By LeAnn R. Ralph
MENOMONIE — The Dunn County Board has decided to use the remaining $5.5 million in American Rescue Plan Act (ARPA) funds for capital improvements in the 2023 budget.
The primary purpose of the Capital Improvement Plan is to allow Dunn County to replace equipment and do necessary maintenance by borrowing $3 million every year because of the state-imposed tax levy limit restrictions, said Nick Lange, Dunn County corporation counsel and acting county manager, at a special meeting of the Dunn County Board held March 26.
The Dunn County Board approved a five-year capital improvement plan at a special meeting in the spring of 2021 that includes $3 million in borrowing every year until 2027.
Lange is filling in as county manager following the resignation of former county manager Paul Miller earlier in March.
The Capital Improvement Plan, which places equipment replacement and maintenance on a schedule, helps to level out the peaks and valleys that would otherwise occur in the annual property tax levy, Lange said.
Over the past several years, Dunn County has borrowed money in some years to balance the budget and to pay for certain capital expenditures, including borrowing $8 million in 2019.
The goal of the special meeting on a Saturday morning was to give Lange and Beata Haug, Dunn County’s chief financial officer, some direction in putting together a balanced budget, said David Bartlett, county board supervisor from Boyceville and chair of the Dunn County Board.
Options
Haug presented four options for the Dunn County Board to consider in what turned out to be a meeting that lasted nearly four and a half hours.
All of the scenarios involved a frozen property tax levy.
The first option called for using the remaining $5.5 million in ARPA funds in 2023 and new annual debt of $3 million each year from 2024 to 2027.
The second option called for using $4.2 million in ARPA money in 2023, $1.3 million in ARPA money in 2024, and borrowing $3 million each year from 2024 to 2027.
The third option called for using $2.79 million in ARPA funds in 2023, using $2.73 million in ARPA money in 2024, borrowing $1.5 million 2023 and borrowing $3 million each year in 2024 to 2027.
Option 4 called for using $2.79 million in ARPA funds in 2023, $2.73 million in ARPA funds in 2024 and borrowing $2.5 million each year from 2024 to 2027.
Haug said she had gone through the capital requests for the 2023 budget, compared them to what the federal rules allow the ARPA money to be used for, and earmarked projects that are clearly identified in the rules as being acceptable expenditures of the money.
Haug’s recommendation to the county board was to use Option 3.
Lost revenue
The biggest category of allowed spending with the ARPA money is “lost revenue” because of the pandemic. Each county can claim $10 million in lost revenue, and since Dunn County will not be receiving $10 million total in ARPA money, all of the funds Dunn County receives can be used for anything, Lange said.
Haug is operating “on the safe side” if the ARPA rules end up being changed, he said.
The CFO is placing items in a specific category to insulate against the federal government changing the rules, Lange said.
All together, Dunn County will receive $8.8 million in ARPA money.
Approximately $3.5 million of the ARPA money already received (half in 2021 and the second half in 2022) has been designated for highway projects in the 2022 budget.
The ARPA money must be encumbered by 2024 even if equipment is ordered and does not arrive until 2025. Issuing a purchase order will encumber and lock in the funds, Haug said.
Haug noted that she had based her budget assumptions on a 2 percent increase in equalized value in the county.
In some years, the equalized value has increased much more than 2 percent, but 2 percent is a conservative number to use, she said.
According to information Haug provided to the Dunn County Board, by borrowing $3 million per year, the county property tax on a $150,000 property would be $186 in 2024 but would gradually decrease over the years to $94 in 2032 and $14.87 in 2037.
The decline in county debt on the property taxes will be due to the fact that debt existing today will gradually be paid off.
The total projected property tax levy for the county budget would be expected to stay at $23 million to $24 million per year from 2024 until 2036.
Levy limit
State law only allows increases in the property tax levy according to a formula based on net new construction.
Dunn County does not have enough new construction to increase the property tax levy enough to cover the increased cost of providing services for county residents from year to year as well as maintaining county facilities and replacing equipment when necessary.
For example, Dunn County still has the same number of miles of road to plow in the winter and still needs the same number of trucks to plow those roads, but the cost of purchasing and maintaining the trucks has increased substantially over the past 10 years.
Or to put it in personal finance terms, imagine a worker who still must pay rent or a mortgage, and must make a vehicle payment, buy groceries, pay utilities and purchase medications, but who has not had a raise in pay in 10 years.
Spend ARPA
Bartlett said he was recommending that Dunn County spend all of the ARPA money on capital improvement projects in 2023.
When President Joe Biden asked Congress for an additional $15 billion to continue with COVID mitigation measures, such as vaccines, masks, and continued testing for the virus, the conservative members of Congress suggested taking back ARPA money from the states because the ARPA money has not been spent yet, he said.
The ARPA money was distributed to municipalities half in 2021 and the second half in 2022 and does not have to be spent until 2024.
The ARPA money is considered “lost revenue” as a result of the pandemic, but maybe the federal government will want it back, Bartlett said.
No one knows what the rules will be for the ARPA money going forward, he said.
The Dunn County Executive Committee is recommending borrowing $3 million now because interest rates will be going up, Bartlett said.
But if the economy ends up in a recession, then interest rates will go down for future borrowing, he said.
Interest rates
Gary Stene, county board supervisor from Colfax, asked about the current interest rates for money that Dunn County might borrow.
