Levy Limits Explanation and Strategies

Under the 2015-2017 state budget, 2015 Wisconsin Act 55, a municipality is allowed to increase its levy over the amount it levied in the prior year by the percentage increase in equalized value from net new construction. If no new construction occurred in your community, then your allowable levy increase is zero percent. All of the exceptions and modifications to levy limits that existed in previous law continue to apply (e.g., debt service levy exempt from levy limits; municipalities can exceed limits if approved by referendum). Act 55 also made the following tow changes to the levy limit law:

Budgeting and Levy Limits


Wisconsin municipalities have now operated under levy limits for a full decade. With its numerous adjustments, the impact of levy limits on individual communities has varied considerably. This article by Todd Taves, Senior Municipal Advisor and Principal, Ehlers, appeared in the July 2015 Municipality magazine.

Net New Construction and Levy Limit Worksheet



Levy Limits Worksheet:  https://ww2.revenue.wi.gov/Internet/forms/govtvc/SL-202m.pdf

Levy Limits Exception Created for Municipalities That Own Landfills


State law requires a municipality to reduce its allowable levy by the estimated amount of fee revenue it collects for providing garbage collection, fire protection, snow plowing, street sweeping, or storm water management if those services were partially or fully funded in 2013 by the property tax levy. Act 55 excludes from the definition of "garbage collection" any garbage collection by a municipality that owned and operated a landfill on January 1, 2013. Under this exemption, a municipality that owns a landfill will be able to establish or increase garbage collection and landfill tipping fees without having to reduce its allowable property tax levy by the amount of new fee revenue it receives.

Allow Communities to Carry Forward Unused Levy Capacity for 5 Years


Beginning with the 2015 levy limit worksheet municipalities will now have the ability to carry forward unused levy limit capacity for a period of up to 5 years under certain conditions. Under prior law, unused levy limit capacity could only be carried forward to the following year and was permanently lost if unused. Under this new provision, the maximum amount of carry forward that can be claimed as an adjustment in any given year is equal to 5% of the prior year’s actual levy. Claiming the carry forward requires approval by a 2/3 majority vote of the governing body, and the amount of general obligation debt outstanding in the year the carry forward is claimed must be less than the amount of general debt outstanding in the prior year.

The amount of the potentially available carry forward adjustment is determined by totaling the amount of any unclaimed carry forward percentages from each of the preceding 5 years' levy limit worksheets. However, since the law specifies that the first worksheet that can be considered is the one for the 2014 levy, the potential of a 5 year carry forward will not be truly available until the 2019 levy year. 

Other Key Levy Limit Provisions


Expanding Levy Limits to Include Certain Fee Revenue


The levy limit law requires a municipality to reduce its allowable levy by the estimated amount of fee revenue it collects for providing garbage collection, fire protection, snow plowing, street sweeping, or storm water management if those services were funded in 2013 by the property tax levy. Similarly, a municipality must reduce its allowable levy by any payment in lieu of taxes it receives that is designated to pay for any of the 5 services listed above if the service was funded in 2013 by the levy.

A municipality need not reduce its allowable levy by the amount of fee revenue or PILOTs it receives if the voters approve in a referendum a resolution stating that the community’s levy limit does not need to be reduced when the community converts to paying for the service by a fee.

Carry Forward Allowed Up to a Limit


If a municipality’s allowable levy in the prior year was greater than its actual levy in that year, the governing body may vote to increase its allowable levy in the next succeeding year by the difference between these 2 amounts, as determined by the Department of Revenue , up to a maximum of 1.5% of the actual levy in the prior year. The carry forward resolution may be passed by a majority vote of the governing body if the increase is .5% or less of the prior year’s actual levy. If the increase is between .5% and 1.5% of the prior year’s actual levy the governing body must pass the carry forward resolution by an extraordinary vote. For municipal governing bodies that have less than 5 members, passage must be by a 2-thirds majority vote. If the governing body consists of at least 5 members, then the carry forward resolution must be passed by a 3-fourths majority vote.

Negative Adjustment for Reduced Debt Service on Debt Issued Prior to July 1, 2005


Under the levy limit law, whenever a municipality’s levy for the payment of any GO debt service on debt issued before July 1, 2005 is reduced from the previous year, the municipality must reduce its allowable levy by the same amount.

