City PRAT Left Out of State Budget

The City of Sturgeon Bay may have to find a new solution to fund upgrades to its crumbling streets. Rep. Joel Kitchens was unable to get the Joint Finance Committee to include the Premier Resort Area Tax (PRAT) exemption in the state’s biennial budget, which was passed July 3. 

City voters had approved the .5 percent sales tax in April 2018 after the city’s Ad Hoc Committee on Funding for Local Street and Infrastructure made that recommendation in November 2017. The tax would have raised an estimated $800,000 per year for street improvements. 

That committee was chaired by then-alder and now Mayor David Ward.  At the time, Kitchens said he would try to get legislative support but was skeptical that then-Gov. Scott Walker would sign off on it. 

“I thought it had a pretty decent chance of at least getting to the governor’s desk,” Kitchens said, but three other communities (Prescott, Minocqua and Pepin) all requested exemptions, and the Joint Finance Committee rejected all of them. 

“Generally it’s tough to get something like that passed for specific areas,” Kitchens said and noted that he’s working with Rep. Rob Swearingen (R-Rhinelander) to introduce new legislation to enact the PRAT in Sturgeon Bay and Minocqua, but that won’t receive consideration until the fall or early winter. 

In the short term, Ward said he’s not counting on special legislation. The city could enact a special assessment or a wheel tax, but the latter proved unpopular when the committee investigated options. 

“I’m not a fan of a wheel tax,” Ward said. “When someone comes here from out of town and uses our roads, they don’t pay that.”

Ward said that in the short term, he supports modest debt financing as a bridge to a larger funding solution.

The city maintains 67 miles of roads that are now on a 55-year replacement schedule – more than double what engineers recommend. The city replaces about 1.2 miles of roads each year. Ward said he would like to use debt financing to increase that to 1.7 miles per year. 

“Interest rates are fairly low right now,” he said. “We ought to be spending about two times what we are on roads. When we investigated this, we had a lot of people who came to us and said, ‘Just borrow the money and fix it.’ We need to be doing something now.”

The ad hoc committee had recommended debt financing in addition to the PRAT in 2017, but then-Mayor Thad Birmingham and the city council chose to put all of its eggs in the PRAT basket.

The city could also go to referendum to exceed the levy limit, but it would likely take a year to get it on the ballot, get approval from voters, then start collecting the tax before it could begin funding road improvements. 

“With modest debt financing, at least you get started,” Ward said.

Municipalities throughout Wisconsin have struggled to keep up with infrastructure maintenance for years, but the problem was exacerbated when former Gov. Scott Walker enacted a 0 percent cap on levy increases in 2010. That limits municipalities to increases equal only to net new construction in the municipality, regardless of increased costs in other sectors. That is, even as the costs of fuel, materials, services and human resources increase, budgets do not increase unless there is significant new construction. Levy increases were first capped at 3 percent by Gov. Jim Doyle in 2006.

Kitchens said he has heard grumbling from local municipal leaders about the cap, but he has not received a formal request from local leaders that it should be relaxed or eliminated. The League of Wisconsin Municipalities has lobbied for relaxing the cap to no avail. 

Kitchens said he is considering introducing legislation that would allow communities to implement a tax if voters approve and eliminate the additional step of getting legislative support. 

In Door County, the towns of Liberty Grove, Union, Jacksonport, Gardner, Nasewaupee, Forestville and Washington have all approved exceeding the revenue caps by resolution, an option not available to villages or cities.