Haug said her assumptions were based on an interest rate of 2.97 percent.
Stene wondered what the interest rate might be if the money were borrowed in subsequent years.
Dunn County has a very good bond rating, and secure government bonds are always issued at a different, lower rate than general borrowing, Haug said.
As of 2020, Dunn County had borrowed 19 percent of the county’s debt limit, said James Anderson, county board supervisor from Menomonie.
State law allows municipalities to borrow up to 5 percent of the equalized value in the municipality.
In 2019, Dunn County was at 23 percent of the debt limit. In 2018, Dunn County was at 21 percent of the debt limit, and in 2017, the county was at 24 percent of the debt limit.
The county’s proportion of the debt limit as determined by 5 percent of the equalized value has been decreasing over the past several years, Anderson noted.
“I believe we have done a good job of managing,” he said.
The money borrowed to build The Neighbors of Dunn County is the bulk of the county’s debt, Bartlett said.
Dunn County is ranked sixth in terms of per capita debt out of the 72 counties in Wisconsin, he said, adding that he does not want Dunn County to become number one in terms of per capita debt.
Even if Dunn County continues to borrow money, the debt will go down because the county would be paying more in principal than what the county is borrowing, Haug said.
Tim Niehoff, county board supervisor from Menomonie, said he was of the opinion that the county should not be borrowing $3 million per year as standard procedure and that the county should be “living within our means.”
Because of the state’s levy limit law, the property tax levy does not increase, Bartlett said.
If the replacement of equipment and maintenance of buildings comes out of the property tax levy, then something else would have to come out of the budget, he said.
Kelly McCullough, county board supervisor from Menomonie, pointed out that the county board had approved the capital improvement plan last year that includes borrowing $3 million per year.
If the county is adding $3 million in debt, the county also is paying off more than $3 million in debt so that the debt level is steady, said Tim Lienau, county board supervisor from Menomonie.
Lienau said he would approve of using ARPA money and borrowing so that the Dunn County Highway Department does not have trucks that are “old enough to vote” and “old enough to drink.”
Earlier in the meeting, McCullough, who is chair of the highway committee, said some of the county’s trucks are old enough to vote and some are old enough to drink.
Dustin Binder, Dunn County highway commissioner, pointed out that after the county plow trucks reach five years of age, because the trucks are used so much in the winter and in the summer, the cost of maintenance doubles.
The older the trucks are, the more it costs for annual maintenance, and the less that Dunn County would receive on a trade-in for a new truck, Binder said.
A concrete example, McCullough said, is the highway department Skid Steers.
After three years of operation, the machines cost more to maintain than the payment for a new Skid Steer, so the machines are traded in every year. The highway equipment should be upgraded because Dunn County is losing money on the older equipment, McCullough said.
What’s reasonable?
What is a reasonable amount of debt for the county to carry? Stene asked.
What is the amount the county is willing to carry in order to deliver the services to Dunn County residents that have to be delivered? he asked.
And what is the object? Stene continued.
Is the object to get down to no debt, but the county also does not deliver any services to county residents? he asked.
“I don’t ever see us not having to borrow money,” Stene said, adding that borrowing is a way to use the taxpayers’ money to the best advantage.
“If the debt does down to nothing, then we’re going to do nothing,” he said.
Dunn County still must deliver services and must still maintain the county’s buildings, Stene said.
The longer Dunn County can keep from borrowing money, the closer the county will be to having The Neighbors paid down, Bartlett said.
Dunn County has a AA+ bond rating. Borrowing $3 million per year helps keep the county’s bond rating steady, and it helps keep the fund balance steady, Haug said.
Options
Vaughn Hedlund, county board supervisor from Boyceville, made a motion to go with Option 3, which used $2.79 million in ARPA funds in 2023 and borrowed $1.5 million, and used $2.73 million in ARPA funds in 2024 and borrowed $3 million.
McCullough seconded the motion.
After some discussion among county board members, Hedlund withdrew the motion, and McCullough withdrew his second.
Hedlund then made a motion to approve Option 1, which uses $5.5 million in ARPA funds for the 2023 budget and does not borrow any money.
On a roll-call vote, the Dunn County Board unanimously approved Option 1.
All of the options presented included vehicle registration fees of $727,000 per year.
The Dunn County vehicle registration fee of $20 per vehicle is scheduled to expire at the end of this year unless the Dunn County Board acts to extend it.
Totals
The five-year capital improvement plan includes $48 million in expenditures from 2023 to 2027.
Recommended revenue for the capital improvements includes $15.6 million in property tax levy, $11.9 million in debt, $553,500 in trade/sale; $10.58 million in general transportation aids, $3.64 million in vehicle registration fees, $5.5 million in ARPA funds and $414,000 in fees.
Expenditures for the capital improvement plan include:
• $77,000 for land and water conservation (2023 and 2024).
• $29,990 for planning and zoning (2023).
• $12,000 for the county surveyor (2023).
• $116,000 for emergency management and communication (2023 and 2024).
• $2.03 million for the sheriff’s department (2023 to 2027).
• $80,000 for child support (2023).
• $2.33 million for facilities and parks (2023 to 2027).
• $42.4 million for the highway department. (2023 to 2027).
• $874,000 for information technology (2023, 2024 and 2026).
• $280,000 for The Neighbors (2023 to 2027).
