Baraboo prepares steps in budget amid inflation concerns, shortfall

City officials took note of a number of factors that will impact the Baraboo budget Tuesday as they work to organize a document that will both address needed cuts brought on by a decade of over-taxation and ensure wages are updated after inflation has increased costs from last year.

City Administrator Casey Bradley explained the timeline to Baraboo City Council members. Supervisors for each department were asked to make up for a shortfall of $826,000 by cutting a percentage of expenses. Those numbers were presented in May.

The proposed budget drafts will initially include those figures, Bradley said.

One of the biggest effects to the document will be the impact of inflation. While it slipped to 8.5% between June and July from a peak of 9.1% between May and June, it remains at 8.5% higher than in July 2021.

When the cost of goods and services rises, wage earners need more income to keep up, prompting a higher cost-of-living adjustment. Per the gauge used by the Social Security Administration to set the annual COLA number, July’s inflation rate put the increase at 9.1%. It will not be announced until October after the SSA gathers three months of data for its determination.

Some groups are projecting the increase could be as high as 10%, Bradley said. That could be negative for the city which could only afford a 3.25% increase in 2021 despite a recommended 6.1% bump.

“If that 10.5 happens, we’re looking at about 13% below our standard,” Bradley said.

Much like last year, Bradley said he and other city department supervisors want to ensure their employees are competitively paid and focus on putting available funding toward the cost-of-living increase.

“We’re going to try focusing on a COLA,” Bradley said. “That was the priority of department heads, was to try focusing on giving any kind of COLA as much as possible, even if we’re foregoing steps for merit increases just to try to keep being competitive with our wages.”

Another snag for their planning is a raise in contributions to the Wisconsin retirement fund by 0.03% for general employees and 1.2% increase for protective employees. There are also national projections of an increase of 6 to 10% in health insurance costs, though the state market has it at 4%, which Bradley said will hopefully be 0% when the numbers are solidified.

The budget shortfall comes from reported finance documents to the state from the city claiming Baraboo needed to levy taxes at its cap to pay for debt incurred by creating two tax increment finance districts. Instead, the city was using the taxes collected through TIDs 6 and 8 to pay for that debt and using the levy for its general operating expenses since 2009. Both TIDs closed this year.

As city officials prepare to deal with added expenses, there has been positive development in the last year.

“We did nearly double net new construction,” Bradley said.

In 2021, economic development was 0.6 of 1% while this year, it has been 1.11%, which is a shift of $34,000 to more than $72,000, Bradley said. Net new construction provides a means for municipalities to increase the amount of property tax they can impart on owners through state law. Baraboo had previously been operating at its cap.

With new development also comes more tax revenue from those properties, which means a higher amount of funding for city expenses. Though Bradley noted it may take time to accrue adequate funding given other financial challenges.

“We’re starting to head in the right direction, finally, but it’s going to take several years to actually get where we need to be,” Bradley said.

Ald. Jason Kent said the timeline for adopting the budget and the steps staff are taking to finalize it fall in line with the newly developed strategic plan city planners have been drafting for months.

The timeline dictates a goal of adoption of a budget by November. There will be a capital review for street projects Aug. 16. The draft will then go to Finance Director Julie Ostrander by Aug. 22. There will be a review Aug. 23 by members of the Administrative Committee, which will cover debt, levy and other items, like priorities of council members and capital planning. Then the Finance Committee will review it as well as the full city council.

Department supervisors have a deadline of Sept. 19 or 20 to turn in their finalized budgets. From there, the council can rank its goals.

“We need that for the overall picture of where the hard decisions need to be made,” Bradley said.

The final draft will be presented during the Oct. 11 council meeting and will be discussed for potential amendments. Votes by council to approve the document are scheduled through October.

“I think the way we’re headed is the way we need to go,” Kent said. “This is definitely how we need to do things going forward.”