MONROE - As the city gets closer to finalizing its 2012 budget, an old problem has resurfaced: Tax Increment District (TID) No. 7 is not capable of making its annual debt payment of about $277,000.
City Administrator Phil Rath alerted the Finance and Taxation Committee Oct. 4 about the pending extra debt service expense in the 2012 budget. The committee is set to take up the issue in a special budget meeting tonight, Oct. 17 at 5:30 p.m.
The district's flat-lined equalized value was a concern last year, but it managed to raise enough tax revenue to make its interest-only payment.
This year, however, the district must make a principal payment as well. With about $26,000 left in its fund balance and an anticipated revenue of $47,000 coming in this year, the district comes up about $200,000 short. Whatever amount the district can't cover, the city is responsible for paying.
"TID Seven has more expenses than revenues - and has had for quite some time," Rath told the committee. "The debt service overwhelms what's left."
TID 7, about 25 blocks in Monroe's downtown Square area, created $128,400 in extra tax revenue in 2009 for its 2010 budget, even though its equalized value dropped by $22,900 from 2009 to 2010. Part of the drop was attributed to a change in state calculation methods, which affected all tax increment districts. But economic change was the greatest factor for the decreases, and most TIDs across the state had decreased values.
The city's five districts lost a total of about $6 million in value last year.
This year Monroe TIDs lost another $6 million, according to Wisconsin Department of Revenue statements of changes in 2010 TID equalized values. Equalized values are calculated using property value assessments from November and adjusted for economic change, new construction and other adjustments or corrections.
TID 7 is valued at $31.5 million, a loss of $2.9 million, or 9 percent down from $34.4 in 2010.
The TID began in 2005. Its 2005 base value is $29.9 million.
Also hit hard this year was TID 5, down $4 million. The district's value at $16.8 million is down 19 percent from last year when it was valued at $20.9 million. The district lost $2.7 million last year. TID 5 covers the city's far west side, Honey Creek Park area, Badger State Ethanol plant and the blocks east of 4th Avenue West.
Only TID No. 8, along Mansion Drive and north along 18th Avenue, showed an increased value of about $900,000, or 35 percent. TID 8 equalized value stands at $3.6 million, up from $2.6 million. TID 8 value increased 1 percent or $23,000 last year.
TID No. 4, the North Industrial Park, and TID No. 6, on the city's near west side including the Pick'N Save shopping strip, showed only a slight decrease, less than 1 percent each. TID 6 is donor to TID 4. TID 6 lost $2.9 million, 13 percent, in value last year, and TID 4 lost $276,000, or 5 percent.
Revenue reports from the TIDs were not yet available last week. But City Treasurer Cathy Maurer said only TID 7 appears to be in trouble.
Rath told Finance and Taxation Committee members the possible options available to them as they prepare the budget: Increase the tax levy amount, because debt service doesn't affect the state imposed levy limit; or dip into the city's fund balance. The city could make the payment as a type of loan to the district, to be repaid with interest, but in the end, if the district continues to falter in raising enough revenue, the city will stand to lose money.
Because the Finance and Taxation Committee has already insisted on a total zero percent increase in the total levy limit, Maurer said there is little choice but to pay with the fund balance.
City Administrator Phil Rath alerted the Finance and Taxation Committee Oct. 4 about the pending extra debt service expense in the 2012 budget. The committee is set to take up the issue in a special budget meeting tonight, Oct. 17 at 5:30 p.m.
The district's flat-lined equalized value was a concern last year, but it managed to raise enough tax revenue to make its interest-only payment.
This year, however, the district must make a principal payment as well. With about $26,000 left in its fund balance and an anticipated revenue of $47,000 coming in this year, the district comes up about $200,000 short. Whatever amount the district can't cover, the city is responsible for paying.
"TID Seven has more expenses than revenues - and has had for quite some time," Rath told the committee. "The debt service overwhelms what's left."
TID 7, about 25 blocks in Monroe's downtown Square area, created $128,400 in extra tax revenue in 2009 for its 2010 budget, even though its equalized value dropped by $22,900 from 2009 to 2010. Part of the drop was attributed to a change in state calculation methods, which affected all tax increment districts. But economic change was the greatest factor for the decreases, and most TIDs across the state had decreased values.
The city's five districts lost a total of about $6 million in value last year.
This year Monroe TIDs lost another $6 million, according to Wisconsin Department of Revenue statements of changes in 2010 TID equalized values. Equalized values are calculated using property value assessments from November and adjusted for economic change, new construction and other adjustments or corrections.
TID 7 is valued at $31.5 million, a loss of $2.9 million, or 9 percent down from $34.4 in 2010.
The TID began in 2005. Its 2005 base value is $29.9 million.
Also hit hard this year was TID 5, down $4 million. The district's value at $16.8 million is down 19 percent from last year when it was valued at $20.9 million. The district lost $2.7 million last year. TID 5 covers the city's far west side, Honey Creek Park area, Badger State Ethanol plant and the blocks east of 4th Avenue West.
Only TID No. 8, along Mansion Drive and north along 18th Avenue, showed an increased value of about $900,000, or 35 percent. TID 8 equalized value stands at $3.6 million, up from $2.6 million. TID 8 value increased 1 percent or $23,000 last year.
TID No. 4, the North Industrial Park, and TID No. 6, on the city's near west side including the Pick'N Save shopping strip, showed only a slight decrease, less than 1 percent each. TID 6 is donor to TID 4. TID 6 lost $2.9 million, 13 percent, in value last year, and TID 4 lost $276,000, or 5 percent.
Revenue reports from the TIDs were not yet available last week. But City Treasurer Cathy Maurer said only TID 7 appears to be in trouble.
Rath told Finance and Taxation Committee members the possible options available to them as they prepare the budget: Increase the tax levy amount, because debt service doesn't affect the state imposed levy limit; or dip into the city's fund balance. The city could make the payment as a type of loan to the district, to be repaid with interest, but in the end, if the district continues to falter in raising enough revenue, the city will stand to lose money.
Because the Finance and Taxation Committee has already insisted on a total zero percent increase in the total levy limit, Maurer said there is little choice but to pay with the fund balance.