Open Spaces, Cultural Places: Exploring Culture & Recreation Funding in Waukesha, Ozaukee, and Washington Counties

About the Public Policy Forum

Milwaukee-based Public Policy Forum – which was established in 1913 as a local government watchdog – is a nonpartisan, nonprofit organization dedicated to enhancing the effectiveness of government and the development of southeastern Wisconsin through objective research of regional public policy issues.

Preface and Acknowledgments

This report was undertaken to provide citizens and policymakers in the Greater Milwaukee region and across the state with an independent, comprehensive analysis of culture and recreation funding and infrastructure in Waukesha, Ozaukee, and Washington counties. We hope that policymakers and community leaders will use the report’s findings to inform deliberations about potential regional approaches to support cultural and recreational assets in Metropolitan Milwaukee. Report authors would like to thank administrators, budget officials, and parks/recreation officials from the three county governments for providing us with financial and programmatic information that was critical to the analysis conducted in this report. We also thank administrative and fiscal officials from each of the institutions and organizations analyzed in this report for their assistance in providing financial information and for patiently answering our questions regarding their finances and infrastructure. Finally, we wish to thank the Spirit of Milwaukee for commissioning and funding this research.

Open Spaces, Cultural Places: Exploring Culture & Recreation Funding in Waukesha, Ozaukee, and Washington Counties

February 2015

Authors: Anne Chapman, Researcher Mike Gavin, Senior Researcher Rob Henken, President

Table of Contents

Executive Summary ...... 3 Introduction ...... 7 County Governments...... 9 Waukesha County ...... 10 Background and Budget Environment ...... 11 Overview of Waukesha County Finances ...... 12 Culture and Recreation in Waukesha County ...... 15 Ozaukee County ...... 26 Background and Budget Environment ...... 27 Overview of Ozaukee County Finances ...... 28 Culture and Recreation in Ozaukee County ...... 31 Washington County ...... 43 Background and Budget Environment ...... 44 Overview of Washington County Finances ...... 45 Culture and Recreation in Washington County ...... 49 Private Organizations ...... 57 Sharon Lynne Wilson Center for the Arts ...... 58 Background ...... 59 Financial Overview ...... 60 Summary of Financial Need ...... 63 Ozaukee County Historical Society ...... 64 Background ...... 65 Financial Overview ...... 66 Summary of Financial Need ...... 68 The Museum of Wisconsin Art ...... 70 Background ...... 71 Financial Overview ...... 72 Summary of Financial Need ...... 74 Observations and Conclusions ...... 75

Executive Summary

While considerable attention has been devoted to the needs of cultural, recreational, and entertainment assets in Milwaukee County, little attention has been paid to such needs in adjacent counties. This is despite continued discussions among civic leaders regarding a possible regional source of public funding that would help support assets throughout the broader metropolitan Milwaukee area.

To what extent do other county governments in metro Milwaukee provide cultural and recreational opportunities for their citizens, and how much local tax money are they spending to do so? What is the condition of publicly- and privately-owned cultural and recreational assets in suburban counties, and would they benefit from a regional culture and entertainment funding source?

In this report, the Public Policy Forum attempts to answer those questions by examining culture and recreation in the "WOW" (Waukesha, Ozaukee, and Washington) counties. Our research is a follow-up to two recent reports released by the Forum that assessed the needs of cultural and entertainment assets in Milwaukee County, and explored funding models from other metro areas. Those reports have framed the deliberations of the Metropolitan Milwaukee Association of Commerce's Culture and Entertainment Capital Needs Task Force.

We begin by examining culture and recreation budgets for the WOW county governments. For each government, we first provide an overview of the overall budget environment. We then hone in on specific cultural and recreational activities provided by each county, detailing such matters as local property and sales tax commitments, capital financing strategies, staffing levels, and five-year needs. Finally, we offer brief perspective on the potential use of revenue from a new regional culture and entertainment funding source.

Our analysis shows that the three county governments spend a combined $16-$18 million on culture and recreation operations annually, with about $6 million of that derived from local property taxes. The three counties also spend a combined $3-$4 million on capital needs annually.

WOW Counties Combined Culture and Recreation Operating Expenses and Tax Levy

$20 Operating Expenditures Property Tax levy $18

Millions $16

$14

$12

$10

$0 2010 2011 2012 2013 2014B

Those amounts pale in comparison to similar amounts spent annually in Milwaukee County and they account for only a fraction of overall annual spending in the three counties. Yet, this level of expenditure also would suggest there is merit in considering how a regional source of public funding might supplement, relieve, or supplant the current financial effort.

Culture and Recreation Spending in Milwaukee County vs. the WOW Counties (2014 Budget) $80

$70 Operating Expenditures

Millions Property Tax Levy $60

$50

$40

$30

$20

$10

$0 Milwaukee WOW County Counties

Next, we consider the needs of private cultural organizations in the WOW counties. Such consideration gives us a better understanding of the overall picture of culture and recreation in each county and also provides context for possible consideration of funding models from other metro regions. In the Denver and Pittsburgh regions, for example, a share of regional public funding is set aside for competitive grants for private organizations that typically can be accessed for programs, special projects, or one-time capital needs.

The three entities that we analyze – the Sharon Lynne Wilson Center for the Arts, Ozaukee County Historical Society, and Museum of Wisconsin Art – were selected because of their prominence and their regional nature. We find similarities among the three as well as with private cultural organizations in Milwaukee County. In general, the private organizations in the WOW counties do not face substantial immediate infrastructure challenges. But all will be challenged to generate resources for various programmatic needs, including desired improvements that could boost earned revenues and basic repair needs as their facilities age.

The report concludes with discussion of four policy observations that emanate from our research. We hope these will be instructive to civic leaders and policymakers as they continue to consider options for supporting the region's cultural and entertainment infrastructure:

 Overall, there does not appear to be a pressing need for a new source of public funding to support county government's provision of culture and recreation services in the WOW counties. Our research shows that each of the three county governments has kept annual property tax increases to a minimum (Washington County actually has decreased its levy in each of the past five years); enjoys healthy reserves and/or undesignated annual fund balances; maintains modest debt loads; and uses long-term planning to stay on top of infrastructure needs. These are all indicators of strong overall fiscal health that suggest new or enhanced public funding sources are not a necessity.

With respect to the specific needs of cultural and recreational facilities owned or operated by the three counties, each has been spared from large budget or staffing reductions in the aftermath of the economic downturn, and each continues to use a combination of user fees and public funding to accommodate inflationary operating expenditure pressures. Meanwhile, costs associated with prioritized items in five-year capital plans appear to be manageable. The only unmet need identified in our research involves a few ambitious projects and improvements within two of the three governments that might improve opportunities for revenue generation but that have not yet been prioritized in five-year plans.

WOW Counties Culture and Recreation Budgeted Staffing

140 Waukesha County Ozaukee County Washington County

120

100

0 2011 2012 2013

 Private cultural organizations in the WOW counties could benefit from opportunities for grant funding from a new public funding source. While not necessarily representative of all privately- owned cultural organizations in the WOW counties, the three organizations we analyzed each has a desire to improve its facilities in ways that could substantially enhance the visitor experience and maximize earned revenue. Each already plays an important role in the cultural and recreational fabric of its community, but each also has aspirations that could noticeably augment community value. Those aspirations, however, may be challenging to fulfill within existing revenue structures.

Our analysis indicates that – if a regional public funding source were pursued – it would be logical to consider giving each of the WOW county governments an annual share to design a competitive grants process, similar to those in the Denver and Pittsburgh regions. Not only would the availability of such grants potentially boost efforts to implement projects like Pioneer Village Hall in Ozaukee County, a pedestrian bridge adjacent to the Museum of Wisconsin Art in Washington County, and an outdoor Arts Park at the Sharon Lynne Wilson Center in Waukesha County, but it also could allow grant recipients to re-focus fundraising efforts on other capital needs or on enhancing endowments.

 Capital planning in the WOW counties should serve as a model for Milwaukee County. There is no question that the strength of their economies and the much lower levels of public safety and human services needs provide the WOW county governments with tremendous financial advantages over their counterpart in Milwaukee County. There also is no question that Milwaukee County's capital planning process – highlighted by the creation of a Capital Improvements Committee – has improved in recent years.

Nevertheless, review of capital improvements planning in the WOW counties reveals several important practices that Milwaukee County leaders would be wise to emulate. Examples include efforts to diligently assess the condition of county assets and plan improvements well in advance of necessary appropriations; strategically anticipate and mix the use of bond proceeds, property tax levy, user fees, and grants based on the prioritization and timing of key projects; and build reserves for unanticipated major capital needs. While such practices obviously are easier to implement and follow when overall fiscal conditions are strong, they also reflect a commitment to fiscal planning and discipline that should exist regardless of resources.

 Need is not the only reason to consider the use of non-property tax public resources to support culture and recreation in the WOW counties. In The Show Must Go On?, our March 2014 report on potential funding models to support cultural and entertainment assets in Milwaukee County, we asked whether the funding debate should be "solely about finding ways to address the immediate needs of valued regional assets, or should it be a loftier discussion about ways to permanently transform the method of financing those assets?” We now ask the same question with regard to the WOW counties.

While our analysis has shown there is not a pressing need for additional public support for culture and recreational services provided by the three county governments, the ability to draw resources from a regional culture and entertainment sales tax, for example, could allow each government to replace property tax levy funding. As noted above, more than $6 million in local property tax dollars is spent annually to support culture and recreation in the WOW counties, and those funds could be returned to taxpayers or redirected to other priorities. Officials may wish to consider whether a sales tax would be a more effective and appropriate means of financing such activities given its closer linkage to economic activity that is generated from quality of life amenities, and given its greater potential for annual inflationary growth in light of state-imposed property tax limits.

Our intention in conducting this analysis is not to suggest that a regional public funding source for cultural and entertainment assets should be pursued, but rather to provide factual context for any such consideration by assessing the need for additional sources of culture and recreation funding in the WOW counties. The findings and observations described above suggest that this need likely is to be determined by how elected officials and citizens view the role of government in providing and expanding cultural and recreational opportunities for its citizens, and which forms of public revenue they deem most appropriate for fulfilling that role.

Introduction

Public discussion regarding the needs of Greater Milwaukee’s arts, cultural, recreational, and entertainment institutions has reached new heights during the past year, driven by consideration of a new arena for the Milwaukee Bucks. And, as this important public debate has unfolded, the Public Policy Forum has attempted to objectively inform it.

In December 2013, we released Pulling Back the Curtain, a report that assessed and quantified the needs of the Milwaukee County-owned cultural facilities and parks, as well as major privately–owned cultural assets and sports and convention facilities. Three months later, we released The Show Must Go On?, a report that analyzed how five other metro areas had established dedicated funding sources to support their cultural and entertainment amenities. Our objective was to define the nature of the problem for policymakers and provide factual background on the options that may exist to address it.

Today, few are questioning the severity of the infrastructure and fiscal challenges facing major cultural and entertainment assets in Milwaukee County. Yet, consensus has yet to emerge on what – if anything – to do about those challenges. As efforts to reach such consensus continue, the Forum now hopes to provide perspective on one of the most volatile elements of the ongoing culture and entertainment funding debate: the prospect of implementing a regional public funding source.

There are a multitude of policy and political considerations surrounding such an approach, most of which center around whether it is appropriate to ask taxpayers from across the metro region to support cultural and entertainment assets located in Milwaukee County. While the Forum’s research cannot answer that question, in this report we seek to address the related question of whether suburban counties might also benefit from having access to a new source of funding to address challenges faced by their cultural, recreational, and entertainment facilities.

Our focus is on cultural and recreational funding in Waukesha, Ozaukee, and Washington counties. We chose these three counties – often called the WOW counties – because they combine with Milwaukee County to make up the Milwaukee-Waukesha-West Allis Metropolitan Statistical Area, which is commonly defined as the Greater Milwaukee region.

While there has been considerable public discussion and analysis regarding the finances of Milwaukee County’s cultural institutions and parks, there is little understanding about how public dollars are used to pay for similar amenities in the WOW counties and whether similar unmet needs have emerged. Such understanding is especially important given that if a regional public funding source for cultural and entertainment assets is to be considered, then it would be logical for some portion of the revenues to be allocated for use in each of the counties in which they were generated.

Specifically, this report addresses the following research questions:

 To what extent do county governments in Waukesha, Ozaukee, and Washington counties use local property and sales tax revenues to support cultural and recreational assets and activities?  What is the nature of financial and infrastructure challenges faced by publicly-owned cultural and recreational assets in the WOW counties, and how are those challenges impacted by countywide fiscal constraints?  Are there privately-owned cultural and recreational assets in the WOW counties that could benefit from public funding if such funding were available?

As with our previous two reports, our intent here is not to suggest a specific course of action, but rather to provide policymakers and citizens with factual context that can promote informed decision- making. In this case, debate about the appropriateness and desirability of a regional public funding source for cultural and entertainment assets should not be driven solely by whether the Milwaukee County assets are “regional” in nature, but should also consider whether such an approach might address the needs of county governments and privately-owned cultural assets throughout the region. This report attempts to inform such consideration by providing an overview of cultural and recreational spending in the WOW counties and assessing how additional sources of funding might be utilized.

County Governments

We begin our exploration of cultural and recreational needs in Waukesha, Ozaukee, and Washington counties by examining the role of county governments in each of the three counties. Because of media coverage and the efforts of civic leaders to highlight budget challenges, most citizens in the region are aware that Milwaukee County Government owns and maintains a substantial array of parks and recreational amenities, as well as some of the region's foremost cultural attractions. But far less is known about the activities of the WOW county governments in this realm.

In the pages that follow, we provide insight into this matter by examining culture and recreation spending and revenues in the three counties. For each county, we first provide an overview of their overall budget environments and fiscal condition. We then hone in on specific cultural and recreational activities provided by each county, detailing such matters as local property and sales tax commitments, capital financing and planning strategies, staffing levels, and five-year needs. Finally, we offer brief perspective on the potential use of revenue from a new regional culture and entertainment funding source.

It is important to note that the financial summaries provided in this section will not coincide precisely with financial information that can be obtained from county budgets or financial statements. That is because we devoted considerable effort to distinguishing true cultural and recreational spending and activity from other related activities that are commonly included in county parks and recreational functional areas, such as land use planning and environmental remediation. Our intent is to provide a concise and accurate depiction of the services provided by the WOW county governments that are truly cultural and recreational in nature in order to inform the broader public discussion about culture and recreation in our metro area.

Finally, while cultural and recreational expenditures by county governments in the region constitute a primary form of public sector support, many municipal governments also make annual expenditures on items such as local parks and playgrounds. Some, such as the City of West Bend, also contribute to private cultural organizations within their municipalities. In this report, however, we focus only on the role of county governments in supporting culture and recreation in the WOW counties.

Waukesha County

Background and Budget Environment

With a population of 393,843, Waukesha County is Wisconsin’s third most populous county (outranked only by Milwaukee and Dane Counties). Its median household income ($75,850), median home value ($253,800), and percentage of population below the poverty level (5.4%) place it among the most affluent counties in the state.1 Waukesha County’s board and administration maintain a stated commitment to leverage these factors to create a stable tax environment for residents and businesses, efficient operations, and high quality services and amenities, including those related to culture and recreation. They do so using a number of strategies.

