RACINE — A revision to the agreement with the state over the city’s electric buses led to a debate during a City Council meeting this week about the long-range consequences of the terms.
At issue was the decision by the state to take the 20% matching funds from shared revenue, rather than allowing the city to determine for itself how to pay for the match.
Kathleen Fischer, the city’s finance director, explained the deal would allow the city to purchase the nine buses for $180,000 per bus. The buses would normally cost $900,000 each.
“We’re getting a really great bang for our buck,” Fischer said.
The City Council approved the purchase of the buses on April 19. The most recent debate occurred during a revision of the agreement to reflect the additional grant money.
This good deal on electric buses is made possible through what is generally known as VW money.
Volkswagen Group of America admitted to violating the Clean Air Act from 2009-16 by installing software on some of its vehicles designed to cheat federal emissions tests.
Volkswagen partially settled with the government for those violations by agreeing to pay $2.9 billion into the Environmental Mitigation Trust Fund. These funds were then distributed to individual states.
The state of Wisconsin received $67.1 million, with $42 million designated for a grant program for the replacement of public transit vehicles.
The City of Racine has received $11.46 million in grant funding from two rounds of VW mitigation funds and from the FTA Low and No Emission Vehicle grant.
In addition to the buses, it was necessary for the city to have charging infrastructure.
Although the deal with the state is good, it does not cover 100% of the costs. There is a 20% match requirement.
Rather than let municipalities decide for themselves how to pay the 20% match, in 2017 the Wisconsin Legislature decided to take the money from shared revenue.
To understand the issue, it is important to understand cities pay their bills with different pots of money.
Normally, capital expenditures — buses, fire trucks, patrol vehicles, snow plows, etc. — are paid for through the capital fund.
Most of the city’s personnel, in contrast, are paid through the general fund.
When the Legislature decided to take the money for the buses from the city’s shared revenue, their decision ultimately meant the city’s general fund would be reduced by $160,000 every year for 10 years.
Mayor Cory Mason called the Legislature’s decision “an encroachment on local control.”
He stressed taking the 20% match from shared revenue would not have been a choice of local government.
“Generally, in the past the buses have been paid for out of the capital budget,” Fischer explained. “With these specific grant funds, the state has changed their mechanism for how they’re allowing us to pay for the match, so they are requiring that the match be paid out of state shared revenue.
“That would not necessarily be our choice, but that is something that is coming down from the State of Wisconsin as a requirement for this particular program.”
Alderman Henry Perez questioned the wisdom of accepting the deal from the state for nine new buses that, in return, will reduce the general fund, the pot of money that pays for staff, including police officers and firefighters.
He expressed concern that more positions would have to be cut from police and fire in the future in order to balance the budget.
“This seems like a good idea, we’re all for electric buses, and we want to reduce our carbon footprint,” Perez said. “But we’ve eliminated 21 positions in police and fire, and I don’t want to see more public safety positions eliminated to help support buses.”
Fischer explained the purchase of the buses does not necessarily mean that Police and Fire Department positions will be cut.
City Administrator Paul Vornholt noted that for the next four years, the city has American Rescue Plan Act funds to help balance the budget.
Additionally, the first year’s payment for the buses has already been budgeted, so any problems relating to loss of shared revenue would not occur for at least five years.
A rock and a hard place
The city also does not have a lot of great choices.
As Fischer noted, some of the buses in the current system are old and costly.
“We leave our aging infrastructure as it is, and we have excessive fuel costs and excessive maintenance on some buses that are past their useful life,” she said.
Alderman John Tate II, president of the City Council, stressed the aging buses were also a public safety issue.
He said the city does not want buses that break down, could have a piece fly off, could crash and hit a person or another vehicle, etc.
Alderman Jason Meekma called the decision “a slam dunk.”
Alderman Trevor Jung agreed: “Our aging infrastructure will cost money to replace,” he said. “When we can have 80% of that cost be covered by another entity, that is a smart financial move.”
This is not the first time the Legislature has passed laws limiting the ability of local governments to control their own finances.
In 2005, the Legislature capped levy increases by tying the increase to a percentage of net new construction. The law was updated in 2011.
The result of the legislation was that cities like Racine, which are not expanding, experience a structural deficit; that is, every year costs increase at a higher rate than what the city is generating in income.
As a result, the city has had to cut benefits to employees and reduce staff. In 2020, positions were reduced in both law enforcement and at the Fire Department.
City governments have been attempting to get the Legislature to make changes almost since the 2011 law was passed.
Tate mentioned his hope the law would be changed in the future.
“Hopefully we can do something to change this so we’re in a better position to serve our communities and not have to defund anything locally thanks the Legislature’s decision,” he said.