Read my lips, no new debt.
That is the message city leaders have been giving the administration in recent years, and this year, it could become reality.
With Verona’s growth beginning to level off now that the Epic boom has cooled, the city’s budgetary options have become merely mortal over the past four years, leading to budget planning similar to that of most of its neighbors. That means holding the line and incremental changes in operations and saving large new construction projects such as the public works facility for when debt from previous buildings falls off.
Unlike last year, however, the budgeting process is expected to be much more predictable, without the myriad uncertainties posed in the early months of the COVID-19 pandemic.
The city’s Finance committee is scheduled to discuss its choices and priorities as soon as next week, after its final set of department head budget presentations Monday, Sept. 27.
The goal is to hash out the details by early October to provide a final recommendation to the Common Council and budget publication by the end of the month so the council can approve the budget in its first meeting of November.
In previous years, the council has approved the budget at the end of November, which can make the following week or two hectic, as the city is required to send tax bills by the middle of December.
The primary limiting factor in Wisconsin municipal budgets is a metric calculated by the state called net new construction, which sets the maximum they can increase their tax levy. This year, that number is just under 2% in the City of Verona, rating it closer to slow-growing, mature cities like Stoughton (1.5%) and Middleton (2%) than Fitchburg (6%) and Sun Prairie (4%).
As a result, the initial draft from the mayor and city administration is holding the line on personnel. The only proposed increase so far is a part-time kitchen worker at the Verona Senior Center going full time, which relates to the city’s agreement to resume serving town residents.
The draft also eliminates debt-funded capital expenses. Even though they wouldn’t have an impact on the 2022 budget or taxes, there’s little reason to expect the city’s growth rate to return to the Epic-fueled explosive growth experienced between 2006 and 2016 any time soon.
Other factors the city will need to consider over the next few weeks besides how much it can increase the tax levy are any increased costs for health insurance, variations in state transportation aids, income from hotel room taxes, interest on investments and cost of living increases for personnel, including contracts with the police and fire unions.
The city is also working on a new garbage and recycling contract, which is passed along on a separate item on the tax bills.
One of the primary tools for a city keeping debt consistent and manageable is adjusting its capital improvement plan.
And the biggest adjustment in this year’s capital plan was delaying the city’s construction of a new public works building from 2022-23 to 2025-26. By doing so, the facility -- expected to cost around $12 million -- would start incurring debt payments around the same time other debt payments are dropping off, city administrator Adam Sayre told the Press.
For 2022, the administration’s proposed $3 million capital budget has no new debt at all, a significant decrease from the $1.7 million in the 2021 budget (out of $5.7 million total) and $6.4 million in 2020 (out of $9.4 million total).
That has not happened in at least two decades, if not more, and it probably won’t happen again for a few years.
The city’s capital improvement plan projects $7 million in spending in 2023 ($3 million in debt), $9 million in 2024 ($5.5 million in debt) and $12 million each in 2024 and 2025 (about $9 million in debt each year) as the city addresses major projects in its water utility and the new public works building.
To avoid debt in 2022, the plan would pull $657,000 from the fund balance, which is slightly above the amount the city need to keep in reserves to ensure a good bond rating when it does take on debt. The rest comes from revolving funds established over the past several years, tax-increment financing, restricted funds like park fees and the levy.