City Finances

City Finances 

The following are key terms and phrases regarding city finances that are essential in understanding how a community and its local government function financially.    

City Budget - A city budget is a detailed annual financial plan that outlines how a municipality will raise and spend money. It funds essential services and infrastructure such as public safety, roads, parks, and more. 

General Fund  - This is the primary operating fund for a municipality that accounts for all core revenues and activities.  

Revenue - Money the city collects from property taxes, fees, state aid, and grants.   

Expenditures  - The amount of money spent on services and projects.  

Assessing  - At the local level, assessment is the establishment of value of taxable real property for both residential and commercial property within a municipality. The procedure is essential to facilitate the levying of property taxes equally and accurately, in accordance with state statutes. In other words, assessment is verifying the value of properties to be taxed equitably under Wisconsin State Statutes and the Wisconsin Property Assessment Manual. While the Wisconsin Department of Revenue is responsible for the assessment of all manufacturing property, the local assessor's office is responsible for assessing the value of other properties within the city. 

Assessor  - An assessor approximates the value of a property by inspecting and comparing property characteristics, comparing them to similar properties in the area, and considering market conditions to arrive at an approximation of the fair market value. 

Property Assessment - This is the value assigned by an assessor to a property. The taxing authority utilizes it to determine the property taxes the homeowner should pay. Often, it is calculated as a fraction of the fair market value of the property.     

Property Tax Lexy - This is the total amount of money which a city government decides to collect from property owners in the form of property taxes. Essentially, it is the rate of tax applied to every taxable property in the locality and serves to finance local amenities such as police, parks, roads and more. So, when you hear of a property tax levy, it is the sum that the local government is "levying" (or putting on) property owners within its jurisdiction to raise money for public services. 

Levy Limit Constraints  - These restrictions are regulations which limit how much a local government can increase the amount of property tax it receives from owners of property in a given year. The limitations are put in place to control the escalation of property taxes and prevent local governments from raising taxes too high or too quickly. 

Net New Construction - The value of new construction and land improvements within the City during the past year, minus the value of any demolitions or removals of land improvements. Net new construction is used as the primary factor to set the limit on property tax increases under the levy limit law. 

FAQs 

What is the process of developing a city budget?  

The process of creating a municipal budget begins by assessing the financial needs and priorities of the city over the upcoming year. Important aspects of this process involve identifying projected revenues, calculating expenditures, and planning for future needs like capital improvements. The City employs three primary financial tools to make informed financial decisions:

• The Ten-Year Capital Improvement Plan (CIP)
• The Five-Year Financial Management Plan (FMP) 
• The previous adopted annual budget 

The timeline follows:

• First Quarter (January – March) - Departments update the CIP. 
• Second Quarter (May – June) - the CIP is presented to council members at Committee of the Whole. 
• Third Quarter (July – September)- Departments start entering cost-to-continue estimates and Council approves the CIP. Committee of the Whole reviews the Financial Management Plan and sets priorities. A draft budget is being prepared that includes initiatives proposed by departments. The City Administrator and the Mayor review the budget document and the Mayor selects which initiatives to include in the budget.
• Fourth Quarter (October – November) - The Mayor’s Recommended Budget is presented at the Committee of the Whole meeting and council members adjust the budget throughout various working sessions. There is a public hearing held before council officially approves the budget.

How are property taxes impacted by a city budget? 

Property taxes serve as a significant source of revenue for the City's general fund and is utilized to pay for the cost of government services and facilities. The amount of anticipated revenue is a major factor in calculating the level of expenditures. When the City needs to enhance services or invest in new initiatives to meet community needs, this can result in an increase in higher property taxes.

What is the difference between a Mayor's Recommended Budget and the one adopted by City Council? 

The Mayor's Recommended Budget is an initial proposal for how a municipality will expend funds for the upcoming year and is created by the mayor and city administrator. Council members will review the proposed budget, hold a public hearing, and make changes to the budget. After final review, council will adopt the budget but it may differ from what was originally recommended. 

How is the levy limit determined? 

Levy limits are established by the state legislature and are designed to control the growth of property taxes within a community. It is based on a variety factors such as previous property tax revenue, net new construction, and other state-imposed restrictions. Each of those factors are taken into account as a municipality balances the need for funding city services and infrastructure while considering the financial impact on residents.