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Mequon city leaders studying future budget shortfalls

State mandated revenue restrictions leave few options

July 17, 2012

Mequon - Faced with the prospect of limited revenue growth and ongoing rising expenses, city officials are grappling with funding options for capital improvements in the immediate and distant future.

Elected officials last week met as a Committee of the Whole to discuss budget prioritization with city staff.

"This is about three or four meetings worth of discussion," City Administrator Lee Szymborski said. "This is about policy issues, and it's not something where we're going to reach a conclusion tonight."

Gov. Scott Walker's Act 32 legislation has pinched municipalities' abilities to increase the property tax levy. Communities that are landlocked or facing little to no new construction face the prospect of zero-percent levy increases in the immediate future.

Costs outpacing construction

Other than the city's tax-incremental financing districts - which are separate from the main operating budget - little to no income growth is projected in the immediate future, based on forecasting conducted by city staff.

"The forecast shows that within the context of costs rising at a faster pace than what Mequon's new construction level will accommodate, the city faces financial challenges," Szymborski said.

"With inflation bumping costs even at a modest rate of one to two percent, Mequon's allowable levies and fees may not move in concert with its needs."

Szymborski and members of the council discussed road improvements, infrastructure and other capital projects on the horizon.

Maintaining existing city infrastructure, roads and public works functions have historically been cited as top priorities by the council.

In the past five years, the city has devoted $14 million toward road improvements. The majority - about $11.24 million - has been funded through 10-year general obligation notes. The remaining $2.8 million has been paid through the city's operating budget.

Debt vs. pay as you go?

One policy issue that cropped up frequently in last week's discussion was linked to funding mechanisms. Borrowing has taken place at a brisker pace than normal in the city because of the current economic landscape.

"Should we continue to ride a wave of historically low interest rates, or do we pivot back to the city's method of financing roads and other infrastructure on a pay-as-you-go basis?," Szymborski said.

This and other questions will continue to be weighed in future budget-planning workshops in the months ahead.

At the next workshop meeting, city staff and elected officials will narrow their focus and discuss capital improvement projects and budget planning for 2013. Officials also look at how policy decisions could impact the budget in 2014 onward.

The meeting will be held in August.

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