By Steve Barg
If you have heard anything about our preliminary work on the 2016 budget, you may know that the city is facing a tough new issue in addition to the usual challenges of developing a balanced budget. This is because we want to qualify for the state of Wisconsin’s Expenditure Restraint Program (ERP). As I write this, it seems likely that the city will decide to make the needed cuts to proposed expenses to be eligible for a 2017 ERP payment, although that is not a certainty.
To give you some background, I will explain the purpose of ERP, how a community meets the program requirements, and why it is important for the city to qualify.
Under ERP, the state has established an annual funding allocation, which is divided each year among all communities that limit their general fund expenses to modest increases over the previous year. The city of Marshfield has historically been committed to meeting the requirements of this state program as ERP payments are an important revenue source.
The exact ERP payment that a community receives depends on how many municipalities qualify for this “finite pie.” To illustrate the importance of this revenue source, in 2015 the city received nearly $400,000 from ERP based on holding the line on general fund expenses in its approved 2014 budget.
Determining eligibility for ERP, the state uses a formula with two components. The first gives a community credit for 60 percent of “net new construction,” which is basically the increased tax value of all new residential, commercial, and industrial construction from the previous year. This allows cities to raise their level of expenses to help cover the costs of providing municipal services to new development areas.
The other component is the Consumer Price Index (CPI), or what most of us refer to as the inflation rate. In recent years the CPI has usually been 1.5 percent or higher. When you combine our net new construction factor (0.7 percent) with the current CPI (0.3 percent), the city must hold any increase in any general fund expenses to 1 percent or less in order to qualify for a 2017 ERP payment. By comparison, the average for the previous five years was 2.8 percent. Having a little room to work is critical as the city has some “built-in” cost increases in its annual budget such as contractual obligations, union contracts, etc.
On behalf of the mayor, common council, and city staff, I would strongly encourage you to make your voice heard during the next few weeks as the city prepares and adopts its 2016 budget. Based on past budget discussions, I can tell you that all comments and suggestions given to us by our citizens are reviewed and given much consideration.
Please contact me at 715-486-2003 or Steve.Barg@ci.marshfield.wi.us with your thoughts so that I can forward your ideas to the mayor and council members. Also, I hope that you will consider attending one of our upcoming budget meetings. Dates and times will be posted on our website, ci.marshfield.wi.us.