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Frequently Asked Questions about the Pewaukee Merger StudyYOUR QUESTIONS ANSWERED In an effort to provide accurate information on the possible merger, below please find answers to some common questions often asked by residents of both the City and Village. This section will be updated periodically with questions selected from those submitted through the Web site. Please note that this Web site is designed for public education purposes to help ensure residents receive accurate and unbiased information, so questions or comments that include political commentary should be directed to your elected officials. The following information has been drawn from studies conducted and a preliminary plan prepared by the Merger Advisory Committee, and does not necessarily reflect the opinions of the Pewaukee Village Board and Pewaukee City Council.
1. Why would the City and Village want to merge? In 2006, the Pewaukee Village Board and City Council agreed to renew discussion of a possible merger/consolidation of the two communities that would only be made if a combined government would be more efficient and less expensive for all residents. A Merger Advisory Committee was appointed to explore various ways a merger might impact all taxpayers and utility customers in a combined municipality. Final estimates have yet to be determined, but based on 2010 proposed budgets for the City and Village, preliminary estimates show that a merger would result in an overall savings of $331,000 in annual governmental operating costs per year and $8.3 million in future utility capital costs over the next 15 years. Those cost savings could increase if future elected officials in the combined municipality look at additional cost-saving opportunities. Visit the www.sewrpc.org/pewaukee-merger for more information and to view reports compiled by the Merger Advisory Committee.
2. What are the possible impacts of merging the City and Village? The overall goal throughout the merger study process was to determine whether a merger would help make government more efficient and less expensive for residents in both communities. The study also has included an examination of public services and public infrastructure. Benefits may include lower property taxes and/or lower water and sewer utility rates in the two municipalities. The final estimates have yet to be determined. Many individuals in both municipalities believe that, together, the Village and City constitute a single community of interest and that, in the long run, it would be best to have a single governing body making decisions for that community. All merger study reports and reviews of previous discussions can be found on the Merger Study Information page of the site.
3. How does the merger process work? The merger of two communities occurs through a process called consolidation. The Merger Advisory Committee made up of residents and local officials from the City and Village, has been studying various ways a merger might impact all taxpayers and utility customers in a newly combined municipality. If the merger study identifies substantial, tangible benefits, residents would then have an opportunity to vote on whether a merger should happen. This would happen with a binding referendum to be held on the same day in both communities. Under Wisconsin law, the City and Village must review and approve the consolidation proposal before a referendum vote takes place.
4. When will a referendum vote take place? That is still undetermined. If the City and Village approve the merger proposal, residents of both municipalities could vote on a merger referendum in June 2010.
5. Where is the process now and what is the next step? The Merger Advisory Committee has been meeting, analyzing and talking about a range of issues that include public services, tax rates, utility rates and other issues. They have held several meetings on the issues and have produced various study reports. You are encouraged to review them as discussions continue. The Merger Advisory Committee continues to meet and discuss various elements of a possible merger. Check back to the Merger Information Web site for updates on future meeting dates.
6. Have Village and City residents ever voted on whether to merge? No. If the issue moves to a referendum, it would be the first time a merger of the two communities would come before respective voters. The Merger Advisory Committee has been studying the key issues since 2008, and a preliminary plan or proposed consolidation ordinance has been sent to the City Council and Village Board to determine possible next steps. No decision has been made. If a final merger plan is approved by both government bodies, a June 2010 referendum vote in each community could be held to decide if a merger should happen.
7. Who makes the ultimate decision on whether there is a merger? City and Village residents will ultimately make the final decision. If the Village Board and City Council approve a final merger plan, voters will be entitled to vote on a binding referendum. If voters decide not to merge, the two individual governments will continue to operate in their current manner.
8. If there is a merger, what happens to the current members of the Village Board and City Council? If voters approve the referendum to merge, the current Village Board and City Council would be replaced with a new City Council made up of two elected officials from each of four voting districts created through a merger. Under the preliminary plan, voters will choose the new City Council and new Mayor in an election that could be held in August 2010. Current Board and Council members will serve on an interim basis only until the new City Council is established.
