Tax Season!! April 18 is almost here!

Let's talk about taxes.  To get a better understanding of how individual tax obligations impact the city budget, I met with Dave Schmiedicke, City of Madison Finance Director.  In a nutshell, I wanted to have a refresher on the terminology used in the budget, a better understanding of the calculations used, and the impact of taxes and fees on the General Fund Expenditures and Revenues.

Dave has been the Finance Director since August 2011.  Prior to that, he worked in Wisconsin state government finance and budget development for 23 years, including serving as State Budget Director for nearly a decade.

What is a property tax levy?

• Each taxing jurisdiction in the city (city, county, school district and technical college district) sets its own levy. 
• The total of those levies is used to calculate the overall tax rate and property tax amount that is paid by each taxable property in the city
• The primary levy in the city is for schools.  That levy is affected by the amount of general school aid received from the state by the school district, as well as changes in enrollment and the state revenue limit factors
• All local governments in Wisconsin have either a revenue limit (school districts) or a levy limit.  In most cases, those limits can only be exceeded through voter referendum.  

Who has jurisdiction over the county's tax levy and calculation?

• The levy for Dane County government is approved by the Dane County Board.  The amount of the county levy apportioned to the city's property tax bill is based on the city's proportional share of the county's overall equalized property value.  Also, note that Dane County is authorized to levy a 0.5% sales tax throughout the county to fund the county government.  The City does not have that authority. 

How is the MATC tax levy determined?

• The levy for the technical college district is approved by the technical college district board.  A referendum is required to exceed the technical college levy limit and for some types of debt.  The same apportionment process described above (city share of the district's equalized value) is used for the technical college district levy within the city. 

How is the school district tax levy determined?

• The levy for a school district is approved by the elected school board.  The same apportionment process described above (city share of the district's equalized value) is used for a school district levy within the city. 

The city government has no authority to impact the school district, county, or technical college district levies.

What Is the Mill Rate?

The mill rate is the amount of tax payable per $1000 of the assessed value of a property. 

• Mill is derived from the Latin word "millesimum", meaning thousandth
• Property taxes are calculated by multiplying the assessed, taxable property value by the mill rate and then dividing that sum by 1,000

How does Madison calculate the mill rate for our local taxes?

• The Mayor, Staff and City Council collaborate on creating and adopting a budget for the upcoming year.  The City Council votes to adopt the annual budget each November.
• The budget determines the amount of money needed to provide city services:

Note: numbers 1-5 are reflected in the City Tax Computation image

1. 2022 Budget Expenditures                                            = $360,321,027
2. 2022 Budget Revenue (state aid, fees, licenses, etc.) =-$101,276,986
3. 2022 Property Tax Levy                                                 = $259,044,041

• The mill rate, or property tax rate, is calculated by dividing the property tax levy by the assessed value of properties in the city, the net of state property tax credits. 

1. 2022 Net Taxable Property Assessed Value    =$31,141,173,900
2. 2022 Mill Rate          = $259,044,041/$31,141,173,900 =8.3184

What other factors impact the mill rate?

• If compared to the previous year, the rate of increase in the levy is greater than the rate of increase in assessed property value in the city, then the mill rate will go up
• If that relationship is reversed, then the mill rate will go down

• Changes in state property tax credits (school levy, first dollar and lottery credits) can also affect year-to-year changes in the mill rate. 
• TIF increments also impact the mill rate calculation

How do I estimate my contribution to the 2022 Madison General fund?

• The mill rate adopted in the 2022 budget was 8.3184 (also found on Page 5 of 2022 Adopted Operating and Capital Budgets).  To get an estimate of your property taxes for city government services the following formula can be applied: (Assessed value of your property * Mill Rate)/1000

The 2022 adopted budget uses an average assessed value of $335,200

Home Assessed Value:                      $335,200

Multiplied by Mill Rate:                         8.3184

Divided by:                                               1000

Estimated City Tax Liability:           $2,788.33

• The tax distribution is also listed in your property tax bill.  The current property tax bill can be found in the city's assessors' site where you can search by address, property owner's last name or parcel number.
• After locating the property, click on the Tax Details button to review the tax allocations

Assessment Information:

Tax Information by Jurisdiction:

• Tax distribution for prior property tax bills can be found in Dane County Treasurer's Office under Tax Dane site  where you can search by address, property owner's name, parcel number or an advance search
• After locating the property, use the Tax Information box to navigate to prior years and click on the Tax Info Details for the year selected to review the prior tax allocations

What is under an alder's purview when it comes to taxes & fees?

• The Council approves all city taxes and fees either through the budget process and resolution (city tax levy) adopted each year or through separate resolutions (e.g., sewer and stormwater rates) or enabling ordinances (e.g., wheel tax). 
• The Council approves, either through the budget or separate resolutions amending the budget, all appropriations authorizing the expenditure of those revenues. 
• There are parameters on the extent of that authority that has been established under state law, such as levy limits on the extent of property tax increases and the Public Service Commission of Wisconsin (PSC) oversight of water rates. 
• Some fees are set in an ordinance (e.g., wheel tax) and require an ordinance change. 
• Also, in the case of the wheel tax, state law and administrative rules establish timelines for any changes. 

