City’s financial forecast called ‘very sobering’

Port Washington City Administrator Tony Brown last week delivered what aldermen called a “sobering” five-year financial forecast for the community.

The document shows that unless the city makes long-term changes in its budgeting, it will begin to run a deficit beginning next year.

And while that deficit is manageable in 2021, it will increase significantly in the following years, according to the forecast.

“This is very sobering,” Ald. Jonathan Pleitner said after Brown presented his report last week. “I don’t think this is something that’s unique to Port Washington, but it certainly is sobering, especially as we enter budget season.”

“This is going to be a challenge for us,” Ald. Paul Neumyer said.

Ald. Dan Benning concurred, noting the state-imposed levy limits have hampered the city’s ability to raise funds through taxes.

“The levy limits really handcuff us,” he said. “The cost of providing services is rising faster than we’re able to increase the tax levy.”

The forecast shows that if no changes are made, the city will have a deficit of $366,000 in 2021 and that deficit will increase to almost $1.5 million by 2025.

“The only way to permanently fix the gap is to change the trend lines themselves — increase revenue growth, limit expenditure increases or, preferably, a combination of both,” Brown said.

“These are budget challenges we need to be cognizant of.” 

Employee compensation, particularly health insurance, and capital expenditures are two of the main reasons the city’s spending is increasing, he said.

The forecast assumes health insurance increases of 8% annually and wage increases of about 3%, Brown said. 

Capital items have been financed in large part through borrowing since the state levy limits don’t allow the city to pay for them with property taxes, he said. 

And with numerous equipment and facility needs, the city’s debt is expected to increase in the coming years, he added.

“We have some significant needs,” Brown said, noting that the street department has equipment that’s 20 to 30 years old, near the end of its life and requiring frequent repairs. “There are a lot of things being requested.”

The city is working on a capital plan that would prioritize needs and help prepare for those expenditures, Brown said.

A debt policy is also expected to be created by the city to define just how much borrowing it can and should do, he said.

The state limits community’s borrowing to 5% of its equalized value, or $55 million, and Port currently has $27.1 million in debt, Brown said.

Brown said the financial forecast is intended to be an overview of the challenges the city faces and will be supplemented by policies under development dealing with debt limits, capital expenditures and other items.

“The city is, financial management-wise, in good shape,” Brown said. “I don’t think the city has the revenue sources available to get to the point where we’re resourced properly.”

The city has a number of options it can look at to ease the challenges of the forecast, Brown said. 

Part of the answer is continued development, he said, noting that the levy limits are tied to new construction and increased development allows the city to spread its tax burden out more. 

The proposed Cedar Vineyard development would add $40 million to $45 million to the tax rolls, Brown said, and “that makes a big difference.

“But you can’t plan on that kind of development every year.”

The city could hold a referendum to increase its levy limits, an option some aldermen have floated, or look at ideas such as a transportation utility fee.

In order to impose such a fee, a transportation utility would have to be created to handle such things as maintenance and capital improvements for streets, sidewalks and alleys. Homeowners would pay for these items separately, much as they receive a water bill to pay for water and sewer services.

“It would allow you to not borrow as much,” Brown said, and it would not count toward the city’s levy limit.

The city will also have to look at the services it provides, whether they can become more efficient and whether they are needed.

“I think we have to be creative in looking at revenue,” Pleitner said. “We need to be creative in what services we keep and maintain.

“The city provides a lot of nice services to its residents. A lot of cities are cutting services, and that’s the last thing we want to do.”