Soglin: 'We knew that the most difficult years would come around 2015 to 2018.'
When Paul Soglin ran for mayor in 2011, he harshly criticized the amount of debt the city was incurring under his opponent, two-term incumbent Dave Cieslewicz.
It was a major theme of the campaign. Soglin called Cieslewicz's budgeting practices unsound, with a ratio of debt service to general fund expenditures creeping toward 13%.
"When I was mayor," Soglin told Isthmus in February 2011, "We decided... our debt as a percentage of total city expenditures should be no greater than 12.5%. Dave Cieslewicz's administration has raised [the acceptable] level to 15%. When Dave came into office, [the actual] ratio was 10.7%; it's now 12.7%."
But in the $247.6 million 2015 capital budget Soglin proposed last week, the borrowing ratio is estimated at just over 14%. And it's projected to continuously rise through 2021, when it will be around 23%.
Unsurprisingly, Soglin's opponents for mayor next year are calling him out for the high level of borrowing, along with other issues in his budget.
Ald. Scott Resnick, a mayoral candidate, accuses Soglin of stuffing his budget with pork as he seeks reelection. "A number of these promises he's pushing for in 2016 or 2017 either are faulty promises, or he's going to put Madison in a place of debt that's fiscally irresponsible."
Soglin counters that all is going according to plan. He says he knew it would take time for the city to gets its debt ratio under control because the infrastructure needs and revenue constraints are great. But he says his policies have slowed the increases in borrowing.
"We knew that the most difficult years would come around 2015 to 2018," he says. "What we've managed to do is stop the rate of increase. We've kept it lower than it was forecast to go back in 2011."
A chart from the 2011 capital budget shows the debt ratio was projected to be 14.3% in 2015, roughly the same as Soglin's budget now forecasts. The 2011 budget projected the city's debt ratio in 2017 at 20.5%; that's also roughly the same as the current budget's forecast.
But Soglin says his projections are conservative. As development occurs and property values rise, the city's tax revenues will increase -- and the debt ratio will fall. "Through 2011 and most of 2012, we hadn't seen much new construction in the city," the mayor says. "We've reached a point now where we're seeing an increase in construction."
He says the 12.5% debt ratio is still ideal, and he believes the city can return to that rate.
Paying for affordable housing
One element of Soglin's budget that is widely praised by even some of his critics is his $20 million plan over the next five years to create about 750 units of affordable housing, both for the homeless and working poor. But there are some questions about how they will be paid for.
Soglin would kick off this program next year with $4.5 million in funding, by borrowing $1.5 million and using $750,000 from the county, $1.5 million from the city's Affordable Housing Trust Fund, and $500,000 in tax incremental financing (TIF) funds.
By state law, when a tax incremental district (or TID) closes, a municipality can keep it open for one more year, using the proceeds generated to fund affordable housing anywhere in the city, even outside the district where the funds were generated.
However, none of the city's 15 active TIDs are closing next year, according to Joe Gromacki, the city's TIF coordinator. Three TIDs are nearing closure.
David Schmiedicke, the city's finance director, says that while the TIF funds might not be immediately available for use citywide, they will be available in "ebbs and flows" over the next five years.
Soglin says the intent is to borrow to jumpstart the affordable housing program, and maintain the program through TIF funds. Although construction on the first of these residences is unlikely to start next year, Soglin hopes the city can ink contracts with developers to build them.
Meanwhile, Bridget Maniaci, a former alder who is also running for mayor, faults Soglin for the large number of projects that have been delayed. The 2015 capital budget proposes reauthorizing $84.4 million in projects -- that is, reapproving projects that were budgeted for this year or earlier. By Maniaci's count, 114 projects are being delayed.
The reauthorizations are higher than in recent years. Last year, the city reauthorized $46.3 million in uncompleted projects. In 2013, it was $32.8 million. In 2011, Cieslewicz's last budget, the city reauthorized $48.5 million in projects from the year before.
"This isn't one or two agencies, this is all across city hall," Maniaci says of the reauthorizations. "There are many items that are not getting accomplished. That has to do a lot with leadership and management coming out of the mayor's office."
Finance director Schmiedicke says some reauthorizations are beyond the city's control, like the project for new fire department offices and a remodeled Fire Station #1, on West Dayton Street. He says that project is part of a Hovde residential and retail development, which has faced delays.
"That's about a $13 million project, all of which is being reauthorized," Schmiedicke says. "The reason is the pace of the developer has been slow. Very large projects can affect the reauthorizations."
Soglin says capital projects take staff time to implement, which strains the operating budget. "The size of the budget is too ambitious in proportion to the size of the staff," he says. "It's very hard to grow city staff with the limits placed on us because of Act 10." Act 10 is the state law that, among other things, restricted the amount municipalities could raise property taxes.
The mayor adds that many reauthorizations are intentional. Delaying projects is one way Madison can keep its debt ratio down. "That's how we're going to have to avoid a debt service rate higher than 15% to 17%," he says. "That's why I'm recommending moving back the reconstruction of Monroe Street."
Here Resnick -- who was until this campaign considered a Soglin protege -- attacks the mayor's priorities.
"You need to focus on the priorities: infrastructure, environment and neighborhoods," Resnick says. "You can make an argument that [Monroe Street] should have been reconstructed when Dave was in office."
Resnick questions why the mayor is pushing ahead on costly projects like renovating the Madison Municipal Building, building a public market and rebuilding the Lake Street parking garage. "While these are important projects for the future of Madison, they can be pushed off," he says.
Resnick also questions whether some of Soglin's initiatives can be sustained.
"Right now he's calling for new neighborhood centers every single year. We're not seeing subsequent operating expenditures. It's not sustainable," he says. "The success of a neighborhood center is not the building, it's the success of the people inside the building. When you don't have staff or resources, you don't have a neighborhood center that can thrive."
Soglin declined to comment on Resnick's criticism of his priorities until he hears more specifics.
Meanwhile, Soglin's operating budget is due to be introduced in the first week of October, and it's sure to bring more political debate.
Ald. Chris Schmidt, the council president, says he has concerns about shifting priorities in the capital budget, including the delay of the Monroe Street reconstruction and a biodigester. However, he adds that he hasn't yet examined the budget as closely as Resnick and Maniaci, who are in campaign mode.
Schmidt does worry about how the upcoming election might taint this year's budget deliberations: "We know there's going to be conflict and argument."