RACINE — The City of Racine is in a tough financial situation, officials announced last week as part of an introduction to a difficult 2020 budgeting process.
One option City Administrator Jim Palenick floated on a local level was adding a county sales tax, although that is not in the county’s immediate plans.
Palenick said a one-cent county sales tax could generate enough revenue to cover the Racine Zoo, the Racine Public Library and public transportation.
Racine is one of six Wisconsin counties that does not have a county sales tax.
Palenick pointed out that a sales tax would bring in new revenue through everyday consumer activity: if a new store opens in an existing building, it would not affect net new construction, but it would contribute through the sales tax.
County spokesperson M.T. Boyle stated in an email that the sales tax discussion has come up quite a few times over the years but she did not foresee it coming up for 2020.
“The County Executive (Jonathan Delagrave) has no plans to propose one,” said Boyle. “Any future decisions would be dependent on County Board (of Supervisors) action.”
The larger picture
In a presentation before the City Council last Tuesday, Palenick and Finance Director David Brown showed how the city’s fixed costs — mostly employee salaries and benefits — continue to rise while revenues remain flat.
Palenick in particular reviewed some options for increasing revenue; however, he pointed out that most are out of the city’s control and the remainder would be hard pills to swallow.
You have free articles remaining.
One of the goals of the presentation, Palenick said, was to drive home to the City Council how limited it is in terms of the budget.
“The things we can control are very limited,” Palenick said.
Forty-one percent of the city’s budget comes from shared revenue from the state, which Brown showed dropped by about $1.5 million in 2012 and has remained mostly stagnant ever since.
In addition to proving less shared revenue, state law restricts other avenues for increasing revenue.
By state statute, the city is only allowed to raise its tax levy by its percentage of net new construction; Racine’s is the second-lowest in the county at 0.14%.
Meanwhile, pressure to reduce the property tax rate continues. A study by the Wisconsin Policy Forum found that in 2018, the City of Racine had the third-highest tax rate in the state. That is down from 2017, when Racine was No. 2, and from 2016 when it was No. 1.
If the city charges new fees to pay for services, it is required by the state to reduce the levy by removing the cost of providing those services. An example Brown gave was if the city decided to charge a fee for snow removal, it would have to remove the cost of providing snow removal from the tax levy.
The state restrains expenditure increases based on a formula that uses the Consumer Price Index. Municipalities that exceed that limit will have that excess removed from their shared revenue by the state.
The recent changes to the water bills — such as putting forestry and fire hydrant maintenance on stormwater and water bills instead of under the tax levy — did not count, since they were technically not new fees. But, as Alderman Sandy Weidner summarized, the changes did shift expenses onto existing fees.
Palenick said he didn’t see the most painful decisions — cutting or privatizing city services — coming up in 2020. But he said he wanted to inform the City Council, Mayor Cory Mason and county or state officials about Racine’s situation. If nothing changes, those cuts will need to be made sooner rather than later, he said.