Debt and Taxes

For those interested in the building blocks of municipal debt and taxes, the Wisconsin statutes that underpin the rules of the game for cities like Bayfield are listed here. Thanks to former Bayfield city attorney Bill Bussey for walking me through this.

State statutes are all available at https://docs.legis.wisconsin.gov/statutes/statutes. References below like "§ 62.11" point to Chapters and subsections that can be found on this website.

The common council's powers to tax and borrow are granted in § 62.11: "[council]... may carry out its powers by license, regulation, suppression, borrowing of money, tax levy, appropriation, fine, imprisonment, confiscation, and other necessary or convenient means. The powers hereby conferred shall be in addition to all other grants, and shall be limited only by express language."

A city's property tax revenue (the largest single source of funds for most) is determined by the tax rate times the "equalized" value of taxable property in the city. The tax rate (or "levy rate" or "mill rate") is the dollars of tax per dollar of equalized property value. For example, in 2022 Bayfield's tax rate (for the city only) was $0.006743403, so a home with an equalized value of $100,000 was taxed at $674.

The equalized value of property in the city is determined annually by the state, through a confusing and slow process. For our purposes here, it changes slowly with only small year-to-year adjustments. The most recent figure for Bayfield is $102,811,800.

However, the city's ability to tax is limited by § 66.0602(2). This says that the tax rate may increase only by the amount that new construction adds to the city's "equalized" property value. The new construction in 2022 allowed the city to increase its tax levy from $615,062 to $617,172, a paltry $2,110.

Increasing the tax rate beyond what is allowed by the above is possible through a referendum, as described in § 66.0602(4). This section allows the common council to formally ask the voters for permission to raise the rate either for one year or on an ongoing basis.

There is also a limit on how much a city can borrow. This appears in § 67.03, where the maximum indebtedness is specified as 5% of the (equalized) value of the taxable property in the municipality. Bayfield's current property value thus allows for up to $5,788,235 in debt.

The purposes for which borrowing is allowed are wide open by the language in § 67.04(1) and (2). Copier paper, salaries, or a new city hall are all permitted.

Finally, the common council may simply add the costs of debt repayment to the tax rate, without a referendum. This feature of Debt and Taxes is articulated in both § 67.035 and § 66.03(d)(2), assuring lenders that the city will repay its debts.

One grizzled veteran of the council put it something like, "we can ask the voters for permission to increase taxes (by referendum), or we can just borrow what we need, add the debt payments to their tax bill, and give part of the new tax to the bank".