Levy Limits Explanation and Strategies
Budgeting and Levy Limits article by Todd Taves, CIPMA Ehlers Senior Municipal Advisor/Principal, in the July, 2019 issue of The Municipality.
By Greg Johnson, Ehlers Senior Municipal Advisor/Vice President
Published in the December, 2018 issue of The Municipality.
Levy Limit Worksheet
DOR posts the annually updated Municipal Levy Limit Worksheet and the Municipal Levy Limit Worksheet Instructions on its website here. The due date for electronically filing your community’s levy limit worksheet is December 15.
Other Key Levy Limit Provisions
Levy Limits and Fee Revenues for Certain ServicesThe 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. The total amount of the levy reduction implemented by a municipality, including prior year reductions, is statutorily capped and may not exceed the amount funded by tax levy in 2013 to provide the covered service.
Water utility related fees for the production, storage, transmission, sale and delivery of water for public fire protection purposes are exempted from this provision. Such fees are not considered “fire protection” service fees that result in a reduction in the community’s allowable levy. This allows communities to shift from using the levy to pay the fire hydrant rental fee to directly charging utility customers without having to reduce the community’s allowable 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 LimitIf 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, 2005Under 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 LimitsThis is not a complete list. See Wis. Stats. sec. 66.0602(3) for all of the exceptions.
Debt Service Levy ExemptAs 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.
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.
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 also specify the purpose of the levy increase. The resolution must then be submitted to the electors for a vote.
Timing of ReferendumIn even numbered years, a levy limit referendum may be held at the spring primary or election or partisan primary or election. In any odd-numbered year, a municipality may call a special referendum on the same dates as when a school board may call for a referendum. Current statutes limit school board referenda to the next regularly scheduled spring primary or election or partisan primary or general election. [s. 121.91 (3), Stats.] For more detailed information, see Legal FAQ Taxation #8.
Sample ResolutionA sample resolution for exceeding the levy limit is posted under Legal FAQs.
PenaltyIf 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.
DOR Levy Limit Referendum Fact Sheet (Includes sample language) (PDF)