Seeking to keep property taxes in check and comply with state law, Mayor Paul Soglin is setting a goal of a 2 percent increase in city taxes on the average home for next year.
Soglin, in his annual operating budget message to managers on Monday, asked for spending proposals with no increases from the 2017 budget, except for full funding of previously approved items, and no supplemental requests.
The city must deliver effective services, invest in infrastructure priorities, and meet pay-equity goals for employees and rising health costs, Soglin said. But with little inflation growth expected next year, a 2 percent rise in taxes on the average home, now valued at $269,377, is prudent.
“This will not be easy to achieve,” he said.
The city has kept an increase on taxes on the average home below 2 percent only twice in the past 15 years.
City Council President Marsha Rummel could not be reached for comment.
The city, which had a 3.7 percent spending increase to $300.3 million in the operating budget for 2017, faces roughly $16 million in new expenses for 2018, finance director David Schmiedicke said.
The $16 million in new expenses is driven by $6 million in projected debt payments, $5 million for scheduled employee pay and health insurance increases, and $1.5 million for staffing at a new Midtown Police Station and a new fire station on the Southeast Side.
The city, however, can increase tax collections only 5.3 percent and collect a maximum of an estimated $12.6 million in additional taxes from all property types next year under state levy limits, leaving a $3.4 million gap to be closed by other means, Schmiedicke said. It would mean a 2 percent increase in taxes on the average home, he said.
For 2017, the city raised tax collections overall 4.7 percent to $219.7 million. The city tax on the average home went up 3.51 percent, or $81.96, to $2,417.51, higher than the mayor’s target of a 3 percent increase. The city could have raised taxes by a maximum 4.1 percent under state law.
The allowable taxes on the average home are going up at a slower pace this year due to a combination of higher property assessments and state levy limits. The value of all city real estate rose 10.2 percent, with residential values increasing 6.6 percent and commercial properties jumping 16.6 percent. The result is a reduction in the tax rate and a shift of some of the city’s tax burden to commercial properties.
The city’s economy, Soglin said, continues to outperform the state and nation, with a preliminary unemployment rate of 2.1 percent for April and rising property values. But the city continues to struggle in some areas, including a limited housing supply and gun violence.
Meanwhile, the city’s economic plans don’t get state support, he said, noting the Legislature’s refusal to allow a regional transit entity that could help produce revenue needed for a bus rapid transit system.
“So we are left to fill the leadership vacuum ourselves,” he said in the message to city managers.
The mayor did not ask agencies for savings plans, as he has in the past, but instead asked for service proposals that would identify who receives services, what outcomes the services are intended to achieve, and strategies to achieve those outcomes. Budget proposals, he said, must be developed with racial equity in mind.
The city is on track to connect services with goals and to set measurable outcomes, Soglin said.
In April, Soglin delivered a capital budget message that asked managers to prioritize projects, seek to delay projects until 2021 or later, and to eliminate low-priority projects. He said no new projects, except community-based ones like libraries and neighborhood centers, should be added to the 2018 capital budget or nonbinding, five-year Capital Improvement Program.
Agency managers will make budget proposals in the early summer and Soglin will offer an executive capital budget around the start of September and an operating budget proposal early the following month. Final council decisions will be made in early November.