Both in terms of property tax rate and levy per capita, Waukesha County ranks lowest among its six border counties, and ranks 70th out of 72 on both measures among all counties statewide.2 For the better part of the past decade, the County has followed a practice of modest annual levy increases, with increases in each of the past three years of a little under 1%.

Waukesha County fiscal officials have emphasized the need to build and maintain reserves, with a policy of maintaining in reserve a minimum of 11% of general and special revenue fund expenditures. The County’s budget environment also is characterized by a number of long-term strategic planning processes. In addition to its five-year capital planning and debt financing plans, the County diligently addresses ongoing maintenance and repair needs through multi-year planning processes such as its pavement management plan, building and grounds maintenance plan, vehicle and equipment replacement schedules, and technology maintenance/replacement fund.

1 United States Census Bureau State and County Quick Facts. Waukesha County. Accessed on February 12, 2015. http://quickfacts.census.gov/qfd/states/55/55133.html

2Waukesha County 2015 County Executive Budget. http://www.waukeshacounty.gov/uploadedFiles/Media/Budget/2015_Exec_Budget/1-Introduction/00- 2015%20Executive%20Budget%20Book%20WEB.pdf

Overview of Waukesha County Finances

Figure 1 summarizes Waukesha County’s Figure 1: 2014 Waukesha County Budget Overview major revenue streams and expenditure categories per its 2014 budget.3 Similar to Waukesha County Revenues (millions) other Wisconsin counties, Waukesha Property tax $99.51 County’s revenue streams include a mix of levy locally-generated and external resources. Intergov't Property tax levy; federal, state, and some $55.79 local intergovernmental revenues; and revenues charges for services are the County’s Charges for $34.73 largest revenue streams. The County also services appropriates significant resources from its fund balance ($22.9 million in 2014 Debt borrowing $10.00 included in “other revenues,” primarily for one-time expenditures in the capital Other revenues $79.08 budget) to balance the budget while minimizing increases in the property tax levy. Distinctly absent is a 0.5% sales tax allowed by state law but which Waukesha County has not opted to levy (along with nine other Wisconsin counties), leaving Total Budget: property taxes as the sole source of local $279.1 million tax revenues funding County services.

The property tax levy is the largest single slice of Waukesha County’s 2014 budgeted revenue mix, at about 36% of the revenue Waukesha County Expenditures (millions) budget. Chart 1 shows that County leaders have used modest but steady property tax Health & human services $72.33 levy increases during the past five years to help meet expenditure pressures. Between Justice & public safety $58.62 2010 and 2014, the levy rose by an Public works $30.29 average of $1.3 million per year, though increases have been limited to less than $1 Parks, educ, & land use $27.27 million annually during the past three years. The County also issues general obligation Non-departmental $26.37 bonds annually ($10 million in the 2014 General administration $21.81 budget) to address infrastructure needs as identified in its rolling five-year capital plan. Debt service $14.42

Capital projects $27.99

3 While 2015 budgets have been adopted for each of the three counties analyzed in this report, the timing of our release and our desire to conduct detailed analysis to distinguish between culture/recreation and other spending in parks and environmental functional areas precluded our use of 2015 budgeted amounts in most cases. Instead, unless otherwise noted, 2014 budgeted amounts are the most recent budget figures used (audited 2014 actual spending and revenue figures are not yet available). Our analysis of five-year budget trends uses actual spending and revenue figures for 2010-13.

Chart 1: Waukesha County Property Tax Levy (2010-2014 in millions) $120

$97.42 $98.04 $98.80 $99.51

$100 $95.72 Millions

$80

$60

$40

$20

$0 2010 2011 2012 2013 2014B

With regard to the distribution of property tax levy, nearly two-thirds of the total levy is dedicated to the public safety and human services functions, as shown in Chart 2. Debt service and public works are two additional areas of substantial property tax levy support, while the Parks, Environment, Education, and Land Use functional area – which includes the cultural and recreational services that are the focus of this section – receive only about 6% of Waukesha County's total property tax levy.

Chart 2: Waukesha County Property Tax Levy Breakdown (2014 budget in millions)

Justice & Public Safety $41.07

Health & Human Services $25.56

Debt Service $13.21

Public Works $11.02

Parks, Env., Educ. & Land Use $5.64

Capital Projects $1.95

General Administration $0.88

Non-Departmental $0.17

$0 $10 $20 $30 $40 $50 Millions The County’s second largest revenue stream (about $56 million, or 20% of the 2014 budget) emanates from federal, state, and local governments in the form of contracts, grants, and state aid allocations. This revenue source has remained relatively stable over the past couple of years.

Charges for services accounted for $34.7 million (12%) of the 2014 revenue budget. These charges include user fees in business-type activities such as golf courses. In accordance with an ongoing

effort to identify county-wide costs that can be tied directly to users, Waukesha County also has developed an extensive fee structure for its parks system, explained in further detail below.

On the expenditure side, Waukesha County’s budget mirrors those of most other counties in its emphasis on human and public safety services, many of which are state-mandated. Those two spending categories comprised 47% of the County’s expenditure budget in 2014. Public works is the next largest expenditure category, which includes highway maintenance, transit services, and other transportation-related spending. The Parks, Environment, Education, and Land Use function received 10% of total expenditures in the 2014 budget.

Culture and Recreation in Waukesha County

Among its many functions, Waukesha County’s Parks and Land Use department oversees and maintains the grounds and facilities of the county’s 8,327-acre park system as well as three golf courses, two ice arenas, the Retzer Nature Center, and the County’s exposition center. The County also provides direct support to two cultural entities. The following is a brief description of each of those functions.

 Parks: The County’s parks system balances environmental stewardship of isolated natural areas/corridors with nature-based recreation and education. Examples of these activities include picnicking; camping; swimming and scuba diving; fishing and hunting; boating; and biking, hiking, and cross-country skiing. With a goal of providing a major county park within four miles of all residents, the County owns and administers eight developed major parks, 12 greenway corridors along eight rivers, five lake-access points, six swimming locations with lifeguards on duty, and three bike and pedestrian trails.

 Retzer Nature Center: Since 1974, Waukesha County has been developing the 400-acre Retzer Nature Center to encompass environmental education, natural land management, plant community restoration, and wildlife habitat improvement. Under a 2005 lease agreement, the Waukesha School District pays the County to build, maintain, and staff a planetarium as part of the Center’s educational offerings. Retzer Nature Center is the only County-owned asset with an active community Friends group. The Friends of Retzer Nature Center works collaboratively with the County on master planning and budgeting and provides an avenue for corporations and other donors to make tax-deductible contributions. The Friends group primarily provides volunteer labor and makes an annual donation to the County of between $20,000 and $50,000.

 Exposition Center: Waukesha County owns and maintains a large event center featuring 40,000 square feet of indoor space and 135 acres outdoors. In addition to hosting the Waukesha County Fair, the center accommodates trade shows, campaign events, concerts, and smaller scale corporate events and weddings. Although most of the center’s operations are supported with charges for services, the County supplements these resources for both operations and capital.

 Golf Courses: Waukesha County operates three golf courses (two 18-hole courses and one 9- hole course), which are supported exclusively by earned revenues such as green fees, golf cart rentals, food, and merchandise. The three courses offer a range of options to golfers of every ability level from the championship course at Naga-Waukee to the 18- and 9-hole options at Wanaki and Moors Downs. The course at Naga-Waukee generates consistent profits, which are used to offset deficits at both Moors Downs and Wanaki, where annual expenditures tend to exceed revenues. Because the golf courses are enterprise funds and are not intended to require County financial support, County leaders are considering whether maintaining both Wanaki and Moors Downs is sustainable.

 Ice Arenas: In contrast to the passive nature of most County Parks and Land Use facilities, the department also manages two County-owned and operated ice arenas. Like the golf courses, Eble Ice Arena in Brookfield and Naga-Waukee Ice Arena in Delafield are enterprise funds that are intended to be self-sustaining using only user fees. They host a number of organized activities including public and figure skating, hockey, learn-to-skate programs, and

rental for private events. The margin between expenses and revenues is relatively tight for these two user-funded enterprises. However, fund balances in these two funds have been sufficient to offset any deficits that occur from year to year.

 Waukesha County Historical Society Museum: Established in 1906, the Waukesha County Historical Society and Museum serves as an educational and cultural resource to Waukesha County and the surrounding region.4 It was owned and operated by Waukesha County until the 1990s, when management was transferred to the Society. At that time, the County continued to support the museum’s operations and retained ownership of the courthouse building where the museum stands. In 2003, the County sold the courthouse complex to the Society for $1 and agreed to provide operating and capital infrastructure support to the Museum through a 10-year transition period.5 Waukesha County extended its support for two additional years, and the 2014 budget made a final grant to the museum of $150,000.

 Waukesha County Tourism Initiative: Waukesha County provides $10,000 in levy annually to support the Waukesha Area Convention and Visitors Bureau for its tourism and promotion work.

 Walter J. Tarmann Parkland Acquisition Fund: This interest-bearing fund houses funds generated and used to acquire natural areas in accordance with the County’s Park and Open Space Plan. The fund is composed of capital land assets, state Department of Natural Resources Knowles-Nelson Stewardship Program grants, donations from developers and others, landfill host fees, investment income, and other miscellaneous revenue streams.

Culture and Recreation Finances

Overview

As shown in Chart 3, Waukesha County’s spending on culture and recreation in the 2010-2014 timeframe totaled $61.4 million, for an average of about $12 million per year. Just over $51 million of the total was operating expenditures, with another $7.9 for capital projects, and $2.4 million for land acquisitions that further the County’s Parks and Open Space plan (Tarmann Fund). Close to half of all culture and recreation spending ($28.4 million) occurred within the parks system, with golf courses making up another 24% at about $15 million. The ice arenas, Retzer Nature Center, and the exposition center each represented between 7% and 9% of recreation/culture spending during the past five years.

4 http://www.waukeshacountymuseum.org/about/mission

5 2014 Budget Book, p. 454

Chart 3: Waukesha County Spending on Culture and Recreation (2010-2014)

$14.0 Operating Capital Tarmann Fund

$12.0 Millions

$10.0

$8.0

$6.0

$4.0

$2.0

$0.0 2010 2011 2012 2013 2014B

Operating revenues related to culture and recreation in Waukesha County roughly followed a 60/40 split between non-levy sources and property tax levy, as shown in Chart 4. This ratio varies widely by function, however. As enterprise funds, golf courses and ice arenas are funded exclusively with non- levy sources, whereas the majority of parks and Retzer Nature Center revenues come from the property tax levy. In fact, the total levy spent on parks between 2010 and 2014 ($16.7 million) accounted for almost 80% of the total levy spent on culture and recreation operations ($21.2 million) for the same timeframe.

Chart 4: Waukesha County Revenues from Culture and Recreation (2010-2014)

Non-Levy Revenues Property Tax Levy $12.0

$10.0 Millions

$8.0

$6.0

$4.0

$2.0

$0.0 2010 2011 2012 2013 2014B

Charges for services (i.e., user fees) totaled $28.5 million over the five-year period, comprising almost 90% of non-levy operating revenue sources for culture and recreation activity. About half of all charges for service were derived from the golf courses ($14.5 million), with the remaining coming from parks ($5.7 million), ice arenas ($5.2 million), exposition center ($2.7 million), and Retzer Nature Center ($436,131).

The nearly $6 million in charges for service generated by the parks demonstrates a key Waukesha County budget strategy related to its parks operations – a goal of 30% cost recovery throughout the entire park system. As a way to insulate the parks budget from economic fluctuation, Waukesha County is unique among the counties in this analysis in that it not only charges users to reserve, rent, and camp at park facilities, but also imposes a host of other use-based fees, most notably annual and daily lake access and park entrance stickers for all County parks and lake-access areas. This strategy has yielded almost 45% in cost recovery of annual operating costs for the Waukesha County Park System over the past five years. Operating Budget

Between 2010 and 2014, Waukesha County spent an average of $10.2 million per year for culture and recreation operations. As shown in Table 1, parks and golf courses were the largest areas of expenditure, accounting for 73% of the $51 million total.

Table 1: Waukesha County Culture and Recreation Operating Expenses (2010-2014)

2010 2011 2012 2013 2014B 5-Year Total Parks $4,305,672 $4,529,329 $4,567,775 $4,516,457 $4,651,714 $22,570,947 Retzer $638,546 $706,658 $697,778 $684,996 $748,775 $3,476,753 Exposition Center $795,702 $745,259 $723,276 $700,481 $810,003 $3,774,721 Golf Courses $2,955,327 $2,784,337 $2,924,858 $2,944,590 $3,052,936 $14,662,048 Ice Arenas $898,752 $935,320 $939,189 $950,931 $1,016,774 $4,740,966 History Museum $477,518 $461,241 $450,234 $300,000 $150,000 $1,838,993 Tourism Initiative $10,000 $10,000 $10,000 $10,000 $10,000 $50,000 Total $10,081,517 $10,172,144 $10,313,110 $10,107,455 $10,440,202 $51,114,428

Chart 5 breaks down these expenditures by three types of costs – personnel, routine repair and maintenance, and general operating. Personnel-related costs (salaries and fringe benefits) comprised more than half (55%) of operating costs during the 2010-2014 time period. Repair and maintenance accounted for about 4% of operating expenses, while other operations costs accounted for the remaining 41%. The following provides additional details about the three areas of expenditure.

Chart 5: Waukesha County Culture and Recreation Operating Expenses (2010-2014)

$12,000,000 General operating Salaries and fringe benefits Repair and maintenance

$10,000,000

$8,000,000

$6,000,000

$4,000,000

$2,000,000

$0 2010 2011 2012 2013 2014B

Personnel

Spending on salaries and benefits for the culture and recreation function in Waukesha County has been relatively stable over the five-year period, averaging $5.7 million each year. As shown in Chart 6, staffing levels also have remained relatively constant over the period, averaging about 121 full- time equivalent (FTE) positions. The County relies heavily on a temporary/seasonal workforce, employing an average of 69 temporary/seasonal FTEs per year to support these functions, in contrast to its 50 full-time positions.

The parks division accounts for more than half of overall culture and recreation staffing, averaging about 63 FTEs. The golf courses are staffed at about 31 FTEs annually, while Retzer Nature Center and the exposition center each employ about nine FTEs. (Spending related to contracted work is accounted for in general operating expenses as purchased services.)

Chart 6: Waukesha County Culture and Recreation Budgeted Staffing (2010-2014) 140 123.67 123.12 119.74 119.48 118.82 120

100

0 2010 2011 2012 2013 2014

The County also makes strategic use of service project volunteers and inmates of the County’s Huber work release correctional facility. These additional staffing resources help with invasive species control, special events, general cleanup and restoration, and other tasks. The Parks and Land Use department estimated the cash value of this volunteer labor in 2013 to be about $236,000.

Spending on fringe benefits is for current employees only (the County has no significant legacy costs). The County also offers a post-employment health plan (to which current employees can contribute) and makes pension contributions to the Wisconsin Retirement System.

Repair and maintenance

The Parks and Land Use Department uses a rolling three-year maintenance plan to ensure that the annual operating budget includes consistent allocations to address repair and maintenance needs at recreation-related grounds, facilities, parking lots, roadways, and paths. These expenditures – which are distinct from capital projects in that they are recurring and narrower in scope – accounted for an average of 3.8% of annual culture and recreation expenditures between 2010 and 2014, totaling about $1.9 million in the five-year period. Most of the repair and maintenance expenditures occurred in the parks division (55%) and exposition center (21%). These expenditures typically include HVAC and plumbing, roof repair and replacement, painting, crack filling, landscaping and other grounds maintenance, some equipment replacement, and greenway and open space improvements.

