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Construction up locally, but counties must tighten their belts

Construction has slowed in Pierce and St. Croix counties and that means a slower growth in real estate tax revenues for both counties.

According to numbers released by the Wisconsin Department of Revenue Friday, new construction has raised St. Croix County's tax base by 4.974 percent. That compares to an increase of 6.645 percent last year.

New construction has raised Pierce County tax base by 3.366 percent, compared to 3.411 percent last year.

Last year St. Croix County's net rate of new construction was the highest in the state. This year St. Croix ranks second, led only by Adams County. Pierce County ranks 17th.

For many years Wisconsin counties have operated under mill rate caps. Although the caps were firm, higher annual values -- due to both to new construction and inflationary increases for existing property -- meant more tax money for the counties. Even if they did no construction, property owners could expect to see a tax increase each year as the value of their property increased.

Last summer, responding to complaints about escalating property taxes, the Wisconsin Legislature adopted a three-year property tax freeze. The governor vetoed part of that bill to end up with levy limits for the 2005 tax levy (collected in 2006) and the 2006 levy (to be collected in 2007).

The "freeze" allows a county to increase its levy by either its rate of new construction or by 2 percent, whichever is more.

Theoretically, new construction would cover the increase, and owners of existing property would see no tax increase. Residents pay less than they would have without the freeze, and local governments have less revenue to fund their services.

Pierce County Finance Director Julie Brickner said her county would need to levy a little over $13 million to continue business as usual, cover inflationary increases and pay already-set salary raises. But the county can levy only $12.86 million.

Brickner said that while the county can levy $418,793 more than it did last year, it needs to make $200,000 in program/staff cuts.

St. Croix County Finance Director Michelle Pietrick said the new number means her county can raise $1.1 million more than last year for a total levy of about $23,370,000.

"(The allowable levy increase) is a little lower than we were anticipating," said Pietrick. "We were hoping it was going to be in the 6% range, but it is what it is."

Last year St. Croix used about $220,000 in fund balances and borrowed for a handful of projects to stay below the levy freeze.

This year the county is in the early stages of budgeting, but with higher gas and steel costs, finance workers expect department requests to be up.

"We're going to have our hands full this year," said Pietrick. "We're going to be starting our three-day (budget) hearings with a hole, and we're going to have to climb out."

Last fall Finance Committee Chairman Ralph Swenson made a point of saying that, for the most part, departments didn't get less than they did the year before, but many got less than they wanted.

Pietrick said that will likely be true again this year. She said last year the Finance Committee sent budgets back to departments with instructions either to trim a specific amount or to cut a certain percent of costs. She expects the same thing will happen this year.