Middleton Review 465

Saturday, July 12, 2025

In this issue:

The budget issue (part II)

City finance 101: Prioritizing in the age of entitlement

The budget issue (part II)

(For part I, see Middleton Review 464)

City finance 101: Prioritizing in the age of entitlement

As identified by its Finance Department, the City of Middleton's fiscal strengths lie in its healthy fund balance levels, low debt levels with rapid repayment, a strong and diverse tax base, as well as its TIF districts, especially high-performing TIF District #3. TID #3 is scheduled to close next year after being extended one more time for one more year, with the 'proceeds' from that extension going towards housing. According to state law, at least 75% of the increment generated during that extension has to be used for 'affordable' housing and the rest for housing in general. At current estimates, the City will have about $11 million to play with, and an ad hoc subcommittee of the Workforce Housing Committee is looking into ways on how to play.

The City's challenges, according to the Finance Department, mostly revolve around the limits on the property tax levy imposed by state law. These limits, which were first imposed in 2006, were tightened in 2011. Since then, only the 'change in net new construction' value can be used to increase the levy, while inflation cannot be taken into account. This leaves the City with few options to increase revenues, not least since state aid, which another significant source of income, is politically volatile. Thus City officials' traditional complaint about 'unmet staffing and facility needs'.

To a certain extent, these 'unmet needs' are of the City's own making. City services can crudely be divided into 'needs' and 'wants'. Trash collection, water and sewer, public safety (police, fire, EMS) and public works activities like street repair are generally considered to be 'needs'. Many of these are required by state law.

'Wants' are less clearly defined since the people who want certain City services and amenities also tend to think they need them. Parks, playgrounds, recreational trails, tennis and pickle-ball courts, offload-bicycle tracks, public pools, even the recycling center, brush pick-up, community gardens, public library and the senior center are among those. They are not essential, and many people lead fulfilling lives without ever using any or most of them, but they are popular and part of what determines a community's quality of life. Even the sometimes contrived City-managed entertainment at the Stone Horse Green is part of that - not necessary, but now part of city life. Nobody missed it when it wasn't there, but as they say, 'build it and they will come'.

And this is where the distinction gets even murkier. Some 'wants' are asked for by the residents, maybe even a majority of residents, and abolishing them is pretty much inconceivable - the park system, library and senior center come to mind. Others originated in City Hall - the trails and the Stone Horse Green are prime examples.

Some - to oversimplify a bit - are subsidized by the poor to benefit the rich. Brush pick-up is an example of this type of regressive system: It benefits mostly single-family home owners, but is also paid for by apartment dwellers whose landscaping is usually done by a private contractor hired by the landlord, the cost of which is factored into the rent.

Both 'needs' and 'wants' grow; 'needs' inevitably so due to population growth, 'wants' often because of a conscious effort by the providers. Police services and street maintenance are examples of the former, library programming, recreational programming and Stone Horse Green entertainment are examples of the latter.

Some of this is without doubt due to bureaucratic empire-building. Some of it is more subtle, albeit no less self-generated: Increased regulation leads to requests for more money and staff (planning and zoning, for example), which leads to requests for more money and staff from the administrators who administer the other administrators (human resources, for example). Others start as City initiatives, but then continue to grow by popular demand.

City departments justify their requests for more money at budget time with this increased demand for their services, and it is the job of our elected officials to set priorities. They do so based on recommendations from City staff and on their own judgment. In recent years, this prioritizing has led, as a cherry-picked example, to denying requests for more police officers in favor of hiring an event-planner/assistant for the Stone Horse Green/Planning Department.

Once a service or amenity has been made available, it is very difficult to abolish it again, or even to reduce its scope. Government programs tend to become entitlements as soon as they are created. Every government spending program has its advocates, and they will speak up loudly when their pet project is being threatened.

This makes it easy for elected officials to approve new initiatives (it buys them quick popularity with groups of engaged voters), but also almost impossible to cancel them again - Common Council members hate saying 'no' to their neighbors and voters. Most of them will also have left public office long before the fiscal consequences of their decisions begin to bite.

It is more immediately rewarding for politicians to buy some (not-so-)cheap popularity through new pickle-ball courts than to hire a few more police officers to enforce traffic laws.

That said, the City is being squeezed by the many demands - basic and frivolous - on the public purse on the one hand, and by the limits imposed on its revenues by state law on the other. Making budget decisions is a fine balancing act that involves trade-offs that inevitably lead to criticism.

Because, by state law, municipalities can only adjust their property tax levy by the change in 'net new construction', they are forced to grow. But because they are not allowed to increase the tax levy to adjust for inflation, the more they grow, they more they fall behind. At the same time, because the money spent on debt service is not restricted by this limit, they are encouraged to borrow. It is a fiscal downward spiral that, under different guises, is repeated at every level of government. The only way for municipalities to escape it is if voters approve exceeding the levy limit through referendum. (For the federal government it is to print more money.)

Chart 1

Middleton has had positive 'net new construction' growth for most of this century, although it has been slowing recently (see chart 1 above). It has not been enough, though, to keep up with inflation and population growth (see chart 2 below).

Chart 2

(Source for charts and other information: City of Middleton)

(To be continued)