By LeAnn R. Ralph
MENOMONIE — Based on a recommendation from the executive committee, the Dunn County Board is considering an option that would freeze the property tax levy and would use $3 million per year in borrowing to fund capital improvements.
“Pay as you go has gone away. (Dunn County) cannot cover operational costs, never mind capital improvements,” said Keith Strey, Dunn County’s chief financial officer, at a special meeting of the Dunn County Board March 29.
At issue is the state’s tax levy limit and the fact that Dunn County has not had enough new construction over the past 10 years.
According to state law, municipalities can only levy a certain amount in taxes every year, and the levy can only be increased by an amount that correlates with the value of new houses or other buildings that have been built.
Dunn County cannot raise the tax levy because of the levy law, which limits increases to net new construction, said Paul Miller, county manager.
Over the past 10 to 12 years, the net new construction in Dunn County has lagged behind the Consumer Price Index (CPI), he said.
The effect is cumulative, so that every year, Dunn County falls farther and farther behind in trying to keep up with operational costs so that the only way to fund capital improvement projects is through borrowing money, Miller said.
Capital improvement projects on the list for 2020 included replacing computers, monitors and printers; courtroom upgrades; replacing a 2006 Chevy Colorado for the county surveyor; replacing a 2007 Ford F10 for land and water conservation; replacing the roof and the parking lot at the Dunn County Judicial Center; replacing machinery and equipment for the highway department; replacing the highway department shop roof; and squad vehicle replacements for the Dunn County Sheriff’s Department.
Peaks and valleys
Last year, the Dunn County Board adopted a five-year capital improvement plan.
The budget now includes capital expenditures, but before that, it was a matter of handling those projects year by year on a case by case basis, with one example being the project to move all of the county offices out of the old courthouse on Wilson Avenue to the Community Services Building on Highway 12/29, Miller said.
“Take as they come” does not allow for smoothing out the peaks and valleys in the county’s expenditures, which creates difficulties and volatility, he said.
The five-year capital improvement plan allows the county board to prioritize projects and to lay out projections so that the improvements become a “rolling process,” Miller said.
Options
The executive committee considered six different options that ranged from no borrowing each year to a considerable amount of borrowing each year, Miller said.
Each of the options included a frozen annual tax levy.
Option 1 included no new debt, while Option 2 included frozen new annual debt amounts.
Option 3 included $2.5 million in new annual debt, and Option 4 included $3 million of annual new debt.
Option 5 included $3.5 million in new annual debt, and Option 6 included $4 million in new annual debt.
The executive committee is recommending Option 4 with the frozen tax levy and $3 million of new annual debt, Miller said.
Credit agencies consider it good business practice to do a multi-year plan so the county can keep up with projects and not get too far behind, Strey said.
Borrowing
Last year, the different county departments made $62 million in requests. This year, the requests amounted to $46.5 million, with the reduction being related to eliminating Dunn County Solid Waste and Recycling, he said.
The cost of some projects also was reduced because the county was able to receive several grants, Strey noted.
Some projects also can be phased or extended, so that the county is still making progress toward maintaining infrastructure, he said.
Balance
The option recommended by the executive committee tries to strike a balance between borrowing money and being able to complete a certain number of capital improvement projects, Miller said.
Dunn County is in the top one quarter of counties for the per capita debt burden, he said, noting that the county has a population of 45,000.
To work down the existing debt, Dunn County could put off doing any of the capital improvements, Miller said.
The problem with putting off capital improvements is that costs tend to increase over time, so that later on, the maintenance or the replacement is more expensive than it would have been, and the interest rates also could be higher in a few years, he said.
“Defer-defer is not the answer,” Miller said.
Option 4 to borrow $3 million per year for capital improvement projects allows Dunn County to pay down existing debt while at the same time addressing some of the capital improvement projects, he said.
More now?
Tim Lienau, county board supervisor from Menomonie, noted the current low interest rates.
“Is it better to do more now with low interest?” he asked.
When the interest rates are low, the county could do more, then maybe in year two or three, there is some other kind of emergency, so the county board decides to do fewer capital improvement projects, Miller said.
The capital improvement plan is a plan, but it is not set in stone, he said.
One year it may be favorable to do more than the $3 million and then the next year, it may not be favorable to do more than $3 million, Miller said.
The plan is to decrease the debt but also to get some of the capital improvement projects finished, he said.
The capital improvement plan is intended to be a “baseline plan,” Strey said.
If there is a roof failure, there is a $3 million base and it can be adjusted later, he said.
The capital improvement plan is based on paying down the debt over a 10-year period, as opposed to The Neighbors, which is 20 years of debt service, Strey said.
The proposal to use Option 4 does not cover everything in the capital improvement plan. The executive committee settled on a “middle of the road” approach over five years, and to do some of the capital improvement projects, but not all of them, Miller said.
Mike Kneer, county board supervisor from Menomonie, asked if the interest rate increases, will the debt still decrease.
The interest rate would be set for 10 years, and there would be no “balloon” payment, Miller said.
Commuter rail
Sheila Stori, county board supervisor from Menomonie, asked about commuter rail and the proposal to build regional facilities to house troubled youth.
Commuter rail would be unlikely to require Dunn County to “pony up” any money, Miller said.
On the other hand, closing Lincoln Hills and building regional facilities could require money from Dunn County, he said.
All counties in Wisconsin are under the levy limit, and all counties must deal with unfunded mandates, Miller noted.
Next step
Miller asked the county board members to consider the overall approach of borrowing $3 million per year as a midway between doing nothing for capital improvements and doing everything and to provide feedback by April 5.
The next step will be to put together a proposal for the county board to consider at the April 21 meeting, he said.
Dunn County also will be receiving $9 million through the American Recovery Act, Miller said.
At this point, there is little information about how the Recovery Act money can be spent, but it could significantly impact the five year capital improvement plan, he said.