Several other repair and maintenance functions that affect recreational facilities are not reflected here, as they are performed by other departments (e.g., public works or highway) and are reflected in the general operating totals in the form of interdepartmental and other charges. Also, an additional $472,000 that was earmarked for building and maintenance repairs at the Waukesha County Historical Society Museum was reflected in the general operating category as part of the County’s general support to the museum.

General operating

Other operating expenditures related to culture and recreation totaled $20.9 million, or about 41% of Waukesha County’s overall culture and recreation spending between 2010 and 2014. About $1.9 million of that amount was directed to the Waukesha County Historical Society Museum. Museum support included (until 2014) an annual operating grant of $215,000; the $472,000 referenced above for maintenance and repair of the national historic building site where the museum is housed; and $357,000 for debt service on a capital loan from the City of Waukesha. After supporting the museum’s operating and capital needs in an original 10-year contract plus a two-year extension, the County recently deemed the venture unsustainable. Consequently, the 2014 budget’s $150,000 grant marked the last year of County support for the museum.

Waukesha County also provides $10,000 in annual operating support to the Waukesha Area Convention and Visitors Bureau for tourism and promotion activities. General operating spending also encompasses utilities, supplies, staff development, and interdepartmental services such as communications.6

Capital Budget

Waukesha County’s capital planning philosophy emphasizes proactive efforts to address the needs of existing assets and capital improvements that are planned well in advance of necessary appropriations. Capital projects tend to receive multi-year budget allocations and are funded through a mix of County funds, federal and state monies, donations from partner organizations, and other sources. The County portion is a combination of bond proceeds, general fund balance, and property tax levy, in that order (i.e., the first dollar spent comes from bond proceeds, while the last dollar spent is levy). General obligation bonds are issued each year and are not tied to specific projects, but instead are based on estimates of overall County capital needs.

To keep annual debt service costs stable, the County structures its borrowing according to three main principles: 1) use a mix of fund balance and levy to put at least 20% down for capital costs with no more than 80% funded by any given general obligation bond issue; 2) never borrow for more than 10 years; and 3) maintain debt service levels below 10% of the operating budget. The County also has developed several processes to ensure prioritization and careful planning of capital projects – from conducting design and implementation in separate budget years, to requiring any new project to be proposed and documented five years before its expected approval.

Capital spending 2010-2014

Chart 7 shows annual capital spending during the 2010-2014 timeframe. Projects in the parks (74%) and Retzer Nature Center (10%) accounted for the vast majority of the $7.9 million in total expenditures, with the remainder directed to various projects at the golf courses, ice arenas, and exposition center. About 83% of the capital expenditures during the period were funded with County resources, while various federal and state sources provided another 8%. Generally, projects undertaken at the golf courses or ice arenas are paid for entirely through user fees.

6 Debt service on culture and recreation capital projects is accounted for in a separate debt service fund and is not included here. Depreciation on golf course and ice arena capital assets also is not included. Instead, to be consistent with the way operating and capital expenditures are accounted for in governmental fund departments such as Parks and Land Use, this analysis counts capital outlay for golf courses and ice arenas incurred between 2010 and 2014.

Chart 7: Waukesha County Capital Spending on Culture and Recreation (2010-2014 in millions)

$1.8 $1.69 $1.67 $1.62 $1.61

$1.6 Millions $1.4 $1.30

$1.2

$1.0

$0.8

$0.6

$0.4

$0.2

$0.0 2010 2011 2012 2013 2014

Waukesha County’s major projects during the past five years consisted of parks restroom renovations, pavement management, trail projects, and various building maintenance projects. Combined, the parks restroom renovations and pavement management expenditures made up about 60% of capital spending between 2010 and 2014 ($2.8 million and $2 million, respectively). First proposed in 2005, the parks restroom renovations began in 2009 with the goal of updating 15 restrooms in parks with reserved picnic areas. Planned expenditures will continue through 2016 and will focus on replacing antiquated vault toilets with energy efficient plumbing and lighting fixtures.

Similarly, the pavement management plan is an ongoing annual appropriation in the capital budget based on a uniform procedure that was established in 1995. The County uses a Pavement Condition Index to rate pavement maintenance needs and prioritize and schedule ongoing pavement repairs. The goal is to maintain a countywide average rating of "satisfactory" as a way to avoid costly urgent repairs. The plan allocates 80% of the project budget to major rehabilitation for areas rated as poor, while the remainder is used for preventative maintenance on sections rated fair or good.

Waukesha County’s capital budget during the five-year period also included about $1 million for improvements to its popular multi-use trails, including construction of the Bugline Trail. In 2011, the County began designing a renovation to an existing gravel trail to complete a 16-mile asphalt-paved trail corridor between Menomonee Falls and North Lake. Funded through a combination of cost sharing agreements between the County and federal and state funding sources, the Bugline Trail improvements have expanded year-round access for wheelchairs, strollers, in-line skaters, and snowmobiles.

The remaining $2.2 million of Waukesha County’s recreation-related capital expenditures in the 2010-2014 timeframe consisted of a combination of parks maintenance and storage building projects, construction of a new energy-efficient maintenance building at Retzer Nature Center, roof replacements at the exposition center and Eble Ice Arena, and various equipment acquisitions at the golf courses and ice arenas.

Not included in these totals is Waukesha County’s Walter J. Tarmann Park Land and Acquisition Fund. A special revenue fund within the Parks and Land Use Department, the Tarmann fund was created to facilitate the County’s acquisition of parkland and natural areas per its Park and Open Space Plan and Greenway Plans. Between 2010 and 2014, the Fund has generated over $6.4 million in revenues from a variety of sources without directly impacting the property tax levy. During that time, the fund facilitated over $2.4 million in direct land purchases, grants to municipalities or conservancy organizations to contribute to land purchases, and related expenses such as legal and survey fees.

Projected capital spending: 2015-2019 and beyond

Waukesha County’s 2015-2019 Capital Projects Plan follows many of the same themes of the previous five years – namely, investments in energy efficient technologies; upgrades to aging infrastructure; and improvements to facilities that expand access and have potential to generate additional earned revenues. Table 2 lists the seven culture and recreation-related capital projects included in the County’s current five-year capital projects plan. The projects would require expenditures of $9.7 million, which is about $1.8 million more than the $7.9 in capital expenditures incurred between 2010 and 2014.

Table 2: Waukesha County Projected 5-Year Capital Expenditures (2015-2019)

2015-2019 Capital Project Description Type Expenditures Waukesha-Brookfield multi-use trail Construction $2,930,400 Park beach area renovations Improvement $1,004,000 Camp Pow Wow expansion Improvement $750,000 Parks restroom renovation Improvement $630,000 Wanaki Golf Course bridge replacement Improvement $425,000 Energy efficiency improvements Improvement $515,000 Pavement management plan Maintenance $3,400,000 GRAND TOTAL - RECREATION CULTURE - PROJECTED CAPITAL EXPENDITURES $9,654,400

As shown in Chart 8, revenues budgeted to cover these costs include almost $6 million in bonding, property tax levy, or general fund balance, with another $2.8 million expected to come from federal, state, and other intergovernmental sources. The remaining nearly 9% of needed revenues will come from a combination of ice arena and golf course fund balances and cost-sharing contributions from project partners.

Chart 8: Waukesha County Projected 2015-2019 Capital Funding Sources (in millions) $7.0 $6.00

$6.0 Millions

$5.0

$4.0

$3.0 $2.34 $2.0

$1.0 $0.50 $0.38 $0.29 $0.15 $0.0 County Federal State Local User/Enterprise Other Contribution Fund

As was true in the previous five-year period, annual investments in parks restroom renovations (which will be finished in 2016) and pavement maintenance and repair make up a large share (about 42%) of planned expenditures for the 2015-2019 period.

Two projects exemplify another theme in Waukesha County’s capital planning – expanding recreational amenities for County residents by taking advantage of cost-sharing opportunities. The 2015-2019 capital plan includes $2.9 million to break ground on the Waukesha-Brookfield multipurpose trail connecting trail networks in Brookfield and the City of Waukesha. With 95% covered by federal and state resources plus the City of Brookfield, the County’s contribution is just under $150,000. Similarly, in partnership with a nonprofit that serves people with disabilities, the County will pay for half of a $750,000 expansion to its Camp Pow Wow site at Menomonee Park, a project that likely will help generate additional rental income for the six months the County rents it out for private events.

Although some of these improvements are expected to help boost user fees, the current five-year capital plan also emphasizes cost avoidance through updated equipment and technologies. Two examples of this approach are summarized below.

 Energy efficiency improvements: The County takes a proactive approach to managing utility costs by including $110,000 annually in its capital plan for energy efficiency improvements in parks and golf course facilities. After several years of HVAC-related improvements at Retzer Nature Center, both ice arenas, the exposition center, and other county facilities, the County will fund several additional LED lighting replacements over the next five years at several parks buildings, parking lots, golf courses, and Retzer Nature Center.

 Park beach area renovations at Minooka Park: Waukesha County plans beach house updates at Minooka Park that include energy efficient lighting, plumbing, and HVAC; picnic pavilion expansions; ADA code compliance improvements; and development of a pond area to incorporate a walking path, dog swim area, and fishing pier. The amenity improvements are anticipated to drive up rental reservation and park revenue by $12,000 annually.

Perhaps because of the County’s requirement that any new project be proposed in the last year of the current capital project plan (that is, five years out from the current budget), most culture and recreation-related capital needs have been anticipated and are reflected throughout the five-year plan. According to County officials, only two recreation-related needs have not yet been documented in the capital projects plan: 1) beach house renovations at Menomonee and Mukwonago Parks (the only two buildings in the parks system that have not been renovated in the past 25 years); and 2) maintenance building replacements at Wanaki Golf Course, Nashotah Park, and Minooka Park. Informal preliminary estimates from County officials put a combined cost for both projects at about $5 million. Summary of Culture and Recreation Finances

While challenged – like most counties – to accommodate rising state-mandated health and human service and public safety needs, Waukesha County’s use of numerous multi-year planning processes helps it to effectively balance and anticipate both operating and capital needs. The relative absence of deferred capital projects illustrates the County’s emphasis on taking care of its infrastructure in a planned and deliberate manner.

Although culture and recreation is not a mandated service, Waukesha County devotes about $12 million per year to such activities, including about $6.5 million from County-generated (non-levy) resources. The property tax levy portion of operations for culture and recreation has averaged about $4.2 million annually (with an additional $475,000 in fund balance generated during the year), while about $1.3 million of its capital expenditures in these areas have been funded by County levy, borrowing, and reserves.

Waukesha County’s ability to keep up with its culture and recreation needs stems from its ability to secure modest annual growth across each of the major revenue streams that support those needs – including slight increases in the property tax levy, a diversified user-fee structure designed to grow with inflation, and cost-sharing agreements with private and public entities that either contract with the County to provide services or share in the cost and use of County amenities.

All of these strategies have put Waukesha County in a relatively stable financial position without a clear indication of need for additional or different types of tax revenues to support its culture and recreation amenities. If such additional resources were available, then perhaps the most logical use would be to substitute those funds for the property tax levy currently dedicated to culture and recreation, thus freeing up levy for other priorities or for property tax relief. It is important to note, however, that County leaders already could pursue that option by availing themselves of the local option 0.5% sales tax for counties allowed under state law – an option that County officials value at about $35 million (2014) but which they have so far opted not to pursue.

Overall, Waukesha County’s fiscal stability and untapped revenue options suggest that access to funding from any potential regional culture and entertainment revenue source likely would not provide much benefit to County government itself. However, as discussed in this report, Waukesha County, like other counties, is home to a number of private nonprofit cultural assets of value to the community that do not receive County support but could potentially make immediate use of additional resources. We highlight a Waukesha County example of such a scenario in our discussion of the Sharon Lynne Wilson Center for the Arts later in this report.

Ozaukee County

Background and Budget Environment

Established in 1853 in an agreement to separate from Washington County, Ozaukee County today has a population of about 87,000 and is Wisconsin’s smallest county by land area. Many of the County’s cultural and recreational opportunities are tied to its proximity to open space and water, including Lake Michigan, smaller lakes, rivers, streams, and creeks.

Ozaukee County’s budget environment is positively impacted by its relative affluence, which produces high property values and relatively low demand for services in the areas of social services and public safety. Ozaukee County’s median household income of $75, 457 is significantly higher than the statewide average of $52,413.7 In addition, only 5.2% of the County’s population is below the federal poverty level (compared to 13% statewide and almost 22% in Milwaukee County). Meanwhile, Ozaukee County’s median home value of $250,200 is among the highest of any Wisconsin county and well above the state average of $167,100.

These advantages allow Ozaukee County leaders to pursue a budget strategy that seeks to maintain high-quality services while keeping annual property tax increases below the growth in the general economy. In addition, policymakers strive to hold 20% of budgeted general fund expenditures in reserve for working capital and cash flow needs.

These goals were tested, however, in 2011 and 2012, as the County suffered a $3 million reduction in several crucial revenue sources used to offset property tax levy, including the loss of state revenues from a reduction in the number of state inmates held in the County’s corrections facilities. The County employed a range of strategies to absorb this loss without noticeable reductions in services, including modest property tax increases, budgeting slightly more aggressively for sales tax revenue, and employing cost-savings measures to limit salary and benefit growth. The 2014 budget narrative alluded to a continued impact of these revenue reductions – department heads have been asked to submit zero-levy-increase budget requests for the past several years, for example.

7 United States Census Bureau State and County Quick Facts. Ozaukee County. Accessed on February 12, 2015. http://quickfacts.census.gov/qfd/states/55/55089.html

Overview of Ozaukee County Finances

As shown in Figure 2, the largest individual Figure 2: 2014 Ozaukee County Budget Overview components of Ozaukee County’s $83 million revenue budget are charges for Ozaukee County Revenues (millions) services, property tax levy, intergovernmental revenues (mainly from Charges for services $22.53 federal and state sources), and proceeds Property tax levy $18.97 from a 0.5% county sales tax.8 The County’s Intergov't revenues $12.96 substantial use of service charges (i.e., user fees) – which totaled $22.5 million in the County sales tax $6.81 2014 budget – is a deliberate strategy to Other financing… $6.10 stabilize and diversify its revenue structure and decrease reliance on the property tax. Other revenues $16.07 The majority of the County’s service charge revenues emanate from its senior living campus (including Medicare and Medicaid reimbursement) and two county-owned golf courses. Total Budget: $83.4 million Property taxes represent Ozaukee County’s second-largest source of revenue. Chart 9 (on the following page) shows that between 2010 and 2014, the levy increased by about $1 million (6%), with most of the Ozaukee County Expenditures (millions) modest increase dedicated to debt service. Lasata Senior Living Campus $18.36 The County’s levy rate and per capita Public health and human services $11.87 property taxes are among the lowest in the state. Sherriff's office $10.75 Highway department $10.23 County roads & bridges $6.66 Transit services $3.39 Department of Administration $2.80 Capital projects bonding $2.53 Debt service $1.90 Clerk of courts $1.55 Facilities management $1.39 Planning & Parks $1.38 Capital reserve $1.27 Information technology $1.13 All other expenditures $8.23

8 While 2015 budgets have been adopted for each of the three counties analyzed in this report, the timing of our release and our desire to conduct detailed analysis to distinguish between culture/recreation and other spending in parks and environmental functional areas precluded our use of 2015 budgeted amounts in most cases. Instead, unless otherwise noted, 2014 budgeted amounts are the most recent budget figures used (audited 2014 actual spending and revenue figures are not yet available). Our analysis of five-year budget trends uses actual spending and revenue figures for 2010-13.

