City of Oak Creek

Common Council Report

Meeting Date:  5/20/03

Item No.:         21

Recommendation: Informational Only. The State legislature is again discussing establishing a property tax levy limit on local governments in response to the State reducing State Shared Revenues.

Background: The State budget process is again in disarray. Every day a news story appears that suggests the cities are going to take a big hit in next year’s shared revenues. We had already anticipated a reduction in the range of $500,000-$700,000. Now the republicans in the house and senate are talking about a levy freeze.

A levy freeze coupled with a reduction in Shared Revenues is the worst possible problem. The State is blaming local governments for its spending problems and their solution is to reduce the money they return to cities. In order to say that taxes didn’t go up, they are then going to restrict local governments to make up the shortfall by raising taxes. From my perspective we were not the problem, but are becoming the solution to the State’s problem.

I have attached a talking points white paper prepared by the WCMA on the problem with a levy freeze coupled with a reduction in shared revenues.

Residential growth in particular increases costs for the City and most of the time does not pay for itself in property tax revenue. Imagine current City services as a 12” pie that is divided amongst our 30,000 residents. The pie has been growing larger over the years as additional personnel and infrastructure have been added to service the residents.

City revenues and property taxes have increased with the growth as well. Imagine now that the State cuts shared revenues so that the pie drops to 11” in diameter still serving the same 30,000 residents. It means that each resident gets less. Now imagine that with growth our pie would grow to 13” because another 1,000 people move into the City. A levy freeze means that each new resident moving into the City does not pay for the services they will be receiving. The 11” pie will be sliced into 31,000 pieces.

I do not believe that the State can demonstrate responsible fiscal management given the current budget problems. Yet they are directing how the City is going to deal with growth and continue to provide services.

The State budget mess will result in fewer services being provided to Oak Creek residents, not necessarily at a lower cost. People move to Oak Creek because they want to enjoy the benefits we offer.

A levy freeze means the costs associated with growth are not charged to the people that increase them. The real costs begin when homes are constructed as compared to developers building subdivisions.

If the State passes a budget that includes a levy freeze I would recommend that the Council establish a residential building moratorium that would be in effect until the State budget is approved by the Governor. The exact scope of the moratorium can be determined by Council direction. The Mayor and Council could then reappraise the impact of the State budget after the final approvals and veto session.

Fiscal Impact: The estimated loss of shared revenues is $528,769 and the Alliance estimates that a levy freeze would reduce revenues still further by an additional $1,332,831. The loss of that much revenue would mean significant staff reductions and service cuts.

Prepared by:

Respectfully submitted, Robert L. Kufrin City Administrator

File name: D:\Files\Word\Active\CCR Levy Limits.Doc

Print Date: 5/16/2003 11:12 AM

Revision No. 1