Revenues

The state of Wisconsin has a lot to say about how our city can manage its finances. It caps our allowed property tax rate while limiting other options, and for decades has been reducing the amount of the state income tax that it sends to local governments.

This is the single most important thing to understand about how we have arrived at such a difficult time. The whole sad tale is very readably and concisely presented in this report from the Wisconsin Policy Forum. At least check-out the graphs.

Key points

• Wisconsin forces cities and villages to rely on real estate tax to a greater extent than any other midwestern state,

• The state maintains control over income and sales tax, allowing only minor sales tax deviations (like county 0.5% and our premier resort tax),

• Through the 1970s, 80s and 90s, state aid was a greater part of city and village budgets than was local property tax, but

• Beginning about 1980, state aids have steadily decreased as a fraction of city and village budgets, increasing reliance on property taxes. Then, in a final insult,

• In 2005 the state began restricting the ability of municipalities to raise property tax rates, even as state aid continued to decrease.

The Wisconsin Policy Forum report compares the Wisconsin model for local government finance with other states. The take-home from this part of the analysis is that we are really boxed-in, compared to cities in other states. And it doesn't have to be this way.

Conclusions

There is little hope for any significant reform in the short term, and the big squeeze is not done with us – every year the gap between allowed tax revenues and expenses will become larger.

We need to look at every one of the few new revenue sources available to us. A referendum to raise the tax rate is our single most important option.

There are three revenue streams designed to let the city recapture from our visitors some of the costs we incur by being such great hosts.

Premier Resort Area Tax

This is tax that select municipalities in Wisconsin are allowed by state law to collect and use "...for infrastructure in support of the tourism economy." Wisconsin DOR has a good explanation here. It seems to be an odd duck, involving a good bit of savvy political work. Former mayor Larry MacDonald made it happen for Bayfield in 2003. The 0.5% tax is on sales made by retail businesses that are (presumably) frequented by our visitors (see link above for the complete list). It annually yields about $100,000 to the General Fund.

Room Tax

The hotel-motel room tax is described in city ordinance § 54-19. It is 8.0% on "gross receipts from such retail furnishing of rooms, lodgings, or sites." As discussed in more detail in Our Funds - Tourism, only about 30% of the collected room tax goes directly to city coffers, about $120,000 annually into the General Fund.

The proliferation of on-line vacation rentals raises the question of how the city should recover costs related to these visitors, and specifically how this tax applies. Discussion is on-going.

Passenger Fees - City Dock

This is a newly-enacted (begins January 2023) per-person tax on departures (or landings, but only once per trip) from the Bayfield City Dock. It applies to charters and tours of all sorts. The Apostle Islands Cruise service will surely be the largest contributor, but small sailboat charter businesses are also covered by it. I am not sure if the charter boats that lease space in the slip by the Coast Guard station are included (that is not considered "City Dock" but does belong to the city). The Madeline Island Ferry owns the dock it uses and so is not covered by this tax. I have not seen projections of revenue from this new tax.