Chart 9: Ozaukee County Property Tax Levy (2010-2014 in millions)

$19.5 $18.5 $18.5 $18.6 $18.8

2010 2011 2012 2013 2014B

With regard to the distribution of property tax levy, more than half of the total levy is dedicated to the public safety function, as shown in Chart 10. Public works and human services also receive substantial portions of the County's annual levy, while the natural resources function – which includes the cultural and recreational services that are the focus of this section – receives only a small fraction of Ozaukee County's total property tax levy.

Chart 10: Ozaukee County Property Tax Levy Breakdown (2014 Budget in millions)

Public Works $5.43

Heath & Human Needs $5.40

Administration & Finance $4.20

Other $0.57

Natural Resources $0.15

Non Departmental-$7.12

-$8 -$6 -$4 -$2 $0 $2 $4 $6 $8 Millions The County also receives substantial funding from federal and state sources, and it levies a 0.5% sales tax as allowed under the Wisconsin Statutes.9 As shown in Chart 11, sales tax revenues grew 11% between 2010 and 2014 and represent 8% of the overall revenue mix. The County planned to use a projected $400,000 increase in sales tax collections in 2014 to restore reserves and provide property tax relief.

9 The State grants all Wisconsin counties the option of levying a sales tax of up to 0.5% to be used for county services or for property tax relief. This is on top of the 5.0% sales tax levied by the State.

Chart 11: Ozaukee County Sales Tax Revenue (2010-2014 in millions)

$6.80 $6.81 $6.54 $6.11 $6.22

2010 2011 2012 2013 2014B

On the expenditure side, Figure 2 shows that Ozaukee County – like most counties – spends heavily on state-mandated responsibilities related to seniors, health and human services, public safety, and transportation. Together, these categories comprise about 73% of the budget. The culture and recreation function accounts for about 6% of overall County spending in the 2014 budget.

Culture and Recreation in Ozaukee County

Culture and recreation figure prominently in Ozaukee County’s strategic goals. In fact, land preservation for purposes including parks and recreation and support of cultural tourism activities are two of the 10 priority issues cited in the County’s strategic plan.

For this analysis, we focus on the six primary areas of Ozaukee County’s culture and recreation function: parks, golf courses, fairgrounds, fish passage projects, Ozaukee County Historical Society/Pioneer Village, and other cultural grants. The following is a brief summary of each area of activity.

 Parks: Ozaukee County owns more than 1,200 acres of parks and trails on 15 sites throughout the County. In contrast to the active recreation that tends to characterize municipal parks (e.g., playgrounds, ball fields, and the like), Ozaukee County parks generally are intended for passive recreation including multi-use trails (for cycling, hiking, etc.), wildlife/nature viewing, canoe/kayak/boat launch, cross-country skiing, fishing, and camping. Some representative highlights of Ozaukee County’s parks assets are the 30-mile paved multi-use Ozaukee Interurban Trail; Tendick Nature Park with its event rental space, disc golf course, and cross country trails; and the 293-acre Hawthorne Hills County Park complex featuring the outdoor history museum at Pioneer Village and a number of other amenities.

 Golf Courses: Integral to the parks system are two championship 18-hole golf courses located at Hawthorne Hills Park and Mee-Kwon Park. Both courses feature full-service clubhouse restaurants. As in many other counties, Ozaukee County’s golf courses are enterprise funds, meaning they run like private businesses and are expected to be self- sustaining with user fees and other earned revenue. Although the golf courses have posted profits over the past five years, the margin can be tight because of weather uncertainty and other factors. Tax levy is not used to fund golf courses per se, but can be used temporarily to help cover year-end deficits; in such cases, the tax levy is paid back when earned revenues rebound.

 Fairgrounds: Ozaukee County owns and maintains the buildings and grounds on the fairgrounds in Cedarburg. A key component of the County’s fairgrounds business model is to cultivate partnerships with external organizations that pay for access to the site. Most notable among such partnerships is the County’s relationship with the Milwaukee Curlers Association. The County and the Association joined forces to construct a new 28,000-square- foot multipurpose facility at the fairgrounds, a large portion of which was financed with a 2011 County general obligation bond issue. As part of the long-term plan for sustainability, the two entities entered into an agreement whereby they essentially split the cost of the building’s construction, operations, and maintenance and also split usage of the facility during the year. The County’s aim is to break even on recurring costs and limit any property tax levy contributions.10

10 Ozaukee County fairgrounds multi-purpose ground breaking. Event announcement found on Ozaukee County Website. http://www.co.ozaukee.wi.us/documentcenter/view/478

 Fish Passage Projects: Since 2009, Ozaukee County has been engaged in a land/water/infrastructure improvement program that it considers to be a vital element in its portfolio of recreational assets. The County’s fish passage projects have received more than $8.5 million in federal, state, local, and private funding to work with more than a dozen public and private partners to restore natural stream functions and habitat for native wildlife throughout the County’s portion of the Milwaukee River Watershed and the Lake Michigan Basin. This program represents a long-term investment aimed at improving County land and water resources for enhanced recreation opportunities and environmental preservation. Culvert replacements and similar projects also have the dual purpose of improving transportation and roadway infrastructure. Outside of in-kind County staff time for grant preparation and reporting, the County uses only external funding sources, including federal and state grants, reimbursement from local municipalities, and private donations.

 Ozaukee County Historical Society and Pioneer Village: Operated by the Ozaukee County Historical Society, Pioneer Village is a living history museum made up of 24 pioneer-era buildings relocated from throughout the state and restored in Ozaukee County’s Hawthorne Hills Park. Since 1960, the Historical Society has operated and maintained the buildings throughout the village, staffing it with a residential caretaker. Ozaukee County’s parks department owns and maintains the grounds as part of its management of the entire Hawthorne Hills Park complex. The County also provides an annual operating grant of $28,000 to the Society, as well as an annual $12,500 capital grant and periodic bond financing for specific capital improvements.

 Other Cultural Grants: Ozaukee County provides annual tax levy-supported grants to support two additional cultural organizations: the National Flag Day Foundation receives $5,000 to support its work to commemorate adoption of the American flag and Ozaukee County as the birthplace of Flag Day; and the Ozaukee County Tourism Council receives $30,000 mainly to produce a comprehensive annual Ozaukee County Official Visitors Guide. Culture and Recreation Finances

Overview

Chart 12 shows that Ozaukee County has spent $26.1 million during the past five years on culture and recreation (both operations and capital needs), or an average of about $5.2 million annually. This has represented about 6% of total annual average County spending during the five-year period. Average annual spending on operations since 2010 is $3.5 million, while average capital spending is $1.7 million. It is important to note that these totals are skewed by one-time spending at the fairgrounds, most of which ($4.6 million) occurred in 2012, that is discussed in greater detail later in this section.

Chart 12: Ozaukee County Operations and Capital Spending for Culture and Recreation (2010-2014) $10 Capital $9

Millions Operating $8

$0 2010 2011 2012 2013 2014B

On the revenue side, Chart 13 shows that only a small portion of the monies spent on culture and recreation are derived from the County’s property tax levy. In fact, the two major areas of spending – water projects and golf courses – are fully funded by outside revenues (public and private grants in the case of water projects and green fees and related revenues in the case of the golf courses). Overall, $2.4 million of property tax levy was used to support culture and recreation in the five-year period, or an average of about $472,000 per year out of a total annual County property tax levy of about $20 million.

Chart 13: Ozaukee County Revenue for Culture and Recreation (2010-2014)

$10 Non-Levy Revenues Property Tax Levy

Millions $8

$0 2010 2011 2012 2013 2014

Most of Ozaukee County’s property tax levy support for the culture and recreation function is directed toward its parks, with $567,441 in levy budgeted for that purpose in 2014. Non-levy revenues to support the parks are budgeted at about $131,000 and include a $35,000 payment in lieu of taxes from each of the two golf courses.

Overall, Ozaukee County strives to use user fees, state/federal grants, and other outside funding streams for quality-of-life services while reserving property tax levy for services that cannot generate their own resources. These twin goals are especially visible in the way the County has aggressively pursued grant funding to support its fish passage projects and in the synergistic partnerships it has developed with the Milwaukee Curlers Association and the Ozaukee County Historical Society. Operating Budget

As shown in Table 3, Ozaukee County spent $17.6 million on recreation and cultural operations between 2010 and 2014. The largest sectors of activity are the self-sustaining fish passage projects and golf courses. Parks-related expenditures totaling $2.3 million represent 13% of the total, while the small remaining balance (less than 8%) is dedicated to fairgrounds operations and cultural grants.

Table 3: Ozaukee County Culture and Recreation Operating Expenses (2010-2014) 5-year 2010 2011 2012 2013 2014B total

Parks $366,950 $389,516 $497,158 $445,494 $587,411 $2,286,529 Golf Courses $1,296,277 $1,320,741 $1,491,075 $1,217,065 $1,492,284 $6,817,442 Fairgrounds $77,535 $224,237 $247,810 $371,516 $165,799 $1,086,897 Fish Passage Projects $2,207,470 $1,052,219 $2,349,471 $1,152,269 $382,175 $7,143,604 Historical Society/Pioneer Village $28,044 $28,046 $28,000 $28,000 $28,000 $140,090 Other Cultural Grants** $35,000 $35,000 $35,000 $35,000 $35,000 $175,000 Total Operating Expenses - $4,011,276 $3,049,759 $4,648,514 $3,249,344 $2,690,669 $17,649,562 Culture and recreation***

Below, we break down Ozaukee County’s culture and recreation operating expenditures into three categories: personnel, routine repair and maintenance, and general operating. As shown in Chart 14, general operating expenditures (e.g., travel, supplies, purchased services, interdepartmental charges) comprise about half of the total, while personnel-related costs comprise about 38% and repair/maintenance the remaining amount.

Chart 14: Ozaukee County Culture and Recreation Operating Expenses (2010-2014) $5.0 Repair & maintenance Salaries & fringe

Millions $4.0 General operating

$3.0

$2.0

$1.0

$0.0 2010 2011 2012 2013 2014B

Personnel

Ozaukee County budgeted $1.4 million in 2014 for salaries and fringe benefits for employees working in its culture and recreation function.11 Spending over the 2010-2014 timeframe was relatively stable with the exception of slight spikes in 2012 and 2014. According to the 2014 budget document, the County has attempted to retain as many regular full-time employees as possible countywide, reducing staffing levels largely through attrition and retirement and striving to keep a lid on annual salary and fringe benefit spending levels.12

Chart 15 shows actual full-time-equivalent employees (FTEs) from 2009 to 2013 in the culture and recreation function, which are contained in two areas: Planning & Parks and Golf Courses. Since 2009, total FTEs between the two functions has ranged between 27 and 31, averaging about 29 FTEs per year.

Chart 15: Ozaukee County Culture and Recreation Full-time Equivalent Employees (2009-2013)

35 Golf Parks & Planning 30

0 2009 2010 2011 2012 2013

Embedded in the salary and fringe benefit costs shown above are a relatively small amount for overtime and a longevity bonus that was eliminated as of 2013. Fringe benefits include the customary retirement and insurance-related budget items. Other than a few line items related to accrued sick leave and vacation payout, Ozaukee County does not incur any significant legacy costs for retired or former employees (i.e., it does not provide other postemployment benefits).

11 Because the County’s Parks department is combined with its Planning department, there are several administrative and planning functions that serve both divisions. Although this report strives where possible to isolate recreation-related parks and planning functions, some Planning & Parks functions are too intertwined to be entirely isolated and may therefore be omitted from these figures. Also, substantial staffing-related expenditures, such as collaborative work between the parks division and the highway department, are embedded in general operating expenditures and reflected as interdepartmental charges.

12 Ozaukee County 2014 Budget book, p. 1-1

Despite similarity in the number of regular staff employed by the two divisions, staffing costs for the County’s two golf courses during the previous five years ($4.1 million) are about three-and-a-half times the amount allocated to the parks division ($1.2 million), which operates and maintains 10 parks and related trail systems and amenities. The principal driver of this disparity is expenditures on salaries and benefits of regular employees – golf courses spend three times as much as Parks on salaries and almost three times as much on total fringe benefits.

Repair and maintenance

Expenditures associated with repair and maintenance are not encapsulated in one specific line item in the County’s operating budget. Rather, they appear throughout several different categories including salaries, supplies, purchased services, and interdepartmental charges. Because consistent routine repair and maintenance is crucial for both operating and capital spending efficiencies, we estimated and analyzed related activity by identifying and aggregating all line items throughout the operating budgets concerned with maintenance or construction. For the purposes of our analysis, this applies to the parks, golf courses, and fairgrounds.

The $2.4 million in expenditures on repair and maintenance in the 2010-2014 timeframe represents almost 14% of all operating expenditures for culture and recreation during that period. Annual spending was relatively stable, averaging about $486,000 per year. As might be expected, repair and maintenance spending at the golf courses ($1.2 million) was almost double that in the parks ($640,000) or the fairgrounds ($548,000) over the five-year period.

General operating13

Fish passage project expenditures ($7.1 million) were the largest slice of Ozaukee County’s general operating expenditures for culture and recreation during the 2010-2014 timeframe, comprising about 40% of all culture and recreation-related operating expenditures during this period, slightly more than golf courses. An important distinction is that a large portion of these expenditures (e.g., construction, land improvements) are non-recurring and are much more akin to capital than operating expenditures. However, because they are wholly dependent on the timing and magnitude of grant funding, they do not figure in the County’s Capital Improvement Plan and are reflected in the County’s operating budget.

As noted above, general operating expenditures during the period also included three annual operating grants to private nonprofit cultural organizations in Ozaukee County. Ozaukee County Tourism has received $30,000 and the Ozaukee County Historical Society has received $28,000 annually to support their respective operations, while the National Flag Day Foundation has received $5,000 in annual County support. Until 2013, the Ozaukee County Fair received $25,000 each year, but that support has been discontinued.

13 General operating expenditures comprise any expenses that are not already accounted for as repair and maintenance or salaries and benefits including travel expense, supplies, purchased services, interdepartmental costs, and other. Debt service funds are controlled at the total expenditure level and generally are not identified in individual department budgets.

Capital Budget

As shown in Chart 16, Ozaukee County incurred about $8.5 million in capital expenditures during the past five years in the area of culture and recreation. About $6.1 million of that amount was concentrated at the Ozaukee County Fairgrounds. Golf courses comprised about $1.7 million of the total, with far lesser amounts of capital dollars spent in the parks and Pioneer Village.

Chart 16: Ozaukee County Capital Spending on Culture and Recreation (2010-2014 in millions) $5.0 $4.7

Millions $4.0

$3.0

$2.0 $2.0

$1.1 $1.0 $0.3 $0.4

$0.0 2010 2011 2012 2013 2014

Ozaukee County departments develop and maintain a 10-year comprehensive list of capital projects, and the County updates and adopts a five-year Capital Improvement Plan as part of each annual budget. Capital projects are funded through a mixture of bond proceeds, property tax levy, user fees, grants, and other outside revenues. The decision on whether to issue bonds typically is predicated on the magnitude and breadth of needed capital projects in a given year and availability of non- property tax revenue sources.

