On February 3, 2015, Gov. Walker officially introduced his 2015-17 state budget, which outlines the state’s revenue and spending priorities over the biennium. The state budget proposal consists of a $68.2 billion operating budget over the two-year period and contains numerous provisions designed to fund services and programs related to transportation, economic development, education, health care, and other areas at both the state and local levels.

The following are some of the specific provisions in the proposed state budget that impact the real estate industry.

Property taxes

Maintains the property tax freeze: Maintains the current property tax controls for school districts, counties, municipalities and technical colleges, which:

• Places a zero percent property tax cap on local levies. 
• Allows increases based on net new construction. 
• Authorizes local governments the power to carry forward up to 0.5 percent of unused levy authority to the next year. 
• Enables local governments to exceed the levy limits if approved through local referendum. 

Reduces property taxes by increasing the school levy tax credit: Increases funding for the school levy tax credit by $211.2 million in the biennium to reduce property taxes by $105.6 million annually. This would result in a property tax reduction of approximately $10 for the average homeowner over the biennium. 

Provides greater transparency on property tax bills: Requires property tax bills to:

• Disclose debt service and fees from each taxing jurisdiction and their respective property tax bill impacts.
• Explicitly inform taxpayers of the impacts of additional amounts levied pursuant to a referendum to exceed a tax levy limitation.

Creates a county-based property assessment system: Modifies the current system of municipal property value assessment to a county-based system for smaller cities, villages and towns. First and second-class cities — which are those with a population of 39,000 or greater; currently 17 cities meet that definition — would maintain their independent property tax assessment responsibilities. This change would begin in 2016 and would be completed by the 2017 property assessment year. Under the proposal, counties may form multi-county assessment regions at their discretion. Counties would be allowed to pass a percentage of the assessment costs (95 percent) on to municipalities.

Government structure and agency reform

Merges state agencies and divisions within agencies: Reduces spending and streamlines government services by merging:

• The Wisconsin Housing and Economic Development Authority and the Wisconsin Economic Development Corporation to create the Forward Wisconsin Development Authority.
• The Department of Safety and Professional Services and the Department of Financial Institutions to create the Department of Financial Institutions and Professional Standards.
• The Division of Energy Services and Division of Housing within the Department of Administration.

Provides DNR and DATCP secretaries with more authority and accountability: Provides state agency secretaries with more authority and accountability by removing rulemaking and policymaking authority from the Department of Natural Resources Board and the Department of Agriculture, Trade, and Consumer Protection Board. See “environmental and land use” below. 

Economic development 

Reduces the historic rehabilitation tax credit: Makes the following changes to the historic rehabilitation tax credit program:

• Limits annual tax credit awards to $10 million. 
• Awards credits on a competitive basis.
• Repeals the credit for non-historic buildings built prior to 1936. 

Increases funding for economic-development loan programs: Provides the new WEDC/WHEDA authority with $55 million in fiscal year 2016-17 to fund reforms to economic development lending programs by directing the authority to create a regional revolving loan fund program.

Creates new enterprise zones: Creates 10 new enterprise zones for a jobs tax credit, and the business development tax credit will be created to streamline the jobs tax credit and economic development tax credit.

Transportation and infrastructure 

Transportation funding and bonding: Provides $6.5 billion to build and maintain transportation projects and relies on $1.3 billion in bonding to fund transportation projects. This transportation funding includes $836.1 million over the biennium for major highway projects, such as the Zoo Interchange and the Stillwater Bridge and Hoan Bridge projects. 

Rural transportation and infrastructure initiative: Provides the following funding and new programs to stimulate economic development in rural areas:

• $6 million to expand the Broadband Expansion program.
• $4 million for dam repair, reconstruction and removal projects.
• $2 million annual increase to the Transportation Economic Assistance grants.
• $9 million in segregated funds to fund the general transportation aids.

Environmental and land use

Transfers regulatory oversight of private septic systems to the DNR: Transfers all regulatory authority related to the review of private on-site wastewater treatment systems, as well as associated funding from the Department of Safety and Professional Services to the Department of Natural Resources. 

Makes the Natural Resources Board an advisory body: Eliminates the rulemaking and policymaking powers currently vested with the NR Board, converting the board officially to an advisory council. See “government structure and agency” above.
Places a moratorium on awards for new PECFA sites: Prohibits approving any new sites from receiving reimbursement from the Petroleum Environmental Cleanup Fund Award. The state would stop reimbursing costs for any sites now in the program for expenses incurred after June 30, 2017.

Creates a study on health impacts of wind farms: Directs the Public Service Commission to conduct a study on wind energy health-related impacts and submit a report of that study to the governor and legislature no later than one year after the effective date of the biennial budget.

Places a moratorium on stewardship land purchases: Establishes a moratorium on Stewardship Program land purchases until the level of debt service is reduced to $1 per $8 of total cost for land purchases acquired since program inception, which is projected to be in the year 2028.

Consolidates recording of boundary changes: Consolidates the process related to recording all changes in municipal boundaries by transferring responsibility from the Secretary of State to the Department of Administration.

Budget process

Over the next several months, the proposed state budget will be reviewed, debated and modified by the state legislature. The legislature’s Joint Finance Committee (JFC) will begin the budget review process by conducting a detailed review of the budget, which will include a thorough cross examination of agency secretaries and numerous public hearings in Madison and throughout the state. After the JFC completes its review, each house of the legislature is given an opportunity to review and make changes to the budget. Eventually, both houses must agree and vote to pass the same version of the budget before the bill goes back to the governor for final consideration and possible vetoes before he signs it into law.

The WRA will continue to work with Gov. Walker’s administration and lawmakers on both sides of the aisle to address any concerns related to provisions in the budget that will have a direct impact on the real estate industry.

Tom Larson is Senior Vice President of Legal and Public Affairs for the WRA.