9. What happens to property taxes? Estimates contained in the initial plan provided to the Council and Board show a decrease in property tax rates for the next several years. Depending on future actions taken by the new City Council, these rates may change.
10. How will a merger impact water and sewer rates? The preliminary plan under review by the City Council and Village Board found that sewer and water utilities for the merged community, when operated jointly, would be less expensive. Under the preliminary plan, there would be combined utility facilities and one rate structure for utility customers. While there would be no immediate impact on utility rates, it is projected that there would be $8.3 million saved in future capital improvement costs through the merger over the next 15 years. Operated as a single utility, there would be cost savings for former City water customers and slightly higher future utility rates for Village utility customers. However, these higher future rates for Village utility customers would be offset by the significant property tax savings that would occur with a merger. It’s important to note that the $8.3 million in savings assumes that the new City would not have to replace the existing City Hall water tower. This issue is under review by the City Public Works Director.
11. What is the Street Utility District? There has been a good deal of discussion about the topic of a Street Utility District (SUD). At this point, it is only a suggestion being considered, and no final decision has been made. Currently, the Village has a higher cost per mile compared to the City for the maintenance of streets, sidewalks and street lighting, as well as services such as leaf and brush collection. An SUD fee that would apply to all properties within the current Village boundaries has been proposed by the Merger Advisory Committee as a means of paying for this higher cost per mile for Village streets. A basic level of street costs for all streets within the merged community would be included in the property taxes paid by all taxpayers. The suggested SUD fee would then pay for the additional services provided in the area of the current Village. If approved by the Village, the SUD would be created by the Village Board before the merger takes place, and exist for a period of 10 years and then automatically dissolve. Even with this additional tax, Village property owners would still benefit from an overall decrease in their property taxes with a merger. As indicated, the idea of an SUD is under review by the Board and Council, and no action has been taken.
12. How will the fire and police departments and other government services be provided under one municipality? If the City and Village merge, operation of those services would be overseen by the newly elected City Council. All departments, employees and contracts of the existing City and Village would remain in place until either the interim Council or the newly elected Council and Mayor decide to make changes. The preliminary plan under review proposes that the combined municipality would have full-time staff to provide most services and that only the City Planner and City Attorney would be contracted services. The Merger Advisory Committee and its consulting attorney are continuing to review the preliminary proposal to make sure it is consistent with state statutes.
13. If the merger happens, what will happen to the City of Pewaukee’s undeveloped land? Under the preliminary plan, the City’s undeveloped land would become part of the new City created with a merger. As discussions have continued, some have stated that if the City and Village remain separate, the City’s tax rates would significantly benefit from future development. However, if the City remains separate, it may cost more for the City to provide the sewer and water services to support new development than if the two municipalities were combined. The preliminary plan estimates that a merger of utilities could save about $8.3 million in future water utility infrastructure. Also, new development may not result in lower tax rates because new development creates demand for City services. Over the long term, new development may further increase the tax rate, as new development has in other municipalities.
14. Where do residents go if they have questions or comments? As discussions continue, Village and City residents are encouraged to ask questions either at committee meetings, future town hall meetings or through the Pewaukee Merger Web site - www.sewrpc.org/pewaukee-merger. The Web site also allows residents to access reports from studies conducted to date, including the proposed consolidation ordinance currently under review by the City Council and Village Board. Again, no decision has been made, and input from residents is valuable as the process moves forward. The Merger Advisory Committee has made it a top priority to provide residents fact-based and unbiased information through regular email alerts, newsletter mailings and updates posted to the merger’s Facebook page and Web site. All materials also will be made available at the Village Hall, City Hall and the Pewaukee Library.
