Update: Dickert's budget saves $683,000 per year; Mayor could have spent a lot more on 2010 budget

Mayor John Dickert bangs the gavel on his first budget address Monday night.

Update: There's a question of whether we reported the wrong number out of the city budget by focusing on the tax rate versus the property tax levy, which is the amount the city will raise in property taxes next year. We'll start with arguments on why we were wrong to focus on the 5.7 percent increase in the property tax rate:

1. The city's tax levy would increase $634,077, or 1.4 percent, under Dickert's budget proposal. Historically (see chart to right; click to enlarge), this is a remarkably small increase and backs up the mayor's claims that the city found significant savings in its 2010 budget.

Reiterating Dickert's comments from Monday night, City Administrator Tom Friedel said Tuesday morning city departments went through the budget and cut nearly every line item in an effort to reduce spending. The result: $683,000 in savings. To get an idea on that number, one alderman said Monday night they weren't sure how it was possible to cut that much out of the budget without cutting jobs.

2. That's a key part of Dickert's budget. His plan calls for no city layoffs, but still only increases the property tax levy 1.4 percent (just 1.1 percent more in its general fund). In these times, that's an impressive accomplishment. "You won't find another community in southeastern Wisconsin that reduced spending the way we did," Friedel said.

2.5. On that point, Friedel noted a number of expenses outside of the city's control increased significantly this year. Overtime costs in the police department increased $600,000 because of relatively little turnover in the department this year. (Turnover saves money because veteran officers make more money than new officers. When someone retires, the department saves money by hiring a new officer.) The city also had to budget for an additional $366,000 to rent fire hydrants from the water utility. The increase was approved by the Public Safety Commission.

2.75. Friedel also said the city expects to lose significant amounts of revenue next year. The state cut shared revenue to the city city by $400,000 and the city lost $600,000 in interest payments on its savings. It also expects to lose another $300,000 on decreases on fees and permits, bringing the projected total lost revenue to $2.3 million.

3. Focusing on the tax rate is not an indication of a government's fiscal responsibility. Under state law, the city could increase its levy 3 percent this year. Instead, Dickert's plan calls for less than half of that increase. (In other words, the city could spend another $700,000 next year and pass that amount on to taxpayers. ) The fact that the projected tax rate increase is 5.7 percent belies the fact that mayor and city department heads significantly cut spending, Friedel said.

4. As proof of the lack of correlation between the tax rate and tax levy, consider two charts in the budget. One shows the city's tax rate, which basically declined from 2001 to 2009. The other shows the city's tax levy, which increased from 2001 to 2009.

5. In short, a headline that reads a 5.7 percent increase in the property tax rate doesn't portray the lengths to which the city went to control spending and hold the line on property taxes, Friedel said. Typically most news sources focus on the tax levy as the more accurate indicator of government spending.

Here's why we disagree, to a degree:

1. At issue here is the relationship between assessed property value and the city's tax levy. In recent years, the city's property tax rate went down, but people's property taxes increased. That's because the assessment on their home increased. For example, consider a fictional home assessed at $100,000 in 2007 and $125,000 in 2008. Even though city property tax rate declined 7 cents per $1,000 of assessed value, the homeowner's city tax bill increased $262 because their assessment increased.

2. This year is a little different. Given the collapse of the housing market and the economy's overall slump, property assessments aren't increasing much, if at all, this year. Most homes saw no increase in their 2009 property assessment, though we couldn't find one home that saw a property tax decrease. (Friedel suggested most news stories focus on tax levy instead of property tax rate, which is true. But in a year where the assessed value of most homes is flat the tax rate is a relevant comparison. In years were assessed values change [typically increase], the tax rate is misleading because it doesn't factor in the change in property value. This year, the change in property value is more of a constant.)

3. That raises the (unanswered, and technical) question: If the city held the line on spending, why would the property tax rate increase? The unknown value here is the total property value of the city, which is multiplied by the tax rate to get the levy.

