City Treasurer: Still Early in Budget Process, But Deficit Grows
“The taxes you get are based on your community growing, not on inflation.” – Corey Ladick
By Brandi Makuski
With budget talks for 2015 slated to begin next month, leaders in the City of Stevens Point say they’re facing a deficit of more than $300,000.
Comptroller-Treasurer Corey Ladick said deficits aren’t uncommon throughout the budget process, as numbers ebb and flow depending on department budgets and state reimbursement formulas, but this year’s he says there’s reason to be concerned.
“We normally don’t put the number out there until we’re closer to the budget presentation, of course,” Ladick said. “This year was a little different because there were some spending decisions that were already made for next year which begged the question for the Council about where we were at with the budget. I was asked that question very directly, so that’s when I said, ‘OK, this is where we’re at’. But we’re a solid month and a half from presenting the budget- I still don’t have the first draft of operating budgets from a lot of our departments, and I don’t know a lot of our numbers from the state yet. There are a number of things that could happen for better or for worse.”
Ladick said various numbers arrive from various state reimbursement programs regularly and city budget numbers are frequently updating. On Friday, Sept. 12th the city’s deficit stood at $368,000. By the following Monday that number had grown to $371,000.
The recent revenue shortfall comes in part from wage increases to the city’s pay plan- which were approved by a tie-breaking vote from Halverson at the Sept. 15 Common Council meeting- and partially from an early payoff for a large special assessment for a property near East Park Commerce Center which eliminated expected interest revenue in 2015.
The special assessment payoff involves about $150,000 which had been expected next year. The assessment comes from an extension of water and utilities for a property on Carrie Frost Drive owned by 54481 Development LLC. That property could begin some kind of development next year.
Ladick said another “big hit” the city is taking is from a state reimbursement program called Exempt Computer Aid.
Since 2000, the state has allowed computer and related equipment to be exempt from taxes. Since many businesses in Stevens Point rely heavily on technology, the exemption is helpful for commercial enterprises’ bottom line, but those exemptions also lessens property values- which means a lower assessed value and lower taxable property.
“Because of that exemption, because this is taking revenue from municipalities, the state gives us the money we otherwise would have gotten (via property taxes),” Ladick said.
The value of all assessed commercial computers in Stevens Point for 2013 was $98 million. But according to Ladick, the value of any computer depreciates very quickly and businesses often upgrade their technology annually or biannually in bulk, leaving a current assessed computer value of only $80 million.
“The amount of computer aid we get is based on our property tax rate: property taxes are based on equalized value, so it’s a little under one percent of the value (of the computers),” he said. “Last year we had $890,000 budgeted for this and right now we’re projecting it’ll go down to $743,000. So the end result of that was the loss of about 147,000 in exempt computers. We kind of have a one-two punch, where that first hit was from the assessor’s office about the value of our computers, and the second punch was working through the special assessments and finding out where we’re at with that.”
Additional new expenses for 2015 include $25,000-$30,000 for maintenance of the former Mid-State Technical College building on Michigan Avenue, as well as sharp increases in worker’s comp costs, though Ladick said he didn’t yet know exactly how much.
Then there’s the much- maligned pay plan. City Council members have been torn on the issue since it came forward for consideration, with most outwardly unwilling to do nothing about admittedly lower-than-average salaries for some city employees but also unwilling to break the city’s budget to do so.
In a memo from Mayor Halverson earlier this month, several managerial positions were recommended for a step and wage increase. Halverson said he made the suggested compromise after the Council turned down rerunning the pay matrix to better align all salaries with comparable cities after more than a year of debating the issue.
“There certainly are some concerns that do exist,” Halverson said about the budget. “But these salaries are much more appropriate for these positions. It’s a good faith move on our part.”
Halverson said the salaries he’d most like to see increased were those of the assistant chiefs in police and fire departments, who have smaller administrative staffs than other cities of similar size.
“It’s slightly higher than our comparables, but the glaring difference is the amount of work our assistant chiefs are doing is above average and unique vis-a-vis staffing levels,” he said.
The proposed wage increases earned a 4-4 vote by the City Council, with aldermen Roger Trzebiatowski and Jeremy Slowinski absent. Halverson said he was “very proud” to have cast the tie-breaking decider, adding the city has dealt with much larger budget problems in the past and needs to better address retaining “the very best” department head in each field.
The move gives pay raises for 12 department heads or assistant chiefs totaling about $6,000, with additional raises in store for 2015.