• The local vehicle registration fee (also known as the "wheel tax") is authorized under state law.  Cities, counties, towns, and villages may adopt an ordinance authorizing a local vehicle registration fee. The fee revenues must be used for transportation purposes.

What is the city, county & state allocation of the vehicle registration fee?

• The state levies an $85 annual passenger vehicle registration fee which is deposited in the state's segregated Transportation Fund from which appropriations are made by the State Legislature for state highway, local roads, transit, rail, harbors, and other related state transportation costs. 
• Dane County has authorized a $28 annual fee, which it uses for county highway costs. 
• The City of Madison has authorized a $40 annual fee which it uses to help fund Metro Transit operating costs. ?
  

Where can I find the actual and projected revenues collected from the vehicle registration fee?

• Revenues from the fee can be found under Metro Transit's budget, page 5 under "Vehicle Registration" line item detail
• For 2022, it is expected to collect $6 Million in revenues to be used for Metro operations
• Removing the wheel tax will impact the Property Tax Levy
  • Taxes will need to be raised within the limits of the state's levy restrictions or other revenue sources
  • And/or city service will need to be eliminated or reduced

• The special charge creates an independent funding source to maintain a robust recycling program despite rising costs. This alleviates pressure on the general fund, allowing the City to fund key priorities and services that cannot be covered through direct charges. 
• Generates revenue of $1.5 million in 2022 (half-year) and $3.0 million in 2023 (full year) to help cover cost of recycling that would otherwise have to be supported by the property tax. The 2022 budget used almost the entire amount of property tax allowed under the state-mandated property tax (levy) limits
• Revenue from the charge was included in the 2022 adopted budget by Common Council in Nov 2021
• For additional information about this charge check the Finance Committee presentation and the meeting recording starting at marker 36:04

How much will an average value home homeowner contribute to the 2022 city budget?

The table below shows the changes from 2021 to 2022 for taxes on the average value home, the vehicle registration fee and the municipal services bill components on a per residence basis. 

This concludes my discussions with Dave.  For some, including me, these are complex concepts to have a full grasp on.  Nevertheless, these are important discussions that impact all of us in the city.  If you want more details on how property taxes impact our general fund, please feel free to reach out. Once again, thanks to Dave, for his support and service to the city of Madison!!  

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General Fund revenues and expenditures, as well as property taxes on the average value home, can be found in the upfront summaries in the budget book. 

• ~72% of General Fund revenues are made up of property tax
  • The property tax bill has multiple allocations 
  • The city portion of the tax bill is on average 39%
• ~13% is made of revenues such as fines and forfeitures, licenses and permits, charges for services and other sources focused on specific activities (e.g., liquor license, building permits, parking violations, ambulance conveyance)
• ~11% is made of State aid of General Fund revenues
• ~4% came from Federal American Rescue Plan Act (ARPA)

I intended to figure out my own financial contribution to the city's values and priorities.  Director Schmiedicke helped me understand the terminology and the calculations used to determine those contributions.  The information collected is represented below in a simple chart indicating the calculations needed to reach an estimate.  To calculate your impact, you can pull the information directly from the tax bill.

The following table uses the example from the budget, which is based on an average home assessed value of $335,200.

The Municipal bill often referred to as the water bill contains revenues that are deposited in separate enterprise funds (e.g., Water Utility) and special revenue funds (e.g., Urban Forestry Special Charge).  None of these revenues are deposited in the General Fund, however, these charges supplement various essential city services.

Avg charges per year:

Some examples of how these funds are allocated and used.  For example:

• Water is fully funded by the Water Utility Fund

• Stormwater is funded is by the Stormwater Utility Fund

Rates can be found on the second page of the utility bill. 

On Oct 16, 2021, update blog entry, I shared highlights of the 2022 Executive Budget and how to get around it.  The same navigation can be applied to the 2022 Adopted Budget.  In order to have honest conversations around taxation, we need to have a broader understanding of our city's strengths and weaknesses.  Do I find strength in Madison's green spaces, access to services, environmental justice, social justice, diversity, and strength in building communities? Or do I see these as weaknesses? 

Most of the people that have connected to inquire about taxes are focused on very specific budget lines; direct service (Refuse/Recycling collection, snow removal, etc.) and their own personal expectations around policing services.  As alders, we are expected to zoom out in order to gain access to a broader view.  We are expected to find equitable and inclusive ways to support parks, various methods of transportation, access to recreation opportunities, direct services optimization, fire, police, health, safe living conditions, business, libraries, community building, and many other lines in our budget. 

I encourage you to review the budget and to continue to question the Mayor's and Council's decisions and funding allocations that directly impact the General Fund.  I want to hear from you:

• Which programs funded by the General Fund should be eliminated?  Why is the program not needed?
• Which city agencies should reduce services? Why?

This was a long blog; hope you'll find it helpful.  Don't forget, Monday is Tax Day!