15. Why is the withdrawal of $5.5 million of Village utility reserves being proposed? The Village’s tax rate is currently much higher than the City’s. One of the reasons for this is the higher debt load carried by the Village. Under current State law, a consolidated Pewaukee would be required to have the same general property tax rate throughout the combined municipality. In order for City taxpayers to share in the cost savings from a merger, the tax rate for the consolidated Pewaukee should be less than what the City’s current tax rate would be. If the tax rate for the merged Pewaukee is set lower than the City’s current rate, Village taxpayers will pay much less in taxes than they currently do. The funds withdrawn from utility reserves would be used as part of the Village’s contribution to the revenues of the merged City in order to make up for the reduction in property taxes levied on Village properties. Without these funds, the initial tax rate for a consolidated Pewaukee would likely need to be higher than the City’s current tax rate. Since part of the reason the Village’s tax rate is higher has to do with debt service, the funds would be used to pay off debt. This would reduce the amount of the debt service cost in the general tax levy, therefore reducing the amount of taxes levied and the tax rate.
16. Is it legal to take funds out of the City and Village utilities and use them for general government? Yes. Wisconsin Statutes 66.0811 specifically allows that public utility revenues in excess of the amounts needed to fund utility costs may be paid into the general fund of a municipality.
17. Will there be enough funds left in the Village utility reserves if we withdraw $5.5 million? Without the withdrawal of funds, the merged utilities would have $13.5 million in reserves. This is a high level of reserves by typical industry standards. Typical industry standards call for an operating reserve of 45 to 90 days of operating expenses. If a utility has debt (which both City and Village utilities do), a debt reserve equal to the highest year’s debt service is also typically required. The consolidation plan took a conservative approach by calculating what the utilities would need to cover 180 days of operating expenses, plus the highest year’s debt service payment for existing debt, plus future debt service for upcoming capital projects through 2025. To meet these requirements, the utilities would need reserves of $5.3 million. The proposed withdrawal of $5.5 million would leave the utilities with $8.0 million in reserves, or more than 1.5 times the conservative estimate of reserve needs.
18. Shouldn’t the utility reserves stay in the utilities? The utility reserves are funds collected from Village utility customers over and above the costs to operate the utilities. These funds also are more than the amount needed for normal operating reserves. As such, the reserve funds will be spent to benefit Village properties, rather than remain in the utility reserves indefinitely. These funds could be spent to cash-finance upcoming capital projects, which would reduce the need to borrow funds. Another option would be to transfer the extra funds to the Village’s General Fund and use them to reduce the amount of taxes levied to pay for debt service or other expenses. This option is what has been proposed in the preliminary merger plan as a means of achieving consolidation of the Village and City of Pewaukee.
19. Won’t the utility reserve funds be needed for future utility projects? According to studies prepared for the Merger Advisory Committee in 2009 (see the Merger Study Information section of this website), both the City and Village utilities are projected to have several million dollars of capital expenditures over the next 15 years. Based on preliminary estimates in the studies, the expenses for these projects would be significantly less if the City and Village utilities are merged into one. Sewer & Water Utility Reserves WITHOUT a Merger: The City of Pewaukee’s sewer utility is projected to face an estimated $4.4 million for capital costs through 2025, while the Village’s sewer utility capital costs are estimated at $4.9 million through 2025. So, moving forward as separate municipalities, the Village and City are projected to have a total of $9.3 million in sewer utility capital projects.
NOTE: These costs include only utility financed costs, not projects that would be special assessed or paid for by developers. However, operating as a merged municipality, the water utility capital costs have been estimated at just under $9.0 million through 2025, for an estimated savings of up to $8.3 million. The consolidated sewer utility is projected to have the same capital costs as the two sewer utilities operating separately. In summary, while the proposed plan would reduce the utility reserves by $5.5 million, it is also projected to reduce future capital costs by up to $8.3 million.
20. How will the withdrawal impact utility customers in the future? To determine the impact of the $5.5 million withdrawal on future utility rates, the proposed merger plan analyzed the projected $9.3 million in the City’s and Village’s combined future sewer utility capital costs and the $9.0 million in the City’s and Village’s combined water utility capital costs. Estimated results showed that, overall, future utility rates are projected to increase by 47% between 2010 and 2025, or on an average of 2.6% per year under a merger. This combined percentage increase is less than the projected increases in utility rates for the City customers, and slightly higher than the projected rate increases for Village customers if the two municipalities remain separate.
