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Janesville drawing a short straw on state shared revenue?

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Neil Johnson
Friday, September 12, 2014

JANESVILLE—What do you do when a wheel on your car is loose?

You tighten it. 

What do you do when a wheel on your car is frozen, locked tight?

You stay put.

Janesville officials said the city's state shared revenue, one of the wheels of the city budget, is frozen while other municipalities are rolling ahead.

Janesville in 2012 received about $81 in shared revenue for each of the city's 63,480 residents, according to figures from the Wisconsin Taxpayers Alliance. Among 14 peer Wisconsin communities with populations between 30,000 and 150,000, Janesville's per-capita state shared revenue is the third-lowest, according to a city of Janesville analysis.

Janesville gets five times less per capita than the $457 collected by Beloit. Other peer cities in the analysis get between $140 and $350 per capita.

State shared revenue is one of the city's largest sources of revenue.

City Manager Mark Freitag said he's sent a letter to Gov. Scott Walker's office seeking a more “equitable” cut of state shared revenue, and city officials have a meeting set with Legislative Fiscal Bureau officials and at least one state lawmaker later this month. 

Even for city officials and fiscally wonkish state politicians familiar with crunching budget numbers, the state model to calculate shared revenue is complex and difficult to understand.

“You can read all the state's fact sheets--and we have--but so far, it (the city's shared revenue) doesn't make sense. I'm not sure I understand it, and I don't think I'm alone,” Freitag said.

City officials are working to understand how Janesville fits in the state's formula. Freitag said he's not sure there's an easy explanation or even necessarily a fix, but the city's trying to find out why it gets so much less per capita than peer communities.

The state in the last 12 years has reduced by at least 13 percent the pot of money municipalities share, according to the Legislative Fiscal Bureau, and the formula was changed to freeze the proportion of shared revenue at a “historical” average.

Max Gagin, management analyst for the city, said the freeze doesn't take into account Janesville's 6 percent population growth over the last decade, and it leaves the city stuck at 2004 state shared revenue levels.

“The system wasn't designed for inequity,” Gagin said. “It's just as more and more time goes by, when you keep rolling back to levels of 10 or even 20 years ago, you're not accounting for any population growth.

“There's a cutoff where you see there are cities that are getting way behind the curve,” Gagin said. “It's one of those where the status quo goes as long as there aren't too many people complaining.”

Meanwhile, municipalities in 2011 were tied to another state law that essentially limits the amount municipalities can increase tax rates based to the amount of new construction.

For Janesville, that limit means the city can increase its property tax levy about $220,000, which is about 0.51 percent of the $43 million budget. The city now collects the fewest property tax dollars per capita among peer communities, according to the city analysis.

While getting a smaller-than-average portion of shared revenue, the city has to cover increasing wage and utility expenses.

That leaves the city in a position to “do nothing but cut” at the start of planning for every budget year since 2011, Gagin said.

The city is now planning its 2015 budget, and more state shared revenue would help, he said.

“People do realize there is an equity issue, but it's also real difficult to kind of fix this. It's really a zero-sum game,” Gagin said.

“I can't anticipate a scenario right now that the state would allocate more dollars as a whole in order for the city of Janesville to receive more. It'd be more about redistributing current dollars as a whole.”

A fix would be a challenge for lawmakers, particularly in an election year. Freitag said he realizes the city is raising a politically “sensitive” issue.

“There is only so much revenue to share. If Janesville is on the low end, and you increase revenue here—that's to assume that if you'd even get to that point—it means somebody else is going to get less money,” Freitag said.

The city is floating a spending referendum for street repairs. The referendum asks residents for permission to exceed state revenue caps to pump as much as $1.2 million into street repairs over a five-year period.   

The referendum comes at a time, officials say, when the city has fallen behind several miles a year in street maintenance. State shared revenue is just one factor driving what the city views as a funding shortfall in street-maintenance and repair.  

Gagin said he's “proud of the fact the city can of Janesville can keep taxes lower while receiving low state-shared revenue and have services that people want and can afford.”

But he painted a hypothetical scenario: What if the city, through what it considers a more “equitable” division of shared revenue, could begin to approach funding levels in Fond Du Lac, which pulls in about 75 percent more shared revenue per capita than Janesville, according to the state Taxpayer Alliance.

“If you do the quick math there, there's as much as a $5 million difference there, and it would just bring Janesville to being the second-lowest of peers in terms of local taxes and state revenues,” Gagin said.

“From the city's perspective, $5 million can take you far no matter what you're looking at."



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