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How levy limits put Madison’s budget in a squeeze

Even a fast-growing city can’t grow fast enough to overcome state property-tax caps and inflation.
A photo illustration shows a coiled boa constrictor overlaid on an old map of the downtown Madison isthmus.
Photo by Eduardo Santos on Flickr, map via UW Digital Collections/City of Madison

Even a fast-growing city can’t grow fast enough to overcome state property-tax caps and inflation.

Imagine you are in the clutches of a snake slowly cutting off your blood flow. You have just enough room to maneuver and control what will lose circulation first. What do you sacrifice? 

The pressure builds slowly so your initial sacrifices need not be big. Certainly not your head; if you let that go everything dies. A pinky? Surely you can go without one of those. Then you give up the other as the snake tightens its hold. Then what? Maybe you value being able to hold stuff, so you sacrifice your toes first because balance is a luxury now. Next you might let go of your arms and legs because what’s a glute or two at this point.

A boa constrictor is slowly strangling Madison’s ability to do much of anything. As the pressure mounts and the beast wraps itself tighter, some of the city’s most beloved appendages may soon lose all circulation and fall off. But once you run out of the obvious and you have to start choosing between the functions you consider most core to your sense of self or survival, how do you prioritize what goes next?

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That is the question Madison, as well as cities, towns, and villages across the state, have grappled with this past few months as they decide what civic services to continue funding and which to cut. Should they reduce library branches? Senior center services? Recreational opportunities for children? Firefighter coverage? Police? Well, probably that last one, but that is never on the table for some reason.

Except, it is not a boa constrictor that has encircled Madison and the larger state, squeezing ever tighter. It is a force far more sinister. One whose very mention is said to bring ill omen. A nightmare that jolts finance directors from their slumber in puddles of cold sweat:

The words "State imposed levy limits!" are rendered in all caps in red red text in a goofy monster-movie font.

State imposed levy limits!

While the writing above may ooze with far too much hype and horror, the metaphor and verbiage is the sugar that makes the medicine go down when understanding topics parched of all sex appeal, like municipal budgeting. 

But trust me, levy limits are hot, and crucial to understand if you want to keep your local library branch from shutting down. Let me show you.

Chopping block

If you think I’m being hyperbolic by insinuating your local library may close, I’m not. I know I’m not because that was the example City of Madison Finance Director David Schmiedicke used when I spoke to him about the potential impacts of levy limits on the city budget. 

“What are levy limits,” you froth? They are a cap on how much property tax a city, town or village is allowed to collect. Municipalities can impose such limits on themselves, but so can higher powers, like then-Gov. Scott Walker, hallowed be thy name, and his apostolic Republicans did in the 2011 session of the state Legislature.

The Grand Old Party did not invent levy limits. Wisconsin has had them in some fashion since at least 2006. People hate paying property taxes. It’s a big bill from the government that arrives at Christmas time, charging you for living on land you own. NOT IN MY AMERICA! But Republicans proved their innovative genius by turning the metaphorical levy limit screws as far as they would go in the “fuck around and find out” direction.

The thing is that while fucking around is fun—so long as everyone involved gets tested—finding out your results after the fact is less so.

Now, Wisconsin communities are finding out that they can’t pay for things that would be really nice to have, like more library branches and ambulances.

Anemic state aid payments compounded the problem. Madison receives approximately $42 million in state aid payments for its general fund, the pot of money that the city uses to pay for many of its beloved programs. But money from the state covers only a little over a tenth of Madison’s $380 million general fund expenses. The city is left to come up with the rest on its own. But where should they get that money given the levy limit? The state says: 🤷.

To bridge the gap created by levy limits, Madison has scaled back operating hours at some libraries, considered closing branches, scaled back parks and recreation services, and left open positions within the government vacant to avoid paying salaries and benefits.

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“It’s a challenge,” says Schmiedicke of attempting to strike the right balance between complying with the state limit and making sure firefighters have the training and equipment to put out fires. “We in the finance department try to serve the Mayor and [Common Council], what they want.”

A tax for your thoughts?

What the city wants is better service. Surprise, surprise: ain’t many local politicians running on how we don’t need the fire department.

