Whoops! City corrects $100 million error in mayor's budget

Mayor John Dickert at Monday night's budget address meeting.

Funny things can happen when you're being responsible.

That's a lesson we learned today after discovering an error in Mayor John Dickert's budget. We reported last night the city's property tax rate would increase 5.7 percent under Dickert's plan, despite only a 1.4 percent increase in the city's property tax levy.

The tax rate number jumped out at us because, well, it didn't make sense. The only reasonable explanation was the city was anticipating a drop in its total assessed value this year. In fact, the mayor's budget anticipated a 4.1 percent decrease in the city's total assessed value to $3.96 billion. (Total assessed value is a combination of residential, commercial, industrial and personal property values. In 2008, Racine's total assessed worth was $4.13 billion.)

A total drop in the city's assessed value may seem reasonable given the economy. It's certainly true homes in the city are selling for less than they're assessed at, which in theory should lead to drops in assessments. But, understandably, communities are loathe to drop assessments because that means less tax base and less money available for city departments and programs. So this year the city's total assessed value remained flat despite market forces indicating they probably should go down.

OK, back to the story. We reported the property tax rate increase last night straight out of Mayor Dickert's budget. City Administrator Tom Friedel called this morning upset the focus of our story was on the tax rate increase, and not on the $683,000 in savings included in the budget. There are two sides to every story and we agreed, after leaving the tax rate up for about 12 hours, to flip the headline around point out the savings, which seem to be legitimate.

But we also kept digging because it didn't make sense for the mayor's budget to, basically, hold the line on spending and still increase the property tax rate by about $75 on an average city home, which is assessed at $124,700.

It all became clear after talking with City Assessor Ray Anderson. We asked him why the city's total assessed value dropped some $133 million in 2009. Anderson's response: It didn't. Actually, it increased slightly.

Something didn't add up. We confirmed with the city's Finance Department that Dickert's budget included the 4.1 percent drop in assessed value. (We're pretty sure we were the one to bring it to the department's attention.) But we also learned from the city assessor there was no decline.

Then we put two-and-two together. The number was wrong. We've heard two theories on why the number is wrong. The first from Anderson was the city left out about $133 million in assessed manufacturing property in the city. The state handles assessments on manufacturing properties (that's how SC Johnson got its Administration Building and Project Honor largely exempt from property taxes), and they have yet to send over the city's 2009 number. The final number is not expected for another two weeks, Anderson said, though projections suggest Racine's manufacturing base slightly increase this year. (It is somewhat shocking, though, to see Racine's manufacturing property only valued at about $133 million, or roughly 4 percent of the city's total worth.)

The second explanation we heard was the city used property tax assessments for 2010 to set next year's budget. This makes a difference because assessments (reacting to the market) are projected to go down next year, compared to staying flat in 2009. Regardless of which, we were right. The budget's number was wrong.

The upshot of the mistake is the property tax rate is too high in the mayor's budget. Instead of $11.36 per $1,000 of assessed value, the projected rate is $10.84 per $1,000 of assessed value, or an increase of less than 1 percent. City taxes on that average city home would increase about $12.50 under Dickert's plan, or about $1 per month.

Discovering this discrepancy in the budget, we called Friedel and the mayor's office for confirmation. Out of courtesy, we held off writing a story this morning to give city officials a chance to confirm and correct the mistake.

Their response? An email from Friedel at 3:57 p.m. confirming our findings - an hour and half after the JT published a story noting the mistake we helped uncover.

Here's the message we got from Friedel (emphasis added):

Our conversation this morning accomplished at least two good things. The budget got presented from my point of view and we learned that the tax rate number was wrong. Thank you for both.

Communication between the budget director and the assessor on the estimated assessed value caused us to use the wrong number in our calculation. The new estimate puts the tax rate at $10.84, which makes a lot more sense. This number will not be finalized until December when the State certifies the value. We will make the correction in the budget document.

We don't usually get upset competing with the JT. If they get a story before us, we link to them and often congratulate them on a job well done. (Well done, Mike!) But in this particular case we could have burned the city this morning with a headline that reads: "Hundred-million dollar error found in city budget." (OK, we still used that language. But imagine the scrambling at City Hall this morning when that headline popped up on their screens. By now it's really lost its impact.)

But we didn't. And we got burned. Lesson learned.

(That sounds ominous, but it's not. We have no problem with the city administrator or mayor's office. Just a little irritated as we still wait for calls to be returned.)