21. What happens to the tax rates after the utility reserve funds are spent? The proposed plan recommends reducing the amount of utility reserve funds used each year over a period of 10 years. The exact amounts that would be used each year are not contained within the preliminary consolidation ordinance under review by the City Council and Village Board. As the amount of utility funds used decreases each year, the amount raised through the property tax levy will most likely need to increase. Eventually, utility funds will no longer be available to reduce the tax levy.
22. Once the utility funds are spent, will City property owners pay more in taxes than they would if the City remained separate? No one can answer that question for certain because we don’t know what the City’s tax rate will be 10 years from now. Although the Village’s tax rate is currently much higher than the City’s, that wouldn’t necessarily be the case 10 or 15 years from now if the two communities remained separate. The gap between the City and Village tax rates has decreased over the last 10 years. In 2000, the Village’s tax rate was more than $3.00 per $1,000 of Equalized Value higher than the City’s tax rate. That gap has been reduced to less than $2.00 per $1,000 currently. (Source: Town, Village and City Taxes, an annual report of local property taxes, as reported by local governments, prepared by the Wisconsin Department of Revenue. These reports are available on the Wisconsin Department of Revenue website). Click here to view a chart of the City and Village of Pewaukee Taxes and Tax Rates: 2000-2009.
23. If a merger happens, will I still be assessed for street repaving or reconstruction? It will be up to the new City Council to decide the special assessment policy for the new City. All or a part of the costs for street repaving or reconstruction may be assessed to adjacent properties. Any costs that the City chooses to assess to adjacent properties would help keep the tax levy lower, but would result in higher costs for those specific properties. On the other hand, if costs are not assessed, the tax levy would be slightly higher, but individual properties would not be faced with special assessments.
24. If a merger happens, will I be special assessed if sewer and/or water are installed in my neighborhood? It is common practice in municipalities, including in the City and Village of Pewaukee, that at least some portion of the cost of sewer and water mains installed to serve existing developed areas without sewer or water service are assessed to the adjacent properties. It will be up to the new City Council to decide the special assessment policy for the new City. The new City Council would decide if costs for construction of sewer and water mains to serve existing developed areas would be assessed to adjacent properties, funded through the sewer or water utility or some combination of both.
25. Who is currently served by City sewer and water utilities? If you live in the City of Pewaukee and have municipal water or sewer service, you receive service from the City of Pewaukee. In order for the City of Pewaukee to provide service to City properties, the City has contracted with other utilities for certain services. That means the City purchases water and sewer service for the purpose of providing it to City properties. For example, the City has an emergency interconnection with the City of Waukesha Water Utility that allows the City of Pewaukee to purchase water from Waukesha to supply to its customers on an emergency basis during times when City wells are not able to provide enough water. The Pewaukee Water Utility pays Waukesha for any water that is purchased for this purpose. That cost is then shared by all customers of the City Water Utility. City of Pewaukee Water Utility customers are billed by the City and all pay the same rates for water service, regardless of the source of their water. If the City and the Village were to merge their water utilities, all customers served by the merged Pewaukee Water Utility would pay the same water rates, would share all of the costs of the merged utility and would therefore share any cost savings as well. In regards to the Sewer Utility, neither the City nor the Village has its own wastewater treatment plant. The City and Village have purchased plant capacity from the Fox River Water Pollution Center in Brookfield, and the City has obtained sewer service through agreements to serve City of Pewaukee lands south of I-94 through City of Pewaukee connections to the Waukesha sewer system. In addition, the City contracts with the Pewaukee Lake Sanitary District to maintain the sewer mains in the areas of the City that previously were in the Sanitary District before the Town of Pewaukee incorporated as a City. These other utilities bill the City of Pewaukee for these services, and these costs are included in the City’s Sewer Utility budget. These costs are then shared by all City of Pewaukee Sewer Utility customers. All properties that receive sewer service in the City of Pewaukee are City of Pewaukee Sewer Utility customers and pay the same rates, regardless of where their wastewater is treated. If the City and the Village were to merge sewer utilities, all customers served by the merged Pewaukee Sewer Utility would pay the same sewer rates, would share all of the costs of the merged utility and would therefore share any cost savings as well. The City of Pewaukee also has an agreement with the City of Waukesha that may allow some properties in the southern portion of Pewaukee who do not currently have water service to be served by Waukesha water in the future. It has not been determined at this time whether the City would purchase water service from Waukesha with Pewaukee building the pipes to serve those properties or for those properties to be served directly by the City of Waukesha. If any customers are served directly by the City of Waukesha in the future, those properties would still share in the savings from a merger. The proposed merger plan includes a transfer of funds from the utilities to the General Fund of the merged municipality to provide tax relief and savings for all taxpayers in the new City, even those who do not have utility service.
