Levy Limits Explanation and Strategies

Under the 2017-2019 state budget 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. 

The 2017-2019 budget makes three notable changes to the levy limit law:



1) Levy Limit Adjustment for Debt Service on Debt Issues before 2005  


The 2017-2019 state budget deleted the provision allowing municipalities to refrain from decreasing their allowable levies by the amount that their debt service on debt issued before July 1, 2005 decreases between the prior year and the current year as long as it did not carry forward unused levy capacity for a prior year.  Under a provision included in the 2011-13 biennial budget, if the amount of debt service in the preceding year on debt originally issued before July 1, 2005, is more than the amount of debt service needed in the current year for such debt, the allowable levy under the levy limit is decreased by the difference between the two amounts. The language exempting a municipality from having to decrease its allowable levy if it does not carry forward unused levy capacity from a prior year was deleted from the law by the budget Act. This modification to the levy limit program first applies to amounts levied in December, 2017.

2) Levy limit adjustment for fire protection fees 


The 2017-2019 state budget modifies the negative levy limit adjustment for covered services so that it does not apply to fees for the production, storage, transmission, sale and delivery of water for public fire protection purposes, beginning with taxes levied for the 2017(18) property tax year. DOR administers the levy limit program and has determined that the covered service adjustment for fire protection extends to public fire protection charges charged by water utilities as authorized under current law provisions and set by the Public Service Commission (PSC). Those charges pertain to a water utility's costs to maintain infrastructure and operating capacity that is necessary for the municipality's fire department to fight fires, but in excess of the capacity needed to provide water service to ordinary consumers. State law allows the water utility to recover those costs by either charging the municipality directly, including a charge in the water bills of its customers, or using a combination of the two procedures. The costs are recovered through a public fire protection fee. When the PSC conducts a rate case for a water utility, it calculates a new public fire protection fee. When the PSC imposes a higher fee, a negative adjustment under the covered service provision of the levy limit law may be triggered depending on how the water utility collects the fee. This provision would override the adjustment in such cases and allow a community to shift from using the levy to pay the fee to adding a fee onto the customer’s water utility bill without needing to reduce its allowable levy.  

2) Municipal levy limit referendum ballot must include purpose of levy increase. 


The 2017-2019 state budget requires for the first time that the language of a municipal levy limit referendum include the specific purpose for which the additional funds levied would be used. This provision would first apply to a resolution to exceed the levy limit that is adopted on the effective date of the state budget, September 2017l.


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


Net New Construction:   https://www.revenue.wi.gov/equ/nnc.html

Levy Limit Worksheet



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

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.


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

When a TIF district terminates 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 2017 levy, collected in 2018, 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 2017 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.