Of particular interest to Mayor Satya Rhodes-Conway in recent budget cycles has been making Madison’s public transit more reliable, with a bus rapid transit line that would run with such frequency as to make checking a schedule unnecessary. Sounds like a good solid use of state and local tax dollars, right? 

Fuck you. You can’t just have nice things. Do you think that the government should just spend our pooled resources on programs for the betterment of society? Get out of here. Not with my property tax dollars. And if that means that you wait for an hour in the rain for a bus that doesn’t take you where you ultimately want to go, so be it. And the levy limit is on my side.

To help raise the hundreds of millions of dollars it will cost to implement bus rapid transit (over $142 million in 2022) the city of Madison spun up a wheel tax in 2020. A wheel tax is a fee you pay when you register your car or truck with the Wisconsin Department of Transportation every year. State law affords local governments only a few ways around levy limits. One is the wheel tax, but money raised through wheel tax can only go towards funding transportation needs. 

As a landowner, I couldn’t be happier. I do not have to pay additional property taxes on any of the rental units I neglect. Instead, my renters must pay for a better bus system because they are forced to own cars to get to their jobs in the absence of a functional public transit system. For bus rapid transit, wheel tax is a match made in austerity. Ronald Reagan would be proud.

The wheel tax isn’t the only other random fee you pay because of levy limits. State law also allows local governments to implement “special charges,” fees that offset specific costs. For instance, Madison will soon impose a monthly charge on all taxable properties in the city to fund urban forestry services. The billed amount will depend on the property’s zoning. Residential land owners will pay the least, $6.38 per month, and government properties owe the most, $49.84 per month. You might find it dystopian to turn local government into a subscription service, but I for one enjoy the petty revenge of Wisconsin’s capital city making the state government pay slightly more to make up for the budget shortfalls it created.

A free idea for Alders: a $1 million special charge on all state government properties to fund librarians.

The boa constrictor

Levy limits are not static. They edge upwards in communities that see new construction. If Madison wants to grow its budget, it can only do so through growth. Levy limits work by tying the amount of property tax a community can collect to how much new development occurred in the previous year.

Timothy Hanna, executive director of the Local Government Institute of Wisconsin, says the average rate of new construction in Wisconsin is around 1.6 percent. That means the average city’s budget grows by approximately that amount year over year.

“Wow,” I hear you say in my head. “That sounds like a modest and sustainable growth rate.” Oh, you sweet summer child. Consider for a moment that inflation increased 7.7 percent between October 2021 and the same month of this year, according to Consumer Price Index data from the Bureau of Labor Statistics.

Madison is one of Wisconsin’s standout communities in terms of population growth, and yet even it can’t manage to keep its new construction at pace with inflation.

If somehow a community manages to keep pace with inflation in its growth, that still doesn’t give additional money for more robust services. It also must maintain that growth every year to delay the boa constrictor’s crush.

And all that growth means more demand for municipal services. New construction needs power lines, water, sewer, streets, fire coverage, etc. All of that must be maintained at additional cost. What if you need to hire more people to provide that maintenance? That’s salary and benefits.

While that is the slow boa constrictor effect, there is another more profound impact coming soon to a municipal budget near you that confounds the masterful snake metaphor I have milked thus far.

Next year, Madison will begin assembling its 2024 budget. Beyond the normal levy limit constraints, the city will also have to navigate a deficit that Schmiedicke estimates between $20 million and $30 million. That gulf will need bridging, and the city doesn’t have the budget for new bridges, even metaphorical ones. Levy limits mean that Madison can’t ask property owners to contribute more, at least not without piling on a heap of special charges.

The shortfall comes from the ending of federal government subsidies to municipalities under the American Rescue Plan, the first piece of marquee legislation President Joe Biden signed after taking office.

Given that Republicans won control of the House of Representatives last month, a divided government makes hope for a renewal of these subsidies all but lost. Saving Wisconsin’s fire departments, libraries, senior centers, and other valued municipal services will be in the hands of the Republican-controlled state Legislature and Democratic Gov. Tony Evers. Meanwhile, the snake coils ever tighter.

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