Also, in addition to adhering to the State’s statutory borrowing limit (outstanding debt shall be no more than 5% of the equalized value of all county property), Ozaukee County has established internal borrowing limits. For example, it is the County’s policy that total debt shall be less than total general fund annual expenditures, and that debt service payments will be less than 12.5% of the total property tax levy. As of the 2014 budget, the County’s margin for new debt was $11.1 million, and its margin for new debt payments was $1.3 million.14 Of course, debt is further restricted in the global sense by the County’s overarching commitment to maintaining one of the lowest property tax levy rates statewide.

Ozaukee County used bond financing for culture and recreation capital needs twice during the 2010- 2014 period. In 2011, the County issued $4.9 million in general obligation bonds to finance projects at the fairgrounds in Cedarburg (most of the proceeds were spent in 2012). Of that amount, $3.8 million was used to construct a 28,000-square-foot multi-purpose building (the Columbia St. Mary’s Building) to serve both the County and the Milwaukee Curlers Association. In addition, the County

14 Source: Ozaukee County 2014 Adopted Budget, p. 8-2. Calculation: $2,418,027 (policy limit on debt payments) minus $1,124,981 (2013 governmental debt payments) equals $1,293,046 (margin for new debt payments)

spent $1.1 million in bond proceeds to help fund several other building improvements at the fairgrounds. The total cost of the projects was about $6.9 million, with the remaining amount secured through external funding from partner entities such as the Milwaukee Curlers Association, Ozaukee County Fair, and others.

Recognizing historically low interest rates as an opportunity to finance a number of deferred capital projects, the County Board authorized another general obligation bond issue in July 2013, this one totaling $6.9 million. Bond proceeds addressed high-priority projects countywide that the County had been unable to fund in previous budgets. Those projects included two in the culture and recreation function that were reflected in the 2014 Capital Budget: about $600,000 for upgrades to a fairgrounds barn, and $225,000 for renovations to bathrooms and shower facilities of a multipurpose building at Pioneer Village.

Another relatively large recent project is to be undertaken at Ozaukee County’s Mee-Kwon Golf Course per the 2014 budget. That project involves construction of a new $750,000 maintenance facility, financed exclusively with user fees. The building will include a mechanic shop, office space, cold and hazardous materials storage, bathroom/shower facilities, and a number of other amenities. Because of safety upgrades, staffing efficiencies, and avoided repairs, it allowed the County to eliminate a superintendent position, thus reducing annual personnel expenses by $50,000.

Besides the golf course facility and the bond-funded projects, Ozaukee County spent another $2 million from 2010 to 2014 on recreation/culture-related capital needs and projects. Those included annual equipment replacements for the parks and golf courses; trail construction and maintenance; land purchases and improvements; and an annual grant of $12,500 to the Ozaukee County Historical Society for Pioneer Village capital needs.

As noted above, Ozaukee County also has secured about $7 million in external funding since 2010 to cash finance a number of fish passage projects. While those projects are capital in nature in that they are large-scale non-recurring land improvements aimed at improving the County’s environmental, recreational, and transportation-related infrastructure, they were accounted for in the County’s operating budget because they are implemented as grant funds are secured, not according to the countywide capital planning process. Where possible, the County has combined fish passage projects with other parks/open space project needs, thereby underwriting some expenditures countywide that otherwise might have landed in the capital budget. For example, about half of the cost of a 2013 capital project at Mee-Kwon Park to build roads and culverts was underwritten by fish passage project grants.

Projected capital spending: 2015-2019 and beyond

Table 4 shows that Ozaukee County’s five-year capital improvement plan (2015-2019) contains 39 projects in the culture and recreation function at a total cost of $4.1 million. Although this is about half of the amount of total capital spending in the previous five-year period ($8.5 million), it does not include any bond-financed projects. Removing the $5.7 million in bond-funded recreation/culture projects from 2010-2014 expenditures yields a total of about $2.8 million, which is about two-thirds of the projected 2015-2019 five-year total.

Because most of the projects on the 2015-2019 list are relatively small, it is unlikely that the County would use bond financing for the vast majority of those projects. Consequently, it would need to spend $1.3 million more from property tax levy and other non-bonding sources in the next five years than it did during the 2010-2014 timeframe to address the projects on the list. Should County leaders elect to issue bonds in the next five years, then it is possible that a few of the larger projects

on the 2015-2019 list could be financed with those proceeds. In addition, bonds could be issued for larger projects that have not yet materialized or have not yet been deemed important enough to make the list.

Table 4 also categorizes the 2015-2019 projects by project type. The table shows that 25 of the 39 projects are related either to maintenance or equipment replacement, and that the combined projected spending for these projects is $2.3 million, or 56% of the total. These projects are limited to repair, upkeep, or replacement needed to extend an asset’s useful life or to keep them in safe, working condition. Another 14 parks and golf course projects are designated as improvement or construction projects aimed at increasing the value of assets, such as building or road projects or facility additions or upgrades. These account for 44% of the plan.

Table 4: Ozaukee County Projected 5-year Capital Expenditures (2015-2019) 2015-2019 Capital Project Description Type Expenditures Fairgrounds Horse barn repair Maintenance $30,000 Beef and hog barn repair Maintenance $60,000 Dairy barn repair Maintenance $70,000 Show arena repairs Maintenance $75,000 TOTAL FAIRGROUNDS $235,000 Parks Cold storage building Construction $50,000 Gatekeeper/Maintenance Truck Equipment $40,000 2 Zero Turn Mowers and Trailer Equipment $25,000 Bathroom and small storage building Construction $150,000 Bathroom facility/Open Shelter Construction $175,000 Crack sealing and seal coating Maintenance $60,000 Pave Park Road & Parking Areas Maintenance $50,000 Playground equipment Equipment $30,000 Playground equipment Equipment $40,000 Utility truckster Equipment $30,000 Bathrooms and shower house Construction $175,000 Campground development Improvement $175,000 Cold storage building Construction $150,000 One Ton Truck Equipment $45,000 Paved parking Maintenance $30,000 Replacement SUV Equipment $35,000 Skidsteer replacement Equipment $50,000 Additional paved parking Improvement $30,000 Grooming equipment Equipment $25,000 Pave Park Road & Parking Areas Maintenance $50,000 Playground equipment Equipment $40,000 Firewood canopy structure Construction $60,000 Milwaukee River/Lake Michigan Water Trail System Improvement $30,000 Off-road mountain bike park/facility Improvement $100,000 One Ton Truck Equipment $45,000 Re-paving trail portions Maintenance $350,000 Tractor attachment for trimming Equipment $60,000 Wash area and grey water management Improvement $25,000 TOTAL PARKS $2,125,000 Golf Courses Golf course equipment* Equipment $295,000 Golf course equipment* Equipment $295,000 Golf Carts Equipment $235,000 Golf Carts Equipment $235,000 Repair maintenance shop Improvement $30,000 Clubhouse remodel Improvement $425,000 Driving range Construction $250,000 TOTAL GOLF COURSES $1,765,000 TOTAL PROJECTED CAPITAL $4,125,000

Table 5 shows an additional nine parks projects that appear on the department’s 10-year plan but that did not make it on to the 5-year countywide capital improvements plan. Like many of the projects in the later years of the five-year plan, almost all of these projects are capital improvements or land acquisitions.

Table 5: Ozaukee County Parks Capital Projects Deferred Past 2015-2019 5-10 Years Project Description Type Location/Use Out Repave roads Maintenance Bonniwell to Green Bay Road, Culverts $20,000 Small land/easement acquisition Acquisition Access/signage for Parks $30,000 Caretaker house garage Construction Mee-Kwon Park $40,000 Off-leash dog park Improvement Parks system $50,000 Water quality monitoring station Construction Parks system $100,000 Small shelter and gazebo Construction Waubedonia Park $130,000 Multi-sport indoor recreation facility Construction Mee-Kwon Park $250,000 Maintenance facility (continuation) Construction Mee-Kwon Golf Course $322,000 Natural areas/open space Acquisition Acquisition Parks: Lake Michigan/ Lion's Den Gorge $600,000 TOTAL DEFERRED CAPITAL PROJECTS $1,542,000

According to budget officials, this phenomenon is not unusual. County officials have been vigilant in meeting pressing capital maintenance and equipment replacement needs, but more ambitious capital improvement projects often are deferred because of ongoing efforts to limit spending, despite the potential of such projects to increase earned revenues. The following briefly describes a pair of such projects.

 New bathroom facility at Covered Bridge Park ($175,000 listed for 2016): The proposed new modern bathroom facility would replace portable bathrooms at Covered Bridge Park, one of the County’s most popular cultural and historic assets. This project – which has been proposed and deferred three times – would provide upgraded amenities appropriate for the current widespread use of the park, and also potentially contribute to expanded use. Wider use could generate increased reservation fees for fishing and special events such as weddings, tours, or organizational gatherings. The project also would eliminate an annual cost of $1,200 for portable bathroom rental. Two other bathroom/shower projects on the CIP, one at Waubedonia Park for $175,000 and one at Lion’s Den Gorge Nature Preserve for $150,000, carry similar potential benefits.

 Campground development at Hawthorne Hills Park ($175,000 listed for 2017): The Hawthorne Hills Park complex hosts the nonprofit Pioneer Village, a County golf course, a youth/retreat facility, hiking trails, and picnic areas. Because of these synergies, a new campground with the capacity to serve both campers and RV campers on 25-30 sites with electrical and bathroom/shower service could generate an estimated $7,500 to $10,000 annually in campground reservation fees, in addition to increased revenues streams for higher attendance at Pioneer Park events and the golf course restaurant.

Summary of Culture and Recreation Finances

Despite its relative affluence, Ozaukee County – like most other counties – grapples with the need to prioritize its finite resources. Over the past five years, County departments have been under pressure to keep their property tax levy requests flat, thus forcing them to “absorb” inflationary increases in fixed costs. Meanwhile, health, public safety, and transportation take up the lion’s share of the County’s property tax levy and other revenue streams, leaving quality-of-life considerations with limited space to maintain and grow existing services.

The County has spent about $5 million annually (combined operating and capital) on the culture and recreation activities described in this section, with only about $470,000 per year derived from the property tax levy. While it is difficult to point to any one area of culture and recreation spending that stands out as a dire need, the County has deferred non-urgent but potentially high-value capital improvement projects. Conversations with County officials and capital planning documents indicate that access to additional resources from a new regional culture and entertainment funding source could facilitate the County’s ability to pursue such opportunities, which might include repaving portions of the Ozaukee Interurban Trail, improving river access for kayaks and canoes, replacing playground equipment, and improving park bathroom, camping, and storage facilities. Such new funding sources also could serve as matching funds to help leverage additional outside funding for infrastructure and other capital projects.

Additional context can be gained by examining capital improvement projects listed on the current five-year Capital Improvement Plan (excluding those categorized as maintenance or equipment replacement) that are not slated to be funded in 2015. If policymakers wished to implement those projects in 2015, then they would need to identify $670,000 to do so. This number includes $400,000 in bathroom and storage projects, $160,000 in campground-related projects, and another $110,000 in infrastructure improvements and newly accessible amenities, such as a mountain bike facility. If the parks division’s 10-year plan were used instead, then there would be another $530,000 in projects that could benefit from a new source of funding.

Washington County

Background and Budget Environment

Washington County is 432 square miles and comprises two cities, six villages, and 12 townships. The county is located northwest of Milwaukee in an area of strong economic and modest population growth. According to the U.S. Census Bureau, the estimated 2013 population has increased by about a half percent since 2010 to 131,887. The county also enjoys a healthy median household income of $66,485 as well as a low poverty rate of 5.4%. The county’s unemployment rate has rebounded over the past couple years after a significant decline in the aftermath of the economic downturn. In fact, its October 2014 unemployment rate of 4% reflected a decrease of more than a third from the October 2010 rate of 6.6%.

Reflecting the county’s overall economic stability, Washington County government enjoys healthy reserves and sales tax collections. In recent years, the County has used a combination of reserves, sales taxes, state shared revenue, and interest earnings to reduce annual property tax levies and stabilize the property tax rate. In fact, one of the County’s primary goals is to keep the tax rate at or below 2007 pre-recession levels. Meeting this goal has been challenging over the past several years because of declining property values, but this trend was reversed in 2014 as property values increased for the first time since 2009. Another key Washington County financial policy is to keep undesignated reserves in the general fund within 8% to 15% of expenses of the general fund and various special revenue funds.

The County plans for its long term capital needs through a five-year capital improvement plan. Through this process, the County prioritizes its long-term capital needs and identifies funding sources. The majority of funding comes from cash financing that is derived from County sales tax collections. Because of the reliance on cash financing, the County enjoys minimal debt levels.

Overview of Washington County Finances

As shown in Figure 3, Washington County has Figure 3: 2014 Washington County Budget Overview an annual budget of about $120 million.15 The largest revenue component is charges for 2014 Washington County Revenue services, which is indicative of the County’s attempt to cover the full cost of providing many Charges for services $40.94 transactional services through user-related fees, thus taking the burden off the property Property taxes $36.44 tax levy. As is common with other county governments in Wisconsin, the bulk of the Intergovernmental $20.05 remaining revenue comes from property taxes Other and intergovernmental aid, which supports $12.34 federal- and state-mandated programs. In County sales tax $10.04 addition, the County levies a 0.5% sales tax which is used solely for capital, debt service, and property tax levy reduction.

On the expenditure side, as is also the case with most county governments, human Total Budget: services and public safety constitute more $119.8 million than half of the budget. The demand for services from the Human Services Department has been growing over the past several years, particularly in the areas of child protective services, food and medical assistance, and 2014 Washington County Expenditures behavioral health. Health & Human Services $39.87 The County's culture and recreation function accounted for only $3.4 million, or less than Public Safety $22.67 3%, of budgeted expenditures in 2014. Transportation $18.41 Chart 17 (on the following page) shows that Administration $13.50 between 2010 and 2014, the County’s Health Insurance & Worker's… $9.37 property tax levy decreased by about $2.6 million, or 7%. As noted above, the County has Capital Projects $5.78 been able to use contributions from reserves, Recreation & Culture $3.40 excess sales tax revenue, and increases in Conservation, Planning, &… $3.05 state aids and interest earnings to achieve that feat. In fact, in 2014, those four sources Library $1.63 allowed the County to collectively reduce its Debt $1.29 property tax levy needs by $8.2 million. Indirect Charges $0.85

15 While 2015 budgets have been adopted for each of the three counties analyzed in this report, the timing of our release and our desire to conduct detailed analysis to distinguish between culture/recreation and other spending in parks and environmental functional areas precluded our use of 2015 budgeted amounts in most cases. Instead, unless otherwise noted, 2014 budgeted amounts are the most recent budget figures used (audited 2014 actual spending and revenue figures are not yet available). Our analysis of five-year budget trends uses actual spending and revenue figures for 2010-13.

