Article 3: What other funding options are available?
The prior two articles on Transportation Utilities explained why the City is considering creating one and how the fees would be set up. This article explains funding alternatives to Transportation Utility Fees, and why the City is considering using a Transportation Utility instead of Assessments or a Wheel Tax.
State and Federal Funding?
The City does take advantage of State and Federal funding as much as it can, through grants, State funds, and ARPA funding, and it will continue to do so. However, State and Federal money is not enough to meet the City’s needs, only certain types of projects are eligible for this money, it will typically only fund a portion of project costs, and State and Federal funds are not always reliable from year to year.
Premier Resort Area Tax (PRAT)
The City had worked to enact a Premier Resort Area Tax to help pay for City projects. Voters in Tomahawk overwhelmingly approved a PRAT referendum in 2019. However, the City needed the state legislature’s approval to enact a PRAT. Unfortunately, the state legislature was not willing to do so, and it appears as though that will not change anytime soon.
Special Assessments
Special Assessments distribute costs for a project by each property owner along the project. Some or all of the costs for roadwork, curb and gutter, sidewalk and storm sewer can be assessed to the property owners. Each owner pays in proportion to how much of their property borders the street being replaced. For example, if a property had 80 feet fronting the street being replaced, and the cost per foot was $100, that property would face a special assessment of $8,000.
Wheel Tax
A wheel tax offers local governments the opportunity to create a local, annual vehicle registration fee. While they are simple to administer, they face two huge drawbacks: 1) they place almost the entire burden on residents 2) they cannot raise the amount of money the City needs without being extraordinarily high.
Increased Property Taxes or Additional Debt
The City could raise taxes through a referendum or take on more debt to pay for roads. However, the costs would be distributed to property owners by property value, which does not directly relate to road usage. For debt funding, there are additional borrowing and interest costs for debt, increasing the cost by 20-40%. The City has been using debt to fund road projects in recent years, but there is a limit to how much debt the City can take on, and even with debt funding the City is significantly behind on road repair work, which can be seen with the condition of many of the City’s roads.
Comparing the Funding Methods
|
Funding Method |
Additional Cost for Road Projects |
Cost per Resident |
Cost Allocation Fairness |
Cost Distribution by Customer Class |
|
Special Assessments |
Moderate |
None – Annually High – every 20-40 years |
Moderate – by road improvement |
Spread among all classes, including tax-exempt |
|
Wheel Tax |
Low |
High |
Low – by vehicle registered |
Almost all on residential |
|
More Debt |
High |
Low – but moderate with increased taxes |
Low – by property value |
Spread among all classes except tax-exempt |
|
More Property Taxes |
Low |
Moderate |
Low – by property value |
Spread among all classes except tax-exempt |
|
Transportation Utility Fees |
Low |
Low |
High – by road usage |
Spread among all classes, including tax-exempt |
- Comparison based on how transportation funding methods, projects, and costs are typically experienced in Wisconsin
While there is no perfect funding solution, a Transportation Utility stands out as a strong option to help pay for the roads the community needs. The City will hold a public information meeting to go into more detail on the Transportation Utility on January 19th, 2022 at 5:30 PM.