26. What are the current bond ratings for the City and Village and how would a merger affect the City’s bond rating? The City’s bond rating from Moody’s as of 2006 was Aa2. The Village’s bond rating from Moody’s as of 2008 was A1. Moody’s is a highly respected and widely utilized source for credit ratings, research and risk analysis, and has established the bond rating for the City and Village and many other municipalities. The ratings given to the City and Village are both high-quality, investment grade ratings. A representative of Moody’s was contacted to ask how the rating might be affected by a merger of the City and Village. The answer given was that the rating would depend on many factors. Some of these factors, such as the economy and unemployment rate of Waukesha County, would not be affected by the merger. Other factors, such as existing debt, household income and property tax base, would be impacted. Factors such as the financial policies and management practices of the new City would be affected, but cannot be determined at this time. It is likely that the bond rating for the new City would be somewhere in the range of the current individual ratings for the City and Village, but an exact bond rating cannot be determined until and unless a merger takes place.
27. Will the new City Council contain an equal number of City and Village residents? Under the preliminary plan for a merger, the former Village Board and former City Council would be replaced with a new City Council made up of two elected officials from each of the four voting districts created through a merger. Anyone within those four districts could run for elected office if they meet the statutory requirements for the state of Wisconsin.
28. Why would Village taxpayers receive a larger reduction in property taxes compared to City taxpayers? While it is true that the proposed plan would result in larger property tax savings for Village property owners, a large portion of the tax relief for Village taxpayers is proposed to be provided by the use of Village utility reserves. These utility reserves were paid in by Village sewer and water customers, most of who are also Village taxpayers. The proposed plan provides City taxpayers with a reduction in property taxes that is in proportion with the projected annual savings of $331,000 per year. Click here to view the chart “Year 1 Allocation of Overall Annual Operational Savings from Consolidation.”
29. How much have the City and Village spent studying a potential merger? The total amount of funding authorized for merger study and assistance so far totals $286,000, including funds for the public education effort. To date, that full amount has not yet been spent. The details of the amounts authorized for each phase of this effort are detailed on this website, under Merger Study Information.
30. How many City residents have water and/or sewer service currently? That is a difficult question to answer precisely. As of late 2009, the City Water Utility billed 2,703 residential metered water accounts. The City also billed 161 multi-family residential meters, which included any multi-family building with four or more residential units. An additional 625 properties are within the service area of a fire hydrant and therefore billed for the availability of water for public fire protection. It would be difficult to determine exactly how many residents are served because: 1) the number of dwelling units served by each multi-family account is unknown; and 2) the number of residents in each dwelling unit is unknown. Assuming eight units, on average, are served by each multi-family account, an estimated 3,991 dwelling units receive water service. Please note that this estimate does not include the additional 625 properties that have water available for fire protection, or the thousands of customers that work in the City’s business and industrial parks. In regards to sewer service, as of the end of 2008, the City billed 3,474 residential sewer customers in addition to 161 multi-family sewer service accounts. Assuming eight units, on average, are served by each multi-family account, an estimated 4,762 dwelling units receive sewer service. According to the Wisconsin Department of Administration, the estimated 2009 population of the City was 12,420. As of the 2000 census, there were 4,553 households in the City and the City’s average household size was 2.57 persons. Current estimates for the number of households or persons per household are not available.