Chart 17: Washington County Property Tax Levy (2010-2014 in millions) $40 $39.1 $39.0 $38.4 $37.4 $36.4

$35 Millions $30

$25

$20

$15

$10

$0 2010 2011 2012 2013 2014B

As previously mentioned, the County enjoys healthy reserves, which reflect a policy to maintain the undesignated general fund balance at specified levels in each annual budget. The existence of such reserves helps the County deal with cash flow fluctuations throughout the year and ensures a sufficient amount of money is put aside to cover unforeseen circumstances. The balance of reserves in the general fund going into 2014 was $25.1 million, or 19.7% of designated expenses. This allowed the County to contribute $1.8 million from the general fund to reduce property tax levy.

As shown in Chart 18, the general fund balance grew by almost 60% over the last five years. The County’s general fund reserves increased by an average of 15% from 2009-2012, while the ending fund balance in 2013 was 5% greater than in 2012.

Chart 18: Washington County General Fund Reserves (2010-2014 in millions) $30

$25.1

$25 $23.7 Millions $20.6 $20 $18.0 $15.8 $15

$10

$0 2010 2011 2012 2013 2014B

In 2013 and 2014, the County increased the contribution made from the general fund by $500,000 as a means of reducing property tax levy. Beginning in 2015, as a way to sustain this practice and to ensure a healthy general fund reserve, the County will increase the amount of sales tax revenue used to offset property tax levy by $500,000 and reduce the general fund contribution by a similar amount.

In addition to possessing healthy reserves, the County has benefited from sales tax revenue growth of 13% from 2010-2014, as shown in Chart 19. When County leaders decided to levy a 0.5% sales tax, they also adopted a policy to utilize the funds to pay for capital projects, make debt payments, and reduce the property tax levy. In 2014, of the total $10 million in budgeted sales tax revenue, $5.4 million was used to reduce property tax levy, $3.3 million to pay off debt, and $1.3 million to fund capital projects.

Chart 19: Washington County Sales Tax Revenue (2010-2014 in millions) $12 $10.0 $9.7 $10.0 $10 $9.2

Millions $8.9

$0 2010 2011 2012 2013 2014B

Chart 20 breaks down the County’s use of property tax levy by functional area in the 2014 budget. As shown, public safety (40%) and health and human services (26%) received the largest allocations. The culture and recreation function received only $1.5 million, or about 4% of the total annual levy.

Chart 20: Washington County Property Tax Levy Breakdown, 2014 Budget (in millions)

Public Safety $17.9

Health & Human Services $11.7

Administration $6.0

Transportation $3.4

Conservation, Planning, & Education $1.9

Library $1.6

Recreation & Culture $1.5

Debt $0.7

Levy Offset -$8.3

-$10 -$5 $0 $5 $10 $15 $20 Millions 47

Finally, it is important to note that Washington County enjoys a very minimal debt load because of its ability to fund capital projects with sales taxes. In fact, the County did not issue any debt over the five-year period and continues to aggressively pay down its existing debt. Entering the 2014 budget, the County’s total outstanding debt was $17.1 million, which amounts to 0.14% of the County’s equalized value. To put this into perspective, the state permits the County to issue debt of up to 5% of its equalized value, which in this case totals $607 million. As the County pays off its debt, a greater proportion of sales tax revenues will be diverted toward reducing the property tax levy, which will allow the County to use a smaller proportion of reserves for that purpose.

Culture and Recreation in Washington County

For this analysis, we focus on the five primary areas of culture and recreation activity in the Washington County budget: parks, golf courses, Fair Park and Conference Center, Convention and Visitors Bureau, and the Washington County Historical Society.

 Parks: Washington County owns more than 1,200 acres of parkland, including 12 parks that offer amenities such as scenic views, wooded trails, lakes, ponds, sporting facilities, and rentable shelters. Activities offered in Washington County parks include hiking, running, biking, picnicking, boating, swimming, archeological education, canoeing, fishing, basketball, sand volleyball, sledding, snowmobiling, and cross country skiing.

 Golf Courses: The park system also includes a 280-acre 18-hole championship golf course. Founded in 1997, the Washington County Golf Course is one of the state’s premier golf courses and was rated the #2 municipal golf course in the nation by Golf Digest. The course runs along the Rubicon River environmental corridor and offers scenic views of Powder Hill and Holy Hill.

 Fair Park and Conference Center: The Washington County Fair Park and Conference Center is owned by Washington County and operated by the Agricultural and Industrial Society, a nonprofit organization. The organization runs the county fair and hosts more than 350 events per year. The center is equipped to host a myriad of events including festivals, conferences, concerts, educational programs, banquets, competitive animal shows, meetings, workshops, and more. While the non-profit is in charge of operations, the County manages all capital costs associated with buildings and assets.

 Convention and Visitors Bureau: The Washington County Convention and Visitors Bureau is a nonprofit organization designed to create an economic impact in Washington County through the attraction of both business and leisure travelers. As such, the Bureau raises awareness of the many tourist, cultural, and recreational attractions as well as special events the County has to offer. The County makes a donation every year to the Bureau to support its mission.

 Historical Society: The Washington County Historical Society museums are jointly run by the Historical Society and the County. The County owns and maintains the facilities while the Historical Society runs the day-to-day operations. The two museums are the Old Courthouse and Old Jailhouse museum. The Historical Society also provides a research center for those who wish to conduct independent research projects in addition to hosting a variety of educational events throughout the year. Culture and Recreation Finances

Overview

Chart 21 shows that Washington County has spent $20 million during the past five years on culture and recreation (both operations and capital needs), or an average of about $4 million annually. Average annual culture and recreation spending on operations since 2010 is $3.5 million, while average capital spending is $478,000.

Chart 21: Washington County Spending on Culture and Recreation (2010-2014)

$5,000,000 Operating Capital $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 2010 2011 2012 2013 2014B

Parks and golf courses are the largest source of annual operating expenditures in the culture and recreation function, with general operating expenses and salaries and benefits making up the majority of annual operations spending. Capital expenses consist of projects related to county parks and the Fair Park, with the majority of these expenses for facility-related projects.

On the revenue side, Chart 22 shows that about $1.5 million of property tax levy is dedicated to parks, culture and recreation each year, while $1.8 million per year comes from non-levy sources. The majority of non-levy sources come from earned revenues at the golf course, which is mostly self- funded. Other non-levy sources come from fees charged at the parks and Historical Society.

Chart 22: Washington County Revenues from Culture and Recreation (2010-2014)

$4,000,000 Levy Non-levy

$3,500,000

$3,000,000

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0 2010 2011 2012 2013 2014B

Operating Budget

Washington County spent $17.6 million on operating expenditures for its culture and recreation activities between 2010 and 2014, as shown in Table 6. As noted above, parks and golf courses make up the most significant portion and account for 70% of total operating expenses over the five- year period. Remaining expenditures include expenses for the Historical Society and the Fair Park.

Table 6: Washington County Culture and Recreation Actual Operating Expenses 5-year 2010 2011 2012 2013 2014B total Conv. & Visitors Bur. $0 $20,000 $30,000 $40,000 $45,000 $135,000 Fair Park $655,525 $743,089 $317,040 $389,765 $337,492 $2,442,911 Golf $1,185,623 $1,162,932 $1,116,573 $1,090,636 $1,208,636 $5,764,400 Historical Society $577,341 $547,835 $538,459 $543,386 $542,278 $2,749,299 Parks $1,344,698 $1,360,095 $1,195,766 $1,369,119 $1,263,680 $6,533,358 Total $3,763,187 $3,833,951 $3,197,838 $3,432,906 $3,397,086 $17,624,968

For purposes of analysis, we break down Washington County’s culture and recreation operating expenditures into three categories: personnel, routine repair and maintenance, and general operating, as shown in Chart 23. General operating expenditures (e.g., travel, supplies, purchased services, interdepartmental charges) comprised about 48% of the total over the five-year period, while personnel-related costs comprised about 34% and repair/ maintenance expenses accounted for the remaining amount.

Chart 23: Washington County Culture and Recreation Actual Operating Expenses (2010-2014) General operating Salaries and fringe benefits Repair and maintenance $4,000,000

$3,000,000

$2,000,000

$1,000,000

$0 2010 2011 2012 2013 2014B

Personnel

Personnel costs in the culture and recreation function have been on the decline since 2011. In fact, the 2014 personnel budget is 13% below 2010 actual expenses. This reduction can be attributed to pay plan changes, including the elimination of across-the-board wage increases and changes made to pay grades, as well as employee attrition.

Chart 24 shows that actual full-time-equivalent employees (FTEs) did decline in the culture and recreation function from 2011 to 2013, but by only one FTE. Most of this slight change took place in the golf area, as this division was reduced by .71 FTE.

Almost all staff members are employed at the parks and golf course. The convention center, Fair Park, and Historical Society are run and staffed by separate entities. The only exception to this is a part-time custodian employed at the Historical Society, who is considered a County employee.

Chart 24: Washington County Culture and Recreation Budgeted Staffing (2011-2013) 20.00 18.47 18.08 17.53

15.00

10.00

5.00

0.00 2011 2012 2013

Repair and maintenance

The $2.7 million in expenditures on repair and maintenance in the 2010-2014 timeframe represents almost 16% of all operating expenditures for culture and recreation during that period. Annual spending was relatively stable, averaging $551,000 per year. More than two-thirds of repair and maintenance expenses took place at the parks ($1.2 million) and the Fair Park (709,262). The Historical Society accounted for $508,000, while the golf course accounted for $380,000.

General operating

General operating expenses over the five-year period totaled $8.3 million. More than a third of general operating expenses took place at the golf course, while the remaining two-thirds were spent at the Historical Society ($2.2 million), the Fair Park ($1.7 million), and parks ($1.4 million). A small portion of general operating expenses was spent on the Convention and Visitors Bureau through the County’s annual donation.

Capital Budget

Washington County utilizes a five-year capital improvement plan, which identifies both anticipated major capital improvement projects and projected funding sources. Generally, the main funding source supporting the capital budget is the sales tax. The balance comes from internal funding sources and the issuance of long- term debt. As previously mentioned, because of the emphasis on pay-as-you-go financing for significant capital items, the County enjoys very modest debt levels. The County does hold about $1.4 million in debt related to improvements made to the golf course several years ago, though it planned to retire $330,000 of that amount in 2014. Although the golf course is mostly funded by user fees, sales tax revenue is used to help offset these debt payments.

As shown in Chart 25, Washington County spent about $2.4 million on culture and recreation capital needs during the past five years, with $1.9 million of that amount concentrated at the parks and $539,000 at the Fair Park.

Chart 25: Washington County Capital Spending on Culture and Recreation (2010-2014)

$900,000 Fair Park Parks

$800,000

$700,000

$600,000

$500,000

$400,000

$300,000

$200,000

$100,000

$0 2010 2011 2012 2013 2014B

As mentioned previously, while the Washington County Fair Park is operated by a nonprofit organization, the County is responsible for maintaining the facilities and grounds. The County dedicates $100,000 in sales tax revenue annually for that purpose. Unspent dollars are carried forward into subsequent years to cover new and ongoing projects. Capital expenses at the Fair Park during the past five years were related to improvements and repairs to parking lots, roadways, and walking paths.

Significant projects included in the $1.9 million16 in parks capital expenses included:

 Various walkway and parking lot improvements, including an ADA trail and sidewalk  Facility maintenance and repairs, including painting projects and roof repairs

16 Washington County received a gift of $233,000 that partly offsets the $1.9 million.

 Construction of tennis and basketball courts, interpretive centers, fishing pier extensions, and other recreational facilities  Landscaping and beautification projects  Demolition projects

Projected capital spending: 2015-2019 and beyond

Table 7 shows that Washington County’s five-year capital improvements plan (2015-2019) contains a total planned expenditure of about $2.2 million. No projects will require bond financing and all will be covered with use of sales tax revenue.

Table 7: Washington County Projected 5-year Capital Expenditures (2015-2019) 5-year 2015 2016 2017 2018 2019 total Parks $116,000 $194,000 $200,000 $200,000 $200,000 $910,000 Fair Park $275,000 $275,000 $160,000 $100,000 $100,000 $910,000 Golf Course $49,000 $92,000 $87,000 $105,000 $90,000 $423,000 Total $440,000 $561,000 $447,000 $405,000 $390,000 $2,243,000

An equal amount of $910,000 is planned to be spent at the Fair Park and parks. Parks projects include $116,000 for building demolition and site restoration and $194,000 for the purchase of various signage. In addition, $600,000 has been set aside for undetermined parks projects.

Projects at the Fair Park include $730,000 for asphalt repairs and replacements, $80,000 for HVAC replacements, $50,000 for exterior building maintenance, and $50,000 for flooring replacements in various meeting rooms.

In addition to capital expenses that will be covered through use of sales taxes, the County anticipates spending $423,000 over the next five years on golf course improvements. Because it opened relatively recently (in 1997), the golf course has not previously required significant capital repairs. Beginning in 2015, however, several golf course capital projects are planned, which will be financed through user charges. These capital projects consist of both repair/maintenance and construction and improvement projects, including HVAC replacements, tee replacements, asphalt improvements, irrigation system upgrades, and drainage projects.

When considering the 2015-2019 plan by project type, Table 8 shows that a small portion of planned projects are related to construction projects aimed at increasing the value of assets, such as building or road projects or facility additions or upgrades. These account for $362,000 of the capital improvement plan. The five-year plan designates another $1.2 million for planned repair and maintenance projects. As previously mentioned, the remaining portion is for undetermined parks projects.

Table 8: Washington County Projected 5-Year Capital Expenditures (2015-2019) 2015-2019 Capital Project Description Type Expenditures Parks Building demolition and site restoration at Ridge Run and Homestead Hollow Construction $116,000 Signage for Homestead Hollow, Glacier Hills, and Sandy Knoll County Parks Improvements $194,000 Undetermined projects Unspecified $600,000 Total Parks $910,000 Fair Park Asphalt replacement and repairs Maintenance $730,000 Flooring replacement - Pavilion Meeting Rooms 116-120 and offices Maintenance $50,000 Exterior caulking/gutters/building entrance repairs Maintenance $50,000 HVAC roof top unit replacement (3) Maintenance $80,000 Total Fair Park $910,000 Golf Course HVAC - Maintenance Maintenance $5,000 Clubhouse windows Maintenance $24,000 Seal cart paths Maintenance $20,000 Bridge Repair Maintenance $10,000 Cart Paths asphalt Maintenance $10,000 Maintenance lot asphalt Maintenance $12,000 Repair 7 and 8 drainage problems Maintenance $30,000 Additional Tees Improvements $30,000 Large outdoor 4 sided clock Improvements $7,000 HVAC: Clubhouse Maintenance $25,000 Beer cooler and lines Maintenance $25,000 Artificial tee on range tee Improvements $15,000 Entrance gates Maintenance $15,000 Repair Pond Outlets Maintenance $20,000 Clubhouse deck Maintenance $55,000 Lesson Center Maintenance $30,000 Kitchen Update Maintenance $15,000 Mobile range tee cover Maintenance $10,000 Replacement trees Maintenance $10,000 Entrance sign and rules sign Maintenance $5,000 Irrigation system upgrades Maintenance $50,000 Total Golf Course $423,000 Total Projected Capital $2,243,000

Summary of Culture and Recreation Finances

Washington County has spent about $4million annually (combined operating and capital) on the culture and recreation activities described in this section, with about $1.5 million per year derived from the property tax levy. From an operating perspective, there does not appear to be significant unmet need. Consequently, perhaps the primary benefit that Washington County would derive from a new source of dedicated funding for culture and recreation likely would be the opportunity to free up an additional $1.5 million in levy capacity to use as it chooses. This could mean shifting the $1.5

million to other operational areas such as public safety or health and human services, or using the excess funds to reduce the tax levy even further.

