Second Budget Meeting Results in Tax Increase
On Monday evening, City of Marshfield Common Council continued discussion about the 2019 Proposed Budget.
(Read more general information about the City Budget process here.)
As City Administrator Steve Barg stated in the first budget discussion, after the original budget proposal was released, staff became aware of approximately $218,000 in
added revenue from the State to offset the loss in tax revenues created by new personal
property tax exemptions.
With this new information, the Mayor/Council could make any changes deemed appropriate, including additions/reductions that are unrelated to the new revenue. Per a memo from Barg, he outlined three basic options for the use of these additional funds:
1. Reduce use of general fund reserves. To balance the budget, I applied $750,000 of
general fund reserves. We can justify a higher amount this year, as our GF reserve
balance has grown to 31% of annual operating expenses (our auditor recommends
25-30%). But $750,000 is considerably more than we have applied in recent years,
which could ultimately reduce the fund balance to around 28%.
2. Restore budget cuts. Significant cuts were made to the budgets that were submitted
by department heads, including those on Appendix A (copy attached). The Council
may choose to add back one or more of these items. (Note: One of my cuts was the
drug prevention program presented during Citizen Comments at our first meeting.)
3. Reduce tax increase. The budget includes a 1.99% tax rate increase, to $9.38 per
$1000 of assessed value. If the Council desires to use some or all of the $218,000
for this purpose, which I would not recommend, please be aware that a 1% tax rate
increase equates to $127,471.
Analysis
Barg previously noted that he had applied $750,000 in GF reserves, due to challenges mentioned in his budget presentation.
“If I had known that we had the $218,000, I wouldn’t have suggested using such a high amount of reserve funds,” he stated. “So I strongly recommend using a majority of
the $218,000 to reduce our use of GF reserves. This will benefit the City in several ways, including how we are viewed by rating agencies, which can affect the interest rate when
we borrow money.”
Barg recommended the following approach for applying the additional revenue:
- Restore the following 2 cuts:
- Snow & ice removal – $50,000. This cut was not on Appendix A, since the
department’s proposal of $375,000 was the same as in 2018. Based upon the
last 2 winters, it would be preferable not to cut the budget for snowplowing. - Slurry seal/crack filling in new City Hall parking lot – $10,000. This project
was budgeted at $14,000, but I cut $10,000, as staff felt there may be funds
remaining from the City Hall renovation. This seems less likely now, due to
possible costs related to setting up cable TV in the new Council chambers. - Use the remaining $158,000 to reduce GF reserves required to balance the budget,
getting us closer to what we’ve used in recent years, and providing us with a better
financial foundation heading into the coming year.
- Snow & ice removal – $50,000. This cut was not on Appendix A, since the
Council discussed how to use the $218,000 in
added revenue from the State to offset the loss in tax revenues created by new personal
property tax exemptions.
After discussion, Council voted 5-5 in favor of allocating the remaining $148,503 towards tax relief. Mayor Bob McManus broke the tie vote, with a vote in favor of raising taxes .82%.
This is a decrease in the proposed budget, which included a 1.99% tax rate increase.
The members of council voting yes, were in favor of reducing the amount of the proposed tax increase from 1.99% to .82% by allocating a portion of the state aid.
The members of council voting no, were not in favor of allocating the remaining revenues from the state towards tax relief.
WATCH DISCUSSION
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Developing story. Check back as we further report on the budget process.