Potential Long Term Solutions
Halverson and Ladick both say addressing two large expenditures could be the solution for the city’s nose-diving budget. During the Sept. 15 Council meeting, Halverson said city leaders had been shopping for a new health insurance carrier, as well as looking to outsource garbage and recycling duties.
The city paid $379,586 in 2012 and $380,155 in 2013, and budgeted $355,122 in 2014 for garbage and recycling costs, to include wages and benefits, supplies, maintenance and landfill expenses.
The city has released an RFP- a Request for Proposal- to area waste management companies in an effort to save additional dollars on weekly garbage and recycling collection. The amount of potential savings was not immediately available on Thursday, but the request was sent to Advanced Disposal, IROW, Waste Management and Harter’s.
What could become of the city’s newer collection trucks was not immediately known.
A new health insurance carrier, according to Mayor Halverson, could also save the city “several hundred thousand dollars” with the right insurance plan.
“I am beyond 100% certain we can fix (the deficit),” Halverson said. “I think by small moves with our own health insurance plan, which would have almost no impact on our employees, the shortfall can be made with one stroke of a pen- with maybe even several hundred thousand more to save, on top of it.”
Halverson said the city could slightly modify copays for employees, and could also look to no longer self-fund employee insurance programs. City documents show $3,370,000 was paid out for health insurance claims in 2013, and $3,480,000 was budgeted for this year.
“We could take our health insurance to an entirely new degree by looking to take it outside of the self-funded world, taking it to an insurance providers and simply buying it on the market,” he said. “By doing that we could find better coverage for the employees we have now and save significant money.”
Budget Growth Depends on New Construction
Ladick said there’s no reason to panic, but there is real reason to be concerned because property taxes are capped to a small percentage of net new construction from the previous year. And like Plover, the City of Stevens Point had a slow 2014.
“I really want to get people to realize is when you have a budget that can only grow one percent a year, roughly, that’s really not very easy or sustainable as far as being able to do things the way you’ve done them in the past, or to keep the level of services you have in the past,” he said. “This year it was limited to 1.63 percent, which gets you about $150,000. The cut, as far as computer aid, will knock that whole thing out right there. New money for this year is gone in one swipe, plus the special assessment and worker’s comp premiums going up substantially. It’s very difficult to find room.”
The news isn’t all bad, though. According to Ladick, that 1.63 percent growth is higher the 1.12 percent state average, so by comparison, Ladick said we’re doing better than a lot of other municipalities.
Community Development Director Michael Ostrowski said his office is constantly working on bringing new business to the area, but of late has put much of its effort into attracting developers to the East Park Commerce Center.
“We were really running out of large tracts of land for development,” Ostrowski said. “When you’re trying to work with a company, not having that would just add another hurdle. We’ve done quite a bit with East Park Commerce Center, getting it ready for new development. We’ve re-established (purchasing) options for another five-year period. We’re working on establishing rail there, which provides a great attraction for business. But it’s development ready and that makes it that much more desirable for construction.”
Service Cold Storage was one of only a few companies which completed new construction in 2014, but Ostrowski said next year is already shaping up to be better with planned development from Skyward in the same business park. Several other developers are also considering relocating to the park, he said.
“We’re also trying to find new areas for residential development and I think 2015 should be a pretty good year in terms of construction projects. We haven’t seen a lot of new multi-family rental construction, and new home construction has been slow but it’s been picking up of late. The market was pretty flooded with homes that could be purchased at a very, very reasonable rate so people would buy an existing property rather than buying new.
“But right now we’ve got six new construction permits on the residential side for September,” he added.
Ostrowski also pointed to continued work on remediating the Lullaby property downtown, the former Cooper Motor site has been put up for sale and the city is gearing up for some major expansion by Skyward next year.
“We’ve got to keep promoting development. We have to keep working to expand the tax base,” Ladick said. “We have to be prepared because it’s not every year we’re going to have a new Marshfield Clinic or Service Cold Storage in the same year. You’re going to have some years where (growth) is going to be at half a percent.”
“It’s real easy to talk about reprioritizing dollars and say we can put money back in the budget, but when it comes right down to it, it’s tough to find places to cut for a lot of departments, and that’s something we have to recognize. It’s like you’re roasting a pig; the first time you might find a real good piece to cut off, but you do back and do it again, which we’ve done before. Now we’re coming back to that same pig- it’s not as easy to find now.”
The 2015 budget presentation will be done by the end of October. Under state law the City Council is required to approve a final budget by November 15.