By Shereen Siewert
City documents show Wausau’s debt is more than double the number shown in the current budget, even though some of the unlisted debt was incurred long before the 2022 numbers were rolled out to the public.
The additional debt is due to borrowing for upgrades to the city’s wastewater facilities, money that City Finance Director MaryAnne Groat said will be included in 2023 figures. Meanwhile, city leaders have been touting what appeared to be Wausau’s declining debt for months.
The disconnect is raising alarm bells with some members of the Wausau City Council.
“I believe the city and utility could have been more transparent with the water/ sewer debt numbers,” Council President Becky McElhaney told Wausau Pilot & Review. “We did have a number at the end of 2021. Even if we knew that number would change quickly, it could have been reported.”
The latest Wausau budget shows the city ending 2021 with $98 million in debt, forecasting that amount to drop to $94 million by the end of 2022. But documents show that the city debt, including utility debt, ended 2021 at nearly $200 million, an amount that will likely increase by another roughly $25 million by the end of the year.
Some of that debt, about $27 million, was already secured by the end of 2020.
In Wausau’s 2020 budget, a column dedicated to water and sewer debt proposed the city would borrow $121 million for water and sewer upgrades, an amount approved by the council in June 2020 through state funds. Each month the city submits invoices, the state pays the bill and places the debt on the city’s tab. By the time the budget was printed on Oct. 1, 2020, the tab stood at just over $9 million. Those numbers do appear, although with a footnote.
Though borrowing continued in 2021, there is no such notation in the following budget cycle.
Saqib Bhatti, co-executive director of the Acre Center on Race and the Economy and an expert on utility spending, said it is not entirely uncommon for municipalities to list utility debt separately in an annual budget. But the practice typically stays the same year after year.
“When something changes, then you ask why,” Bhatti said.
Dist. 7 Alder Lisa Rasmussen, who chairs the Finance Committee, said the general fund, the Tax Increment Districts and the utility all show their own debt service amounts because general obligation debt is paid by the levy, TID debt is paid by the increment for the individual districts, and utility debt is paid by user charges.
But critics say debt, no matter how it is repaid, is still debt – and if residents are expected to fund that much new debt through fees they can expect a significant rate hike in the future.
“There will be incremental rate increases,” McElhaney said. “I believe we should break down our budget, especially debt, into easily understood terms.”
Wausau has already borrowed and spent $109,424,170 on the water projects, debt that will be funded by residents. With an operating budget of about $14 million per year for the water and wastewater utilities, the city will probably need between $7-8 million in debt service to require the debt necessary to complete the projects – and that’s before the upgrade necessary to filter PFAS from the water.
“That will mean a pretty big increase in water bills,” said Keene Winters, a Wausau financial advisor who formerly served on the Wausau City Council. “Those are some pretty big numbers to withhold from policymakers at budget time when they are trying to strike a balance between demands for services and what taxpayers can afford.”
Efforts to lift TIF cap fail
City documents show the debt burden was already quietly skyrocketing before city officials petitioned members of the state Legislature to lift the statutory Tax Increment Financing cap.
Without input from most Wausau City Council members, city officials in December persuaded several lawmakers to put forward legislation that would allow for a new tax increment district at the former mall property, now owned by Wausau Opportunity Zone.
Wisconsin Reps. Patrick Snyder (R-Schofield) and John Spiros (R-Marshfield) co-sponsored the bill, which passed the state Assembly and sought to add a new TID that would have encompassed the former mall property, land that is now privately owned. Wausau asked for an exception to state rules that require the equalized value of taxable property of a new or amended TID not to exceed 12 percent of the total equalized value of taxable property in the city.
Wausau Pilot & Review broke that story, revealing that Groat approached lawmakers as early as Dec. 7 on the proposed legislative exemption. Mayor Katie Rosenberg, who was copied on the request, was also aware of the plan, public documents show. But members of the city council and the public were not, prompting Wisconsin Sen. Jerry Petrowski (R-Marathon) to pull the bill.
Finance Chair Rasmussen defended the issue with the TIF cap, calling it a “matter of timing of upcoming projects.”
“We are set to close two TIDs soon, which will place Wausau well under the cap, regardless of whether the exception would have been granted in the interim,” Rasmussen said.
But Dist. 3 Alderman Tom Kilian disagreed, calling the city’s decision to seek a TIF-related exemption “imprudent and inappropriate” to begin with, especially knowing Wausau’s total taxpayer-funded debt.
“In my opinion, the budget should readily indicate and reflect construction and project costs like this that are undertaken with millions of dollars, rather than essentially pulling them and reducing them to a footnote,” Kilian said. “I felt that trying to seek a TIF-related exemption was imprudent and inappropriate to begin with and, in the context of the seemingly siloed and unheralded costs or borrowing that you reference, this feeling is only underscored. I would note that, for other reasons, I voted against the budget at hand.”
Rasmussen said she is “not concerned about the debt service schedules or the borrowing and spending that is phased to complete projects that are multi year capital investments.”
“Utility debt is a separate consideration for policymakers since utility rates carry a separate review and approval process for rate changes, and a narrower purpose,” Rasmussen said. “So while there is typically utility borrowing and debt for smaller projects, legacy investments like the two plant projects we have underway are generational and usually occur many decades apart. Wausau’s utility planned for retirement of the large project debt as it clarified rate impacts in a host of public engagement sessions in the lead up to the plant projects being approved and started, so those projects alone have been well documented as to what rate payers can expect and plan on.”
But the public engagement sessions and associated rate hike projections were shared long before the city’s PFAS problem became public.
During a March 1 Wausau Water Commission meeting, representatives from Donahue & Associates presented several options for long-term solutions to the city’s water issue. The projected cost ranges from $10-30 million. Wausau is undergoing pilot testing to find the best possible solution to reduce PFAS in the city’s drinking water that will align with the upgraded treatment facilities.
Wausau Public Works Director Eric Lindman said the upgrades are due for completion in August.
Dist. 9 Alder Dawn Herbst, the council’s representative on the Water Commission, did not respond to a request for comment for this story. Wausau Pilot & Review submitted questions to the city’s media portal and received responses only from Groat and Lindman. Dist. Dist. 4 Alder Tom Neal was also invited to comment but did not respond.
Wausau’s first payment on the debt will be in 2023, Groat said.
