New residential and commercial development can help address financial challenges faced by local governments in places like Jefferson County, according to the latest Wisconsin Policy Forum report.
New construction can directly boost county and municipal revenues by increasing how much local officials can raise property taxes under state law, per the report, as well as expanding the tax base paying into local governments’ coffers.
Jefferson County has lagged behind the state in development since 2015, with new construction rates between 0.7% and 1.8%.
That has limited property tax growth and forced the county and other local governments to tighten their belts.
“Jefferson County in theory has strong opportunities for development,” the report’s authors note, citing its placement along the Interstate 94 corridor between Madison and Milwaukee. “In practice, that has not materialized.”
But if the county had a new construction rate of 2% – equivalent to over $240 million annually – it would have generated an additional tax levy of $8.4 million since 2017 without additional impact to property owners.
The report notes that while this is a “very difficult task today,” the county posted rates of net new construction between 2.4% and 3.3% between 2000 and the 2008 housing crisis. Counties such as La Crosse and St. Croix have at times posted construction rates close to or exceeding 2% since 2015.
Municipalities in Jefferson County would see a similar boost to their tax base, as well as benefit from increased revenue from impact fees and special assessments. The county could also see a boost to its sales tax revenue.
School districts could indirectly incur benefits from new residential development, since more housing could draw more students to the district and increase the state aid received by schools. Area technical colleges would also benefit since state aid for tech college districts is tied to net new construction.
The report finds that new local costs generated by this infrastructure would not exceed local revenues.
However, the report’s authors warn that development “is not by itself a panacea for the financial challenges faced by local governments and schools,” noting that the state has limited revenue and spending for local governments despite rapid inflation.
“Your costs are going to grow more than your revenues are allowed to grow, and over time that’s going to become more and more difficult to address,” senior research associate Tyler Barnes told WisPolitics.
While the report focuses on Jefferson County, the authors note that the county’s mix of urban and rural areas serves as an “effective stand-in” for communities facing similar fiscal challenges across the state.
Still, Barnes said, not all communities may be able to stimulate the kind of growth discussed in the Forum report, particularly rural counties where the population is currently declining.
“Wisconsin’s population is not growing all that rapidly, so there are a lot of places that are going to be facing that pressure, regardless of what local government policies are,” he said.