In other words, if the city's project tax rate in 2010 is $11.36 per $1,000 and the proposed tax levy is $45,015,267, how much is the total value of city land? Quick math suggests it's about $3.96 billion. No doubt the number is much, much more complicate than that, but if we do the same for previous years we see the city is assuming a 4.1 percent decline in its assessed value this year compared to last. (Explained! See the explanation of the erroneous number here.)

4. So what does this have to do with the property tax rate? It raises another question: If the city significantly cuts spending, as the mayor proposes, why will many homeowners see a property tax rate increase? It's not a major increase - a home valued at $125,000 will pay $77.50 more in city property taxes under Dickert's projected budget - but it's still an increase.

5. That brings us back to the unanswered question: Where is the city losing property value? And, more interestingly, who will save money on their property taxes because of it? Hopefully, we can find out.

Original post:

The big news in Mayor John Dickert's 2010 budget, released Monday night at City Hall, is found on Page 10 of its 260 pages:

The tax rate is going up.

After eight years of declines during the past decade (with only one 8-cent increase in 2004), Dickert's budget calls for an $11.36/$1,000 tax rate -- a 5.7%, 62-cent increase from this year's $10.74 rate. (Click graphic from the budget at right to enlarge.) All things being equal, that computes to an additional $62 in city property tax for every $100,000 in assessed valuation.

The levy -- the total amount to be raised -- is $45,015,267, an increase of about 1.4% from this year's $44,381,190.

Property taxes will provide 38% of the city's general fund revenue, up from 37% this year.

Total general fund expenditures will rise from $79.8 million to $82 million. Fire Department spending is flat, but Police see an increase of almost $700,000, from $27,733,007 to $28,421,846. Public Works spending goes up almost as much -- and a much higher percentage -- from $12.8 million to $13.45 million. Public Works personnel stays stable at 113.8 positions, but its capital improvements budget jumps $600,000.

Public Safety will get 56% of the budget; up from 54% in 2009. The Fire Department maintains its complement of 144. The Police Department goes from 199 to 202, with one additional Lieutenant and three more Patrolmen. The budget cuts police overtime by $100,000, from this year's $750,000. The expenditure for police salaries goes up only $150,000, but FICA and Wisconsin Retirement costs for police increase $400,000.

The city is accepting $246,551, this year's funding of a COPS Hiring Recovery Program Grant that will pay for three officers for three years with the fourth year's cost funded by the City. The city is levying taxes over the four years of the grant period "to minimize the fluctuation of tax levy in the fourth year." That amount comes to $77,586 this year.

City Council President Q.A. Shakoor and the rest of the City Council takes in Dickert's budget address.

The Parks Department budget is flat at $7,230,069, with personnel stable at 65.45 positions. But the big news is the inclusion of $330,000 in capital improvement funds to construct a Splash Pad to replace downtown's popular Laurel Clark fountain, which was not built to handle the chlorine state law now requires. The budget doesn't say where the new splash pad would be located but the mayor has mentioned Riverview, his term for the inner city. The budget also includes the addition of an "honor pay system or kiosk" for $12,500 to generate revenue from the boat launch. Funds for a mat system to provide access to the water's edge at North Beach for persons with disabilities are also proposed; the amount is $46,500. The budget includes a 2.5% increase for the Zoo and 3% more for the Wustum Museum; the total increase is $19,763.

City Administrative expenses -- the cost of the Mayor and City Administrator, City Council, City Attorney and Human Resources offices -- is increasing from $2 million to $2.1 million. One 32-hour position is being increased to fulltime; staffing will rise to 31. City Council salaries and benefits go from $115,000 to $123,700.

One area where costs are increasing substantially is Recycling. The city has budgeted $2 million in capital funds to implement a "recycling cart system." Operating expenses will go up $225,000 to $900,000 and a $10 yearly fee will be charged customers who receive recycling services.

The full budget -- warning: it's a big .pdf file -- is HERE. The Capital Improvement Plan details are HERE.