Option for Avoiding Negative Adjustment for Reduced Payments on Debt Issued Prior to July 1, 2005.


The levy limit adjustment requirement described above does not apply to a municipality in any year the municipality does not carry forward unused levy capacity.

Key Exceptions from Levy Limits


This is not a complete list. See Wis. Stats. sec. 66.0602(3) for all of the exceptions.

Debt Service Levy Exempt


As in the past, the levy limit does not apply to a municipality’s debt service on general obligation debt authorized on or anytime after July 1, 2005. For general obligation debt authorized before July 1, 2005, if the amount of debt service in the preceding year is less than the amount of debt service needed in the current year, the levy limit is increased by the difference between the 2 amounts. Also, for the first time If a municipality’s levy for the payment of any GO debt service on debt issued before July 1, 2005 is reduced from the previous year, the municipality must reduce its levy limit by the same amount. The negative adjustment requirement described above does not apply to any municipality that does not carry forward unused levy capacity.

Also, amounts levied to cover any revenue shortfall for debt service on a revenue or lease revenue bond are exempt from levy limits.

TIF Increment


As in the past, in determining its levy for 2015, a municipality must subtract any TIF district tax increments.

Increment from a Closed TIF District

If a TIF district terminates in 2015, 50% of the increment of the former district may be added to the community’s allowable levy.

Referendum Option

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Levies can be increased above the allowable limits if the amount is approved by referendum. The governing body must adopt a resolution specifying the proposed amount of increase in the levy beyond the amount that is allowed and stating whether the proposed increase is for the next levy only or if it will apply on an ongoing basis. The resolution must then be submitted to the electors for a vote.

Timing of Referendum


With regard to the 2016 levy, collected in 2017, a municipality may hold a referendum to exceed the levy limits only after it learns what its allowable levy increase is from Department of Revenue. Department of Revenue staff has concluded that a community must know what it's allowable levy increase is (i.e., the percentage increase in equalized value because of net new construction) before it can conduct a levy limit referendum. Communities won't learn the net new construction number until August 1 at the earliest. So, practically speaking, the earliest a municipality can schedule a referendum relating to the 2016 levy is the general election in November.

Sample Resolution


A sample resolution for exceeding the levy limit is posted under Legal FAQs.

Penalty


If the Department of Revenue determines that a municipality’s levy exceeds the allowable limit, it must reduce that municipality’s shared revenue payment in the following year by an amount equal to the excess levy. However, levies that exceed the allowable levy by less than $500 are not subject to the penalty. Also, Department of Revenue is authorized to waive the penalties if it determines that a penalized excess was caused by a clerical error by Department of Revenue or a municipal clerk in preparing or delivering the tax roll.

Municipalities and Counties that Passed Levy Limit Referendums



Year County - Municipality Code Municipality  Name County Amount of Increase Comments
2006 05106 Village of Bellevue Brown $299,477  
2006 05216 City of De Pere Brown $343,700  
2006 20022 Town of Friendship Fond Du Lac $13,799  
2006 37192 Village of Weston Marathon $226,636  
           
2007 05216 City of De Pere Brown $760,886  
2007 66166 Village of Richfield Washington $398,632  
           
2008 05216 City of De Pere Brown $180,390  
2008 24271 City of Princeton Green Lake $378,347  
2008 29036 Town of Summit    Juneau $536 We have been unable to verify whether the Town of Summit actually passed a referendum or if they incorrectly completed their levy worksheet.
2008 44020 Town of Grand Chute Outagamie $697,000  
2008 54246 City of Ladysmith   Rusk $12,000  
2008 56181 Village of Sauk City Sauk $1,780,834 It was determined after contacting the Village of Sauk City that they did not pass a referendum in 2008.  They incorrectly completed their levy limit worksheet.
           
2014 69146 Village of Lohrville Waushara $20,000  
2014 23999 Green County Green $790,000 Referendum passed on 08/12/2014 for a period of 5 years to begin on 2014 levy limit worksheet for an additional $790,000 per year.
2014 44006 Town of Buchanan Outagamie $350,000 Referendum passed on 11/04/14 for an ongoing basis to begin on 2014 levy limit worksheet.
           
2015 66018 Town of Polk Washington $216,506 Referedum passed on 11/03/2015 for an ongoing basis to begin on 2015 levy limit worksheet.