Oak Creek — The cost of city operations and services is not sustainable and elected officials and residents will need to make hard decisions about what to cut next year, a budget memo sent to the Common Council states.
City Administrator Gerald Peterson and Finance Director Bridget Souffrant, who penned the letter, point out that taxes over the last five years have increased about half as much as the Consumer Price Index. They argue that, with rising costs and flat revenues, the city's financial model cannot continue unchanged in the future.
The 2014 city budget calls for the property tax levy to go up $114,000, or 0.6 percent, over last year. That increase is allowed by the state due to new construction in the community. The CPI, which affects the price of commodities the city needs, such as salt and gasoline, has increased 22.6 percent from 2005 to 2013. However, the property tax has only increased 12.13 percent in that time, Souffrant said.
"That's always on the table in the future," Peterson said about a potential reduction in services. He added that while reducing services isn't the focus this year, the city may ultimately have to seek guidance from Oak Creek residents about what to cut.
The city will begin a dialogue with residents about its financial health next year.
Peterson and Souffrant said their plan is to send residents a series of brochures, much like the brochures used for the proposed lakefront development, to explain the city's financial difficulties. The brochures will include times and dates for public meetings, one of which they hope will be held next year roughly one or two months before the city lays the groundwork for the 2015 budget.
"We want to make a case and say we have been squeezing ... and we have been spending your dollars well," Souffrant said.
Competing for money
Many departments are underfunded and have been for years, Peterson said. He outlined multiple examples in the letter.
The city likely will spend about $2 million on capital improvements in 2014. Half will go to road improvements and half to other capital purchases including new police body armor, an update for the city's 19-year-old accounting software and a dump truck.
Peterson estimated the city would need to spend $2.7 million per year to keep roads in their current condition.
The capital improvements fund isn't being financed by the levy for 2014. The city is using $1 million from utility tax fees and $1 million in mitigation money to fund them. In his letter, Peterson wrote that the city levied $4 million to fund its capital improvement budget in 2005. It has levied nothing for capital improvements since 2010.
Saying the city has been able to maintain most buildings and vehicles, Peterson asked, "What happens when our new police station, which isn't that new anymore, needs a new roof or HVAC system? When are those coming into the budget?"
Some requests, such as requests from the Parks Department for new basketball hoops and other park improvements, have been put on the back burner for years, he said. Competition for capital improvement money is high and other departments, such as Police and Fire, often take priority.
Peterson proposes in the 2014 budget draft to use fund balance money to pay for streetlights and sidewalks this year, but next year those projects will be in the same court as park improvements, competing for capital improvement fund money.
Squeezing the budget
The driving factor behind the shrinking budget is the state-imposed levy limit. Cities aren't allowed to increase the municipal levy more than the amount of new construction growth. In addition to the state limit, Oak Creek has had self-imposed levy limits since 2008.
Even though Oak Creek will be adding to its tax base through the construction of Drexel Town Square, The Oak View Business Park and the lakefront development, each of those areas are in tax-incremental financing districts. Any additional tax revenue generated by these districts will be used to pay for infrastructure improvements made there until the districts close out.
According to Souffrant, a TID takes 27 to 29 years on average to close out.
The city has cut staff pay, reduced staff numbers and partnered with Wheaton Franciscan Medical Group to mitigate healthcare costs. It is in discussions to provide dispatch services to St. Francis at a potential $200,000 cost to Saint Francis.
But more savings are needed, and public input will be vital, Peterson said.
"The only thing that's sustainable is to provide people the level of services they want and are willing to pay for," he said.
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