31. It seems that the central issue for the merger is the consolidation of the Sewer and Water Department costs. Why can this not be treated as a separate issue? Utility studies have documented that a merger of the sewer and water utilities alone would result in benefits flowing entirely to City of Pewaukee Water and Sewer ratepayers. The Village Board has shown no interest in pursuing a utility consolidation in the absence of consideration also being given to consolidation of the remainder of the broad array of municipal services.
32. If it is a merger study, then why is it only limited to the City and the Village of Pewaukee? Why not consider the merger with other neighboring communities like Brookfield, since they are also within the Waukesha County system? The present merger study is limited to the Village and City of Pewaukee for the simple reason that the governing boards of those two municipalities have asked for the study and have provided the necessary funds. There has been no interest expressed in expanding the merger study to neighboring municipalities like the City or Town of Brookfield. If any such interest were to materialize, it would have to be accompanied by a financial commitment to support the study and be acceptable to all other parties to the study.
33. The February 2010 “Pewaukee Merger Information” newsletter appeared to be somewhat informative except when it tried to explain #5, “What happens to Property Taxes?” The explanation – “depending on future actions taken by the new City Council, the rates may change” – reads like a typical political statement that says one thing so we buy into this activity. How would you explain this? State law governs the basis upon which adjacent municipalities may consolidate. Upon a successful consolidation effort, the law requires that the new governing body makes all decisions regarding the structure of the new municipality and how and at what cost municipal services will be provided. There is no way under the law that any consolidation ordinance can constrain these fundamental determinations of the new governing body. Consequently, any merger study has to contain the qualifying statement to which you refer.
34. Would the combined municipality be obligated to continue the 5-year contract for law enforcement services that the current City has with the Sheriff’s Department? The City of Pewaukee contract with the Waukesha County Sheriff’s Department gives an annual “opt out” opportunity to the City, provided that notice is given by August 31st in any given year. The exercise of that “opt out” clause by August 31, 2010 would entail a cost penalty of about $30,000 to cover administrative overhead charges in the first year. Decisions regarding the policing of the merged municipality would be made by the new City Council. 35. Do the revenue and cost projections in the merger study include the sunset of the TIF district in the Village? Yes. The TIF district in the Village closed on January 1, 2010. The property value in the Tax Incremental District (TID) has been factored into the merger study analyses.
36. After the sunset clause expires in 10 years, what will the estimated tax rate be for a merged city and what is the current and estimated tax rate in 10 years of both the village and city if a merger does not occur? Also please provide the current tax rate for both the city and village. There are a number of factors that could impact future tax rates, such as a Street Utility District (SUD) or contribution of Village utility reserves. Without an SUD and utility reserves, the estimated tax rate, based on 2010 Village and City budgets, for a merged Pewaukee would be $3.07 per $1,000 fair market value. With an SUD and utility reserve funds, the tax rate would be $2.52 per $1,000 fair market value for the City and $2.85 per $1,000 fair market value for the Village. Under the proposed plan, the Village of Pewaukee would be subject to the Street Utility District (SUD) tax and the Village would also contribute reserves that have been built up in its utilities. This would keep tax rates in a merged community lower for a period of ten years. After the sunset clause expires in ten years, the tax rate could increase depending on a number of factors. For example, spending decisions by the new City Council, increased or decreased property values, new development, future revenues and other factors could come into play over the next 10 years that could impact tax rates. Those uncertainties make it unwise to try to predict what the tax rate for a merged community would be 10 years from now and how that rate would compare to what the City and Village tax rate would be if the two communities remained separate. The current tax rate for the Village is $4.51 per $1,000 fair market value and the tax rate for the City is $2.68 per $1,000 fair market value. Although the Village’s tax rate is currently much higher than the City’s, that wouldn’t necessarily be the case 10 or 15 years from now if the two communities remained separate. Click here to view a chart of the City and Village of Pewaukee Taxes and Tax Rates: 2000-2009.
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