Wausau Friday Facts 7/7

 

Remember, Money is Fungible.

That is not a question. And, no matter what we give a local government money for, it can find a way to use it for something else.  Remember, we were told that we had to grin and bare a 63% hike in water rates to pay for the construction and operation of a new water treatment plant.  We were not told 1-in-8 dollars collected by the water utility would be turned over to the city to use on other things.

Here is another example. Say the citizens approved a wheel tax to increase funding for roads.  That money should be used for roads, right?  But, even if the wheel tax money was deposited in a segregated fund, it could be used to offset current and future general revenues that would have gone to roads. The wheel tax money would free-up those dollars to be used elsewhere.  The net effect would be the same as if the wheel tax money was used to support other programs directly. 

Seriously, if you think the current referendum is just for firefighters and nothing else, then I have a downtown bridge that I would like to sell to you.

With the understanding that money is fungible, we can now look at the big picture.  What happened in the last decade?  The city went on an unchecked spending spree.  It grew Wausau City Government by 40 new positions or 12.25% in a city where the population barely changed at all. City government grew faster than the local economy that supports it.

With the average cost of salary and fringe benefits at about $123,500, those 40 positions require about $4.9 million, almost exactly the same as the new taxes levied using the debt service exemption. The city increased debt to game an increase in the levy to hire more staff.  And, if the city's debt disappeared tomorrow so would the levy authority needed to support those 40 positions.  That is a problem.

Next, if you have followed this series and the community debate about it, you will have heard much handwringing about the state restrictions on how much a local government can raise taxes in a given year. The often-repeated insinuation is that the world would be a better place if there were no levy limits, and local governments faced no restrictions. Would that really be a good thing?

The state has imposed levy limits to keep municipalities from double-dipping. When the governor and state legislature raise taxes to increase state aids, they want the credit for providing property tax relief; they do not want the local government to scoop up all the tax savings like Wausau has done to Marathon County and the Wausau School District.

The levy limit is a formula that computes the maximum amount a community can raise taxes. It includes factors for inflation, for growth, and for efficiency gains.  In the eleven years since the city started using the debt service exemption, Wausau's allowable levy has grown from $22.4 million to $29.5 million. That is an average annual increase of 2.53% and a cumulative increase of 31%. But that was not enough for Wausau.

In sum, 11 years ago, the city's Finance Department discovered the debt service exemption.  In the next decade, the city grew its use of the exemption to tax citizens $4.8 million annually above and beyond the allowable levy limit.  It also increased city staff by 40 positions, more than the levy limits could support.  Now, the spending spree has to end. We cannot thrive as a high-tax outlier. We cannot keep growing city government faster than the economy that supports it.

We must return to common-sense prudence. Marathon County lives within the state-imposed levy limits and still finds a way to lower property taxes.  The Wausau School District faces levy limits and still finds a way to reduce its mill rate.  In fact, every household in Wausau must find a way to live within the revenue limits of its family budget.  Now, Wausau will have to do the same plus walk-back or grow-into a decade of government excess. The alternative is a downward spiral of escalating tax rates on a stagnating tax base.