Earlier this year, officials were preparing to cut services to close a $2.2 million gap. Instead, the city found nearly $1 million in efficiencies, including changes to technology purchasing and waste disposal practices, and used one-time funding sources to balance the rest.

"We actually started out thinking we'd have to reduce services in order to save about $2.2 million," said District 19 Alder John Guequierre. "Now, it's true that to avoid that, we've done some one-time things that will not carry over to next year, particularly the use of some other funds at Metro. But the end result is we are able to sustain all of the services that Madisonians expect."

## What homeowners will pay

The owner of an average-value Madison home can expect to pay about $90 more annually in city property taxes, or roughly $7.50 per month, according to Finance Director David Schmiedicke. That represents a 2.7% increase over the previous year, which Schmiedicke said is below the rate of inflation.

The city's tax rate is actually dropping, from approximately $7.01 to $6.93 per $1,000 of assessed value. But rising property values mean homeowners will still pay more: the average Madison home's assessed value increased from about $481,300 to $500,300.

Schmiedicke emphasized that the $90 estimate applies only to the city's portion of the property tax bill, which accounts for roughly one-third of the typical total. The remainder supports the Madison Metropolitan School District, Dane County and Madison College.

## What the budget funds

The approved budget maintains essential services while directing new spending to several priorities, including an additional $12 million for the affordable housing fund and continued investment in the Triangle redevelopment project. It also funds a 10th ambulance company and staffing at the recently opened Imagination Center Library, along with investments in violence prevention and a new police body-worn camera program.

The council added approximately $200,000 in operating spending for priorities including violence prevention and Vision Zero traffic safety efforts. A separate capital budget approved alongside the operating plan includes longer-term projects such as a new public works facility on Madison's far west side, intended to reduce travel time and fuel costs for city vehicles.

## Temporary fixes and a looming shortfall

While the budget avoids major cuts, some of the solutions are temporary. Metro Transit is using federal funding that can support either day-to-day operations or capital projects—money the system historically used more for capital improvements—as fare revenue has not recovered at the same pace as ridership, which has rebounded close to pre-pandemic levels. State transit funding has remained relatively stagnant for more than a decade.

The operating budget also draws approximately $6.5 million from reserves.

Despite those pressures, Madison remains in a relatively strong financial position. The city has approximately $125 million in reserves, equivalent to about 28% of annual general fund spending.

"In the short term, that's a really good position to be in, having 30%, almost 30% of their spending in the bank," said Tyler Byrnes, senior research associate at the Wisconsin Policy Forum.

But the Forum's analysis found that spending from the city's main fund is growing by approximately 5.5%, while its property tax levy is growing by roughly 3.4%.

"If your main source of revenue grows more slowly than you're spending, over time you end up with a gap where we call that a structural deficit," Byrnes said.

Schmiedicke pointed to restrictions on municipal revenue growth, Madison's comparatively low level of state aid, and rising employee compensation, health insurance costs and debt payments as drivers of that gap. The city projects a shortfall of approximately $20 million in 2028, growing to roughly $59 million by 2031 under its longer-term projections.

"The budget isn't really growing in terms of what the city does. It's just more expensive to do the things the city's already doing," Byrnes said.

Both Schmiedicke and Byrnes noted that city staffing has not kept pace with Madison's population growth; Schmiedicke said the city has fewer employees per resident than it did 15 years ago.

Madison's five-year financial plan includes potential use of reserves and additional special charges to address future shortfalls, though the specific revenue measures that could be considered remain uncertain. The 2027 budget does not include new special charges.

City leaders are also looking to the state for help. Guequierre said he plans to encourage fellow alders to meet with state lawmakers in December to discuss the financial pressures facing local governments. The next state budget proposal is expected in February 2027, and Byrnes said changes to state funding could significantly affect Madison's financial outlook and the choices city leaders face in future budgets.