's previous experience with having an assessor revalue all residential properties in the city. Engelke said in both 2002 and 2007, assessors slightly overestimated the total value of homes in midyear reports to the state during the revaluation process, causing a correction to be necessary the next year.
In theory, the state's Department of Administration could have corrected both year's numbers and allowed Verona - which didn't use all of its maximum 14 percent increase last year - to increase its levy by the actual increase in construction value. That would have been appropriate given the extra demands for service (such as police and public works) typically required by new homes and businesses. But, as the DOA repeatedly told Engelke, "the law does not provide for that."
And since levy limits were not yet in effect in 2002, this relative handcuffing from the state was unprecedented for a city that is among the fastest-growing in Wisconsin.
But while the limit presented serious challenges, it worked out well in the end, with the city avoiding a tax hike and continuing to receive its bonus from the state - $118,000 this year - for keeping its budget increase to a modest level, or what's known as "expenditure restraint."
And the more than $400,000 draw from the fund balance is not exactly tapping into the kids' college fund, as the city actually has had more there than its financial advisers have deemed necessary.
In fact, the city dipped even farther into it last year, and a budget resolution being voted on this month will tack on another $100,000 from the fund for unbudgeted expenses related to the failed city-town consolidation effort and the expansion of the Fitch-Rona EMS station on Venture Court. That makes the draw from leftover funds in 2008 more than $610,000.
The excess in the fund balance actually was the subject of some heated debates on the 2006 and 2007 budgets, when some alders suggested it be drawn down to the recommended level more quickly to keep the taxes flat both years. That happened in 2006, but not 2007, when $256,000 was applied from the fund balance and it actually grew during the year because of a pair of unfilled positions in the police department and surprisingly good returns on investments.
So last year the city raised the amount put into the general fund to $403,000 to compensate, then put another $107,000 into debt service, with the intent to avoid using finite money to fund ongoing operational costs.
While operational costs have risen as always - many employees are getting union-mandated 3 percent salary increases and the city has the added expense of running the new City Center building - the same $403,000 taken out this year is seen as a temporary measure, with future budgets likely to be closer to the 2007 withdrawal. And the city is continuing its policy of using one-time sources of funding - such as the Community Development Authority's loan proceeds - for one-time expenses.
The CDA loan - made in 1992 for Sugar Creek Apartments with a bond that has already been repaid - is providing more than a half-million dollars in extra revenue this year. But rather than apply it to operational budgets, the money is being put into public safety and public works equipment.
Part of it - $141,000 - will cover this year's traditional transfer into a public works revolving fund, while another $27,000 will pay for a replacement police car and the rest will be spent to create a similar fund for police and, eventually, perhaps, fire equipment.
That left city budgets in a tight spot, and as one alder put it in a September committee meeting, it gave the city "an opportunity for introspection." Several proposed items were eliminated, including an additional police squad car, the long-planned extension of Silent Street to Main Street, leaf-collection equipment, several parks projects, a part-time employee to oversee building and grounds contractors and full-time status for the fire chief.
In addition, the city insisted on maximum 6.8 percent increase with the fire department's budget and ensured that by making a stand so stiff at last month's annual meeting it ended up with the towns walking out. The Town of Springdale approved that budget earlier this month, and the Town of Verona was set to vote on it next week.
Another adjustment planned to make the numbers work this year is a shift of most of the cost of the city's street maintenance program (known as mill and overlay) to debt rather than splitting it between debt and tax levy.
In other words, though street improvements have a life span of several years, making them appropriate for being paid by bonds, the city's longstanding policy has been to pay for half of it up front. Only $100,000 of the $586,000 is coming from up-front money this year, but that is expected to return to a 50-50 split in the future.
Despite adding that and some other recent projects to the city debt, it's not as onerous as it might seem. Though the $47.7 million in outstanding bonds looks like a burdensome monstrosity -10 years' worth of property taxes - almost half of that is in self-funding accounts such as TIF and utilities.
Much of the remaining $28.8 million is directly secured by an asset, such as the $14 million put into the library and City Center, and even that number is well below the state debt limit of 5 percent of the city's equalized value. In fact, it is also not close to the maximum 3.75 percent ($50.5 million) allowed by city policy - which is set to get good interest rates on bonds.
Though some basic numbers were published in last week's Verona Press as required by law, most of them are meaningless to the layman's perspective. But a few items are worthy of note.
• $408,132 for the Capital Improvement Program
• $428,241 for the fire district, after the mayor and town chairs agreed on a budget compromise
• A 13.3 percent increase in public works spending (mostly salary)
• A 9.4 percent increase in public safety spending (one full-time equivalent for the fire department, police salary and benefits)
• A $61,000 drop in license/permit revenue (mostly building permits)
The Common Council will discuss the budget at its annual mid-November Committee of the Whole meeting at 6 p.m. Monday, and it is set for adoption after at a public hearing 7 p.m. Nov. 24.
Capital Improvement Plan Highlights of the city's 2009 Capital Improvement Plan, in thousands:
Item
Debt
Levy
Fees/Fund
Refurbish old City Hall
$50
Old library roof
$32
Mill and overlay
$486
$100
Nine Mound relocation
$770*
Public works vehicles
$13
$299
Park repairs
$133
$58
New playground/trails
$10
$35
Police fitness room
$10
$8**
Tasers
$14
Police car
$27
Police computers
$39
EMS defibrillators
$17
* Total cost $1.15 million over two years
**Paid by grants