Revenue generated from sales taxes helps provide the County with a substantial income source to appropriately manage its assets. Although sales tax revenue has provided a steady stream of income, it is plausible that County leaders would pursue additional capital projects or initiatives that could enhance cultural and recreational opportunities for citizens if additional funds were available. A new funding source, therefore, might also better position the County to pursue new projects and improve existing assets more aggressively than it is currently able to do.

Private Organizations

In this section, we consider the needs of private cultural organizations in the WOW counties. As with our comprehensive research on cultural and entertainment assets in Milwaukee County, we believe that knowledge of the finances and infrastructure challenges of prominent privately-owned cultural assets and organizations in the WOW counties will promote a better understanding of the overall picture of culture and recreation in each county. For our Milwaukee County research, we considered six privately-owned assets to gain a representative sampling of the condition and challenges of such institutions. In this report, we consider three – one in each of the WOW counties.

Consideration of privately-owned cultural assets also is important given the possible consideration of funding models from other metro regions. In our previous research, we described models in the Denver and Pittsburgh regions that supported both public and private arts and cultural organizations and facilities in an effort to ensure that citizens of those regions have a desired array of offerings from which to choose. Private organizations were supported through the provision of annual appropriations for grants that could be accessed on a competitive basis.

In this section, we provide a broad overview of the finances of the three selected privately-owned entities. Our intent is to provide a brief synopsis of their respective business models, the financial challenges they face, and the manner in which public funding is or might possibly be used.

The three entities that we analyze – the Sharon Lynne Wilson Center for the Arts, Ozaukee County Historical Society, and Museum of Wisconsin Art – were selected because of their prominence and their regional nature. It was also useful to consider one organization that already does receive substantial public support (the Ozaukee County Historical Society) so that we could compare its finances and unique challenges with two others that do not.

We recognize that the finances and infrastructure needs of these three entities are not necessarily reflective of the dozens of other privately-owned cultural assets that exist in the WOW counties. We do believe, however, that they provide important insight into our primary research question, which is whether access to new or enhanced public funding would be useful in ensuring the overall provision of cultural and entertainment activities in the WOW counties.

Sharon Lynne Wilson Center for the Arts

Background

Located in Brookfield’s city-owned Mitchell Park, the Sharon Lynne Wilson Center for the Arts offers professional performances, arts education programming, a gallery of fine art by Wisconsin and national artists, and a number of other special events and programs. Established as a nonprofit in 1994, the Center began as a partnership with the City of Brookfield, the Elmbrook School Board, and a broad base of community stakeholders who were involved in initial building design, fundraising, and program planning. The $10.5 million facility hosted its first events in early 2002.

As mentioned, the Center’s program offerings encompass both performing and fine arts, as well as arts education. Each season, the Center presents about 50 professional performances ranging widely in genre from modern dance and literary readings to classical, jazz, and pop musical performances. In addition to these ticketed events, the Center’s Beyond the Classroom arts education offerings include a performance series and outreach programs aimed at integration of the arts into other classroom curricula. The Center’s various lesson, workshop, and summer camp opportunities in visual art, music, and theater are open to children, adults, and families. On the visual art side, in addition to its artist-in-residence program and annual outdoor, juried visual arts festival, the Center’s Ploch Art Gallery exhibits painting, photography, mixed media, and installation works by Wisconsin artists and hosts free opening exhibit receptions where patrons can meet artists.

Financial Overview

The Center’s annual operating revenues have averaged $2.3 million between 2010 and 2014.17 As shown in Chart 26, about two-thirds of this amount ($1.5 million) consists of contributed revenue.

Chart 26: Sharon Lynne Wilson Center for the Arts Revenues (2010-2014)

$3,000,000 Contributed revenue Earned/Program revenue Other revenue

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0 2010 2011 2012 2013 2014

The Center receives the majority of its contributed revenues from individuals and corporations. A relatively small portion of its contributed support comes from local and national sources such as the Wisconsin Arts Board, National Endowment for the Arts, and United Performing Arts Fund. Center officials point to challenges in securing contributed revenues in recent years as donors have recalibrated their approach to giving in response to recessionary pressures. Many of these donors are scaling back their giving, making future contributed revenue streams tenuous. For example, between 2012 and 2013, the Center lost seven long-standing stable donors and $85,000 in contributed revenues with no warning. These sorts of events make annual efforts to secure revenues sufficient to cover expenses difficult and unpredictable.

Event revenue such as from the Center’s annual “Big Event” gala and golf tournament constitutes the largest single contributed income source at close to a half million dollars, or 20%, of all annual revenues, on average. Other contributed revenue streams and their average share of total revenues include program sponsorships (14%), annual campaign (13%), capital income (9%), and other gifts (10%, a large portion which consists of contributions intended for restricted uses, not necessarily general year-to-year operating expenses).

Earned revenues from programs, as well as rentals of gallery and studio space for weddings and other events, make up a smaller share of the Center’s revenue mix. This reflects a challenge faced by many performing arts and fine arts presenters, who find that ticket and admission sales do not keep pace with actual costs, thus requiring greater reliance on contributed revenue to subsidize the

17 The Center's fiscal year runs from July 1 through June 30. Consequently, 2014 financial figures are actual amounts for the 2014 fiscal year, which ended on June 30, 2014.

cost of programming. At the same time, this revenue category has shown dramatic growth – the Center’s program-related and other earned revenues, as a whole, increased by 18% between 2010 and 2014, making up almost a third (31%) of the Center’s operating revenue mix from year to year. (The small remainder of total revenues, less than 3%, comes from miscellaneous other sources.)

On the expenditure side, Chart 27 shows the Center’s budget divided into three primary areas: general operating, personnel, and repairs and maintenance.

Chart 27: Sharon Lynne Wilson Center for the Arts Expenditures (2010-2014)

$3,000,000 Personnel General operating Repair and maintenance

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0 2010 2011 2012 2013 2014

Overall, operating expenditures average about $2.5 million annually and have decreased slightly (about 2%) between 2010 and 2014. However, they have been trending upward since 2012 and have exceeded revenues in four of the past five years. Excluding personnel and repair and maintenance expenses, all other general operating expenses have trended down by about 9% between 2010 and 2014 and average about $1.7 million. They include program expense, some facilities costs, and various other operating costs.

The largest single expenditure item is for personnel (compensation and fringe benefits), making up almost a third of all operating expenses, at an average of $775,000 per year. This rising area of expenditure reflects the Center’s ongoing investment in efficient use of human capital by paying more for higher-qualified staff. The personnel figure covers an estimated average of 18 FTEs (14 full- time staffers and over two-dozen part-time employees). At the same time, the Center works to keep its paid staff as small as possible and stretches its personnel capacity with project-based consultants and a large number of volunteers. Some volunteers serve in traditional capacities such as ushers, clerical staff, and event volunteers, while others, including Board members, provide professional services (for example, the Center’s Financial Director is a part-time volunteer).

In light of the Center’s relatively recent construction (as mentioned, the facility was completed in 2002), routine repair and maintenance has represented a small share of annual expenditures. During the 2010-2014 timeframe, repair and maintenance expenditures have averaged about $11,800 annually, or less than 1% of all operating expenditures.

However, as the Center has built its audience and donor base, it has identified and invested substantial sums in a number of major capital items needed to further its mission. These capital expenditures are not included in the operating expenditure totals shown above. As shown in Chart 28, capital expenditures ranged widely between 2010 and 2014, from $37,830 in 2011 to more than $500,000 in 2012.

Chart 28: Sharon Lynne Wilson Center for the Arts Capital Expenditures (2010-2014 in millions) $600,000 $539,749

$500,000

$400,000

$300,000

$186,346 $200,000 $120,584 $100,000 $78,180 $37,830

$0 2010 2011 2012 2013 2014

Summary of Financial Need

As it enters its 13th year, the Sharon Lynne Wilson Center for the Arts has established itself as a valued regional arts and cultural asset. The questions it now faces focus on growth and sustainability. On the operating side, the Center has hired professional full-time staff and expanded programming in its pursuit of long-term sustainability, but the dividends from those investments have not yet materialized to the point that annual operating deficits could be avoided. Center officials say that this circumstance –combined with a downshift in reliable annual grants from historical funding partners – has placed the Center in a precarious fiscal position.

On the capital side, construction debt from original construction is now paid off, and the Center is now shifting capital investments to major maintenance and improvements. To address this shift, the Center is beginning the silent phase of a $3.5 million capital campaign to address a number of capital needs that are aimed at increasing the artistic quality of its offerings or driving operating efficiencies. A prominent mission-driven project that is under development is construction of an Arts Park – an expansion of the existing outdoor spaces in Mitchell Park to accommodate expanded sculpture and visual art and performing arts programming. The capital campaign also is hoped to cover HVAC repairs, new theater sound and lighting equipment that would reduce operating expenses, and other new equipment and remodeling.

Beyond these concrete operational and capital needs, the Center’s ultimate goal is long-term fiscal security. Through efforts to expand its endowment (by $250,000 in the current capital campaign), build cash reserves, and other mechanisms, the Center hopes to secure a fiscal cushion and a steady stream of revenue to cover a substantial portion of annual operations and allow it to weather unexpected operating and capital needs without incurring cuts in staffing and programming. Additional reserves also would allow the Center to take greater risks on programming that might be unprofitable at first, but that holds potential for earned revenue success on a longer time horizon.

These challenges associated with capital aspirations and the desire for healthy endowments and reserves are not unique to the Sharon Lynne Wilson Center, but also were observed in several of the private Milwaukee County cultural organizations we analyzed in our previous research. While these challenges do not necessarily convey overall fiscal distress, they do indicate the manner in which a new source of public funding might benefit these organizations. Specifically, a competitive grants program that would be available to private cultural organizations – similar to programs established in the Pittsburgh and Denver regions as described in our earlier research – could be beneficial to efforts to build long-term earned revenue capacity and stabilize operational challenges.

Ozaukee County Historical Society

Background

Established as a nonprofit in 1960, the Ozaukee County Historical Society is a membership organization that preserves and disseminates information about Ozaukee County's history and heritage. It seeks to accomplish that mission largely through preservation of historic buildings and artifacts and via community programs and education.

While many local historical societies typically maintain small museums or collections of historical artifacts, the Ozaukee County Historical Society is distinct in that it owns and maintains more than 25 historical structures representing various historical eras and immigrant communities in Wisconsin. These buildings are located in three locations throughout Ozaukee County: Pioneer Village, situated within the County-owned Hawthorne Hills Park complex in Saukville; Stony Hill School in Fredonia; and the Hazel Wirth Center in Cedarburg.

The 10-acre Pioneer Village is open May through October and hosts the majority of the Society’s programming and cultural events. The village consists of 24 historically significant donated buildings, primarily from the 19th century, as well as various furnishings and equipment. With the help of Ozaukee County government and a cadre of volunteers and donors, the society has relocated and restored these artifacts, making Pioneer Village a prominent cultural and tourist asset in Ozaukee County and surrounding communities. Prominent events held at the Village annually include school tours (serving about 2,000 students per year), a bluegrass festival, a Revolutionary War reenactment, an antique tractor show, and Autumn at the Village.

Known as the birthplace of National Flag Day, Stony Hill School is a restored one-room schoolhouse built around 1850 and listed on both the Wisconsin and National Registers of Historic Places. Open year-round, the site hosts annual Flag Day celebrations, historic tours, and educational programs for school groups and seniors. Finally, the Hazel Wirth Center located at the Interurban Depot in Cedarburg houses the society’s offices, archives, research center, and museum.

In addition to the five or six major events and other programs held on these society-owned historical sites, the society invites local experts and artists to give free public talks at the society’s quarterly membership meetings held at the Cedarburg Cultural Center.

Financial Overview

The Society has an annual budget of approximately $100,000. As shown in Chart 29, the Society's revenue is derived largely from grants/contributions and earned revenue it generates through programming and other activities.

The Society’s single largest source of revenue is Ozaukee County, which provides annual grants of $28,000 and $12,500 for operations and capital needs, respectively. In the 2014 budget, public support from Ozaukee County comprised about 39% of total revenue, which is down from more than 50% in 2011. This decreased reliance in public support has been accommodated largely through increases in gifts and donations, which made a large jump from $5,500 to $15,000 between 2012 and 2013.

The Society also relies heavily on fees charged for event and program attendance ($15,000 on average between 2010 and 2014) and sponsorships and other event and program-related support (roughly $11,000 per year). Memberships, sales of food and gifts, and smaller miscellaneous revenue sources make up the revenue balance. Not included in the operating revenue budget are a number of donor-designated funds restricted to specific projects such as a Caboose Restoration/Train Station Fund and a scholarship fund.

Chart 29: Ozaukee County Historical Society Revenues (2010-2014)

$120,000 Contributed Revenue Earned/Program revenues Other Revenue

$100,000

$80,000

$60,000

$40,000

$20,000

$0 2010 2011 2012 2013 2014B

On the expenditure side, Chart 30 shows the Society's budget divided into three primary areas: general operating, personnel, and repairs and maintenance.

Chart 30: Ozaukee County Historical Society Expenditures (2010-2014)

$120,000 General operating Personnel Repair, maintenance, restoration

$100,000

$80,000

$60,000

$40,000

$20,000

$0 2010 2011 2012 2013 2014B

On average, about half of the society’s annual expenditures are attributed to basic operations such as utilities, supplies, merchandise, insurance, event expenses, and professional services. With regard to staffing, the Society spends about $20,000 per year (20% of its expenditure budget) on salary and benefits for two Pioneer Village property caretakers, whose compensation mainly consists of lodging; a school tour coordinator; and six to eight part-time docents/tour guides. However, the vast majority of its staffing is composed of volunteers, many of whom are board members who serve in professional functions such as executive director, curator/historian/archivist, volunteer coordinator, and accountant. In addition, more than 200 volunteers fulfill a myriad of other functions critical to the Society’s mission such as grant writing, gardening, food service, carpentry, cleaning, and office work.

With more than 25 historical buildings to maintain, the Society has dedicated about $23,000 annually to repairs, general maintenance, and capital improvements during the past five years, or about a quarter of its total annual spending. As noted above, two of the Society's paid employees (its on-site caretakers) dedicate most of their time to grounds maintenance and routine repairs of existing buildings and equipment.

The Society does not generally differentiate between operating and capital expenditures in its financial reporting, but rather designates all capital-related expenditures, whether routine or associated with capital improvements, as “repair and maintenance” in its annual budget. As previously mentioned, a large portion of this spending is supported by an annual $12,500 grant from Ozaukee County that is specifically designated to help the Society keep up with capital needs.

Summary of Financial Need

While the capital grant from Ozaukee County has been a crucial revenue source, it does not generally cover all of the Society’s capital needs in a given year. This has been especially true in recent years, with several historic buildings in need of large repairs such as roof replacements.

