A new report from the Wisconsin Policy Forum calls the long-term financial outlook for the city of Racine “worrisome.”
This comes as the city and surrounding areas prepare for the arrival of Foxconn, which promises to bring thousands of jobs to the area as the Taiwanese company builds out its high-tech manufacturing campus.
The presence of Foxconn is seen as a mixed bag by report authors. More workers means an increased tax base and higher revenues, but service demands are only expected to increase.
Report authors say this situation presents a big opportunity for the city to live up to its economic potential. But to do so it will need to enhance its attractiveness to developers and to the thousands of residents looking to fill the jobs expected along with Foxconn.
“A critical factor will be the capacity of Racine’s city government to provide the public services and public infrastructure that developers and potential new residents will be seeking,” they wrote.
Among the issues listed in the report is budget solvency — a longstanding problem for Racine, report authors say. General fund revenue growth has been sluggish — 3.3 percent from 2012 to 2016 — and has led to the loss of 46 full-time positions, putting pressure on department operations.
The report notes Racine had substantial growth in debt service, which led to a “heavy property tax burden” for local residents.
Another issue is that Racine has a large retiree health care liability which, in combination with the city’s capital debt, will keep eating up its budget.
Report authors stress that the concerns in the report do not indicate “an immediate financial crisis.”
“Rather, they should be seen as evidence of a gradually worsening financial paradigm that can continue to be tolerated for the time being, but ultimately could force damaging reductions to existing service levels and corresponding threats to future growth prospects if left unaddressed,” authors said.
Eighty-two percent of Racine’s total revenue comes from only two sources: property taxes and intergovernmental revenues. And neither of these is growing.
If nothing changes, the report says departmental cuts may be needed just as the Foxconn project and other developments are increasing demand for services.
A third issue, service solvency, relates to public works like parks and roads. Services like these have declined over a five-year period, report authors note.
Though residents haven’t yet seen their roads fall into disrepair, city officials say insufficient maintenance now will eventually lead to expensive fixes.
But it’s not all bad — the report found Racine’s cash on hand is an area of strength. Though growth has been slow, the general fund balance is healthy with strong liquidity. That provides the city with flexibility to deal with other problems listed in the report.
The Wisconsin Policy Forum was created in early 2018 after the Wisconsin Taxpayers Alliance and the Milwaukee-based Public Policy Forum merged. Both groups performed independent research on public policy issues, and the new group continues to do so.
This report relies on metrics from the International City/County Management Association.
See the full report here: http://publicpolicyforum.org/sites/default/files/LivingWithinItsMeans_FullReport_Final.pdf
–By Alex Moe
WisBusiness.com