In light of these realities and anticipated future capital needs, the Society is in the midst of a private capital campaign that aims to raise $300,000 to $500,000 to remodel its “Old Red Barn” into the multipurpose Pioneer Village Hall, which will better accommodate large events and rising visitor demand. Launched in the spring of 2014, the campaign is projected to finance a number of upgrades including kitchen/food service facility improvements; indoor bathrooms; and plumbing, electrical, and exterior improvements. These improvements will allow the facility to accommodate year-round functions. The Society kicked off the campaign with a $100,000 bequest and is working gradually to raise the rest, including $50,000 to establish an endowment to address future operating needs of the new facility.18

The Society has identified a number of other operating and capital needs that, if fulfilled, could help further its mission in coming years. On the operating and programming side, the Society could benefit from hiring additional paid employees to expand its event offerings and Pioneer Village school tour program, run year-round educational programs and exhibits, and manage the archives and research center (currently staffed exclusively with volunteers).

In terms of capital needs, the society anticipates several major maintenance and improvements at all three of its sites, including roof and window replacements, pathway maintenance, installation of a wheelchair ramp, construction of a new wagon barn, a caboose restoration, and equipment upgrades. The Society has not yet projected costs for these capital-related expenditures.

A pressing challenge for the Ozaukee County Historical Society that significantly affects its ability to plan for future capital needs is the navigation of its relationship with Ozaukee County. On its face, this relationship produces a "win-win" scenario for both parties. The County leases the parkland on which Pioneer Village sits to the Society for a nominal fee, and in return the Society maintains all of the buildings and structures located there, allowing the County to attract tourism without directly incurring the considerable costs of maintaining and operating the historical structures.

On the other hand, on average, the County supports more than 40% of the society’s annual general expenditures through its two annual grants - $28,000 for operations, and $12,500 for capital. In recent years, the County Board has discussed discontinuing automatic annual approval for the $12,500 capital grant, replacing it with a competitive grants process that would not guarantee the money to the Society. If the County implements this new paradigm, then the Society could be forced to secure alternative revenue streams for approximately 13% of its annual budget. And, because capital maintenance of aging buildings is a critical and growing expense, the loss of this annual influx for capital needs would be difficult to absorb.

18 Not reflected in the Society’s budget - but worth repeating here to illustrate the mutual interests of the County and Society - is Ozaukee County’s 2014 appropriation of $225,000 (from a 2013 bond issuance) to build a multipurpose building at Pioneer Village in Hawthorne Hills Park. This project is distinct from the “Old Red Barn” improvement, but also will include bathroom and shower upgrades.

Ironically, despite this reliance on County funding, the Society perceives as one of its fundraising challenges a misinformed belief on the part of some potential donors that its County support is sufficient for its sustainability. Compounding this, according to Society officials, is a perception that Ozaukee County is home to a large volume of small arts and cultural organizations that all are struggling to compete for the same small pool of local charitable dollars.

If viewed as a representative example of Ozaukee County’s cultural organizations, the case of the Ozaukee County Historical Society illustrates how even regional cultural assets that currently receive public support likely have ongoing unmet needs and face substantial fundraising challenges. It stands to reason that a new stream of dedicated funding could be helpful both in supporting the mission of such assets and in relieving county government from pressure to use property tax resources to assist them.

The Museum of Wisconsin Art

Background

Located in West Bend, the Museum of Wisconsin Art (MOWA) collects and exhibits contemporary and historical art collected throughout the state of Wisconsin. Unlike most regional museums that have a local focus, MOWA recently rebranded itself as the museum of art for the entire state and has expanded its collections to include pieces from artists across Wisconsin.

The rebranding effort was part of a larger plan developed by the museum's board in the fall of 2006 that included a change in name (from the West Bend Art Museum to Museum of Wisconsin Art) and the launch of a capital campaign to finance construction of a new building that would double the museum's size. The new building – on the banks of the Milwaukee River in downtown West Bend – opened in April 2013. Its triangular shape and design have earned it multiple awards, including the 2014 Honor Award for Design Excellence from the American Institute of Architects Wisconsin.

The new building is 31,000 square feet and includes 12,000 square feet of gallery space and 7,000 square feet of rental space for special events, a gift shop, two education studios, and an outdoor sculpture garden. The total cost of the new facility was $9.3 million. MOWA has approximately 4,000 pieces of art and features about 14 exhibitions every year.

MOWA's new building has produced a dramatic increase in membership and admissions. In fact, membership jumped from 676 to 10,000 over the past 18 months, while attendance skyrocketed from 2,900 in 2012 to 35,000 in 2013.

The museum’s statewide focus and impressive new facility have made it a true regional and statewide attraction. In 2013, 68% of visitors came from outside Washington County and 78% of visitors came from outside West Bend. It is estimated that the economic impact for the City of West Bend is $1.2 million in 2014. Thus, MOWA's expansion effort has led to benefits not only for the museum itself, but also for the surrounding economy.

Financial Overview

MOWA's actual expenditures totaled a little under $1.5 million in 2013. The museum's budget is supported primarily by various forms of contributions and by earned revenues. Contributed income is the largest revenue source and includes philanthropic contributions, sponsorships, and a nearly $50,000 annual contribution from City of West Bend hotel/motel tax revenues. Earned income – consisting mostly of membership dues and admission fees – represents a smaller but growing share of the museum's revenue pie.

Chart 31 breaks down the two main sources of revenue and also shows the substantial growth in MOWA’s annual revenue between 2011 and 2013 resulting from the move to the new facility and the museum's overall transformation. Revenue has grown nearly $640,000 during that period, or 43%.

Chart 31: MOWA Operating Revenue (2011-2013)

$1,600,000 Contributed Revenue Earned Revenue $1,400,000

$1,200,000

$1,000,000

$800,000

$600,000

$400,000

$200,000

$0 2011 2012 2013

Operating costs also have grown substantially during the past three years, as shown in Chart 32, but the $594,000 increase has been more than offset by revenue growth. An obvious cause for the growth in expenditures is the museum's operation in a much larger building and the expansion of services, exhibits, and collections.

Chart 32: MOWA Operating Expenditures (2011-2013) $1,600,000

$1,400,000

$1,200,000

$1,000,000

$800,000

$600,000

$400,000

$200,000

$0 2011 2012 2013

The majority of operational expenses are related to personnel. Staffing levels have increased over the three-year period in accordance with the need to accommodate expanded museum offerings. This resulted in a 50% increase in personnel expenses from 2011 to 2013. Another significant area of expenditure is facility-related costs, which also have grown with the move to a larger building. Marketing is a third significant expenditure item, particularly in light of the transition to an even greater statewide focus.

MOWA does not face any pressing capital needs given its recently-constructed facility. However, plans have been discussed to pursue improvements that would better connect the museum with downtown West Bend.

For example, a pedestrian bridge on the east side of the Milwaukee River could be constructed for easier access to the museum. Other potential projects include aesthetic improvements along the river. There is a desire to create a river walk along the museum property to help lure more patrons and provide a calming atmosphere. In addition, park areas and landscaping improvements could be made outside the property for an even more aesthetically pleasing look and a connection with other recreational options.

Summary of Financial Need

The Museum of Wisconsin Art has undergone a dramatic transformation in recent years, growing "from a small community-based gallery to one of the top regional art museums in the country," according to its website. The fact that this transformation has occurred with only minimal public support – and that it has generated substantial revenue growth that has exceeded the need for new operations spending – indicates that MOWA is financially stable and is not currently in need of additional public financial assistance to support its business model.

As MOWA's popularity continues to grow, however, and it explores possibilities for maximizing earned revenue potential and producing even greater benefit for the local economy, it is possible that uses for new sources of funding could emerge. For example, access to grants from a new regional culture and entertainment funding source could help MOWA to improve its surrounding footprint and better connect it to downtown West Bend, as described above. In addition, as the facility ages, greater maintenance and repair needs will materialize, which may place greater pressure on existing revenue streams and siphon resources from programming and collections.

Overall, MOWA has become one of the region's foremost culture and entertainment success stories. While maintaining that success appears to be achievable without access to new public funding, such access could be helpful if additional growth is desired.

Observations and Conclusions

Our exploration of culture and recreation assets and funding in Waukesha, Ozaukee, and Washington counties shows that the three county governments spend a combined $16-$18 million on culture and recreation operations annually, with about $6 million of that amount derived from local property taxes. The three counties also spend a combined $3-$4 million on capital needs annually.

WOW Counties Combined Culture and Recreation Expenses and Tax Levy

$20 Operating Expenditures Property Tax levy $18

Millions $16 $14 $12 $10 $8 $6 $4 $2 $0 2010 2011 2012 2013 2014B

Those amounts pale in comparison to similar amounts spent annually in Milwaukee County, as shown in the chart below. Also, as we have previously noted, the culture and recreation function accounts for only a fraction of overall annual spending in the three counties. Yet, this level of expenditure also would suggest that there is merit in considering how a regional source of public funding might supplement, relieve, or supplant the current financial effort.

Culture and Recreation Spending in Milwaukee County vs. the WOW Counties (2014 Budget) $80

$70 Operating Expenditures

Millions Property Tax Levy $60

$50

$40

$30

$20

$10

$0 Milwaukee WOW County Counties

In general, we found many similarities among the three county governments with regard to their cultural and recreational funding needs and the condition of their assets. None of the governments face substantial immediate infrastructure repair backlogs and none have seen their ability to conduct regular repairs and maintenance impacted by reductions in staffing levels – two factors that clearly contrast their situations with that of neighboring Milwaukee County. A similar contrast exists with regard to longer-term capital improvement needs, as each of the WOW counties has developed an achievable five-year plan that appears to fully address immediate needs.19

Our examination of private cultural organizations in each of the three counties also yielded similarities among the three, but in this case we also found notable parallels with private cultural organizations in Milwaukee County. In general, the private organizations in the WOW counties do not face substantial immediate infrastructure challenges, but all recognize future challenges in their ability to generate resources for various programmatic needs, including desired improvements to boost earned revenues and basic repair needs as their facilities age.

The following are four primary observations that emanate from our research. We hope these will be instructive to civic leaders and policymakers as they continue to consider options for addressing the region's cultural and entertainment infrastructure needs:

The only unmet cultural and recreational need identified in our research involves potential capital improvements – like parks bathroom enhancements, campground development, and repaving of the Interurban Trail in Ozaukee County or beach house improvements at two parks in Waukesha County – that might improve opportunities for revenue generation. Ozaukee County leaders also have cited some highly ambitious projects that could substantially improve recreational opportunities for citizens but that have not made it on to long-range priority lists. Still, while possibly benefiting from a new source of regional funding, these projects appear to constitute "wants" as opposed to significant "needs."

19 It should again be noted that the cultural and recreational assets that are owned and operated by Milwaukee County are much more complex and varied than in the surrounding counties, and that the number of publicly-funded cultural attractions in Milwaukee County far exceeds those in the WOW counties. This places a greater burden on Milwaukee County to continue to maintain and administer these attractions than in the surrounding region.

In Pulling Back the Curtain, the Forum's December 2013 report assessing the needs of public and private cultural assets in Milwaukee County, we suggested that any efforts to address the needs of private cultural organizations should focus on publicly-funded competitive grants, as opposed to guaranteed appropriations of public funding. We argued that "such an approach could be aimed at providing a temporary infusion of public funding to build the capacity of organizations with viable long-term business models to withstand revenue volatility and address basic infrastructure needs."

Our analysis indicates that – if a regional public funding source were pursued – it would be logical to consider giving each of the WOW county governments an annual share of that funding that could similarly be used for competitive grants. The grants process could be designed so that private (or perhaps even public) cultural assets could make their case for funding on projects that would enhance their attractiveness and stabilize their business models.

Not only would such an approach potentially boost efforts to implement projects like Pioneer Village Hall in Ozaukee County, a pedestrian bridge adjacent to the Museum of Wisconsin Art in Washington County, and an outdoor Arts Park at the Sharon Lynne Wilson Center in Waukesha County, but it also could allow grant recipients to refocus fundraising efforts on other programmatic or capital projects or on building endowments. In addition, the temporary nature of a competitive grant program could help prevent replication of the paradigm experienced by the Ozaukee County Historical Society, whereby the existence of guaranteed annual public support acts as a deterrent to potential private donors.

Milwaukee County has improved its capital planning process through the creation of a special committee that is charged with reviewing five-year capital requests from departments and preparing a five-year plan. Yet, despite this improvement, a recent report by County auditors suggested that the County still "lacks a solid preventive maintenance program for its mechanical systems and building infrastructure."20 In addition, the Forum's recent analyses of the County's capital budget suggest that the overall magnitude of the County's capital needs remains unknown and likely is not appropriately reflected in its five-year plan.

It also should be noted that an important element of capital planning is prioritization, which often involves deciding which projects not to fund. Given the magnitude of capital repair and improvement needs facing all parts of Milwaukee County government, it is inevitable that certain assets will need to be liquidated or eliminated. While Milwaukee County has made some progress in this regard in recent years, efforts by the county executive to sell or abandon capital assets often are met with fierce opposition from the county board. The contentiousness surrounding such proposals contrasts with Waukesha County, where leaders collectively made the difficult decision to withhold support for the Waukesha County Historical Society Museum when its infrastructure needs grew too daunting, and when they could not be convinced that the long-term business model was viable.

Consequently, it may be appropriate for Milwaukee County officials to undertake a review of capital planning processes and procedures in the WOW counties and use that review to determine where additional capital planning improvements might occur.

 Need is not the only reason to consider the use of non-property tax public resources to support culture and recreation in the WOW counties. In The Show Must Go On?, our March 2014 report on potential funding models to support cultural and entertainment assets in Milwaukee County, we asked whether the funding debate should be "solely about finding ways to address the immediate needs of valued regional assets, or should it be a loftier discussion about ways to permanently transform the method of financing those assets?" We now ask the same question with regard to the WOW counties.

While our analysis has shown there is not a pressing need for additional public support for culture and recreational services provided by the three county governments, the ability to draw resources from a regional culture and entertainment sales tax, for example, could allow each government to supplant property tax levy funding. As noted above, more than $6 million in local property tax dollars is spent annually to support culture and recreation in the WOW counties. Officials may wish to consider whether a sales tax would be a more effective and appropriate means of financing such activities given its closer linkage to economic activity that is generated from quality of life amenities, and given its greater potential for annual inflationary growth in light of state-imposed property tax limits.

The replacement of county property tax dollars with regional sales tax dollars to support culture and recreation could translate into dollar-for-dollar property tax relief in each county, or it could allow each government to use all or a portion of the property tax levy savings to address other needs. Logically, that would be up to elected officials in each county. A model for such an

20 Aftermath of Courthouse Fire Illustrates Need for Improved Insurance Claims Management and Business Continuity, Milwaukee County Office of the Comptroller Audit Services Division, December 2014.

approach can be found in the Pittsburgh area. As we reported in The Show Must Go On?, when that region moved from a City of Pittsburgh property tax to an Allegheny County sales tax to support its culture and entertainment functions, suburban municipalities were given full discretion as to whether to use their new sales tax allocations for property tax relief or other needs, and most did use it to reduce property taxes.

As explained in the Introduction of this report, our intention in conducting this analysis was not to suggest that a regional public funding source for cultural and entertainment assets should be pursued, but rather to provide factual context for any such consideration by assessing the need for additional sources of culture and recreation funding in the WOW counties. The findings and observations described above suggest that this need likely is to be determined by how elected officials and citizens view the role of government in providing and expanding cultural and recreational opportunities for its citizens, and which forms of public revenue they deem most appropriate for fulfilling that role.