Payments for Municipal Services

The Payments for Municipal Services (PMS) program reduces property taxes in localities hosting state-owned facilities by contributing toward the cost of services provided to these facilities.

Background

The PMS program was established in 1973. It provides for payments to municipalities (very occasionally counties) for a portion of the tax-supported cost of the following services provided to state facilities: fire protection, police protection, (including extraordinary police services), and solid waste collection and disposal. The legislature's Joint Committee on Finance must review and approve PMS payments in order for the payments to be disbursed.

If a state facility self-provides a service (such as hiring its own police force), then no PMS is made for that service. Similarly, no PMS is made for utility services (such as water, sewer, and electric power) or services funded through user fees (such as a refuse collection fee). Such utility services and user fees are paid to the municipality by the state agency in charge of the facility.

For a given calendar year, PMS entitlements are normally calculated in November using data for the prior calendar year. The actual payment is normally made on the following February 15th, but there is no statutorily specified date for the payment to be made. If the appropriation is insufficient to pay full entitlements, payments are prorated. The program is administered by the Department of Administration (DOA).

Formula

While some PMS entitlement is set through negotiation with the municipality, most entitlement are determined using a 3-step formula that estimates the portion of the tax-supported costs of qualifying services "caused" by the state facility. A sample calculation is shown on Table 1 (based on information from DOA).

The first step is calculating the net cost of qualifying services. From the total expenditures for qualifying services (including personnel, fringe benefits, equipment purchases), any revenues directly related to that service (including user fees, state and federal grants, and payments from other governments) are subtracted. The result is the net cost for PMS payment purposes.

The second step is calculating the percentage of net costs paid by the municipal-purpose property tax levy. This is done by dividing the municipal-purpose property tax levy (excluding any levies for tax incremental financing districts) by the municipality's total "general" revenue (the sum of the municipal-purpose property tax levy and general-purpose state aids.) This product of this percentage times the net cost for PMS payment purposes is the net costs of qualifying services paid through the property tax.

The final step is calculating the share of net costs to be paid by the state. This is done by dividing the value of state buildings (land is assumed to have no service requirements) by the sum of the value of state buildings plus the equalized value of taxable buildings (improvements) in the municipality. This percentage is multiplied by the net costs of qualifying services paid through the property tax to determine the amount of the PMS entitlement.

If total entitlements exceed the amount appropriated for the program, payments are prorated. For 2006 payments (paid in 2007), payments are limited to 79.99% of entitlements.

TABLE 1
CALCULATION OF PMS ENTITLEMENT FOR 2001
FOR THE CITY OF WISCONSIN DELLS
Step 1: Determine Net Costs
Total police protection, fire protection, and solid waste and refuse collection/disposal expenditures (based on data in municipal finance forms filed with DOR)
Total police protection, fire protection, and solid waste and refuse collection/disposal direct revenues (based on data in municipal finance forms filed with DOR)
Total Net Cost (A - B) 		(A)



(B)


(C) 		$ 1,663,180



364,345


$ 1,298,535
Step 2: Determine Local Property Tax Share of Net Costs
Municipal-purpose property tax levy
General state aids (shared revenue, expenditure restraint, and small community shared revenue payments, as calculated by DOR)
Total general revenues (D + E)
Property tax as a percent of general revenue (D/F)
Net Costs Allocated to Property Tax (C * G) 		(D)



(E)
(F)
(G)
(H)		 $ 1,697,665



269,257
$ 1,966,922
86.311%
$ 1,120,775
Step 3: Determine State Share of Tax-Allocated Cost
Full value of state buildings (based on data from the Department of Administration)
Equalized value of buildings on tax roll
(as determined by DOR)
Total value of buildings (I + J)
State buildings as a percent of total buildings (I/K)
PMS entitlement before proration (H * L)
Proration factor
PMS payment (M * N)

(I)

(J)

(K)
(L)

(M)
(N)
(O)

$ 1,443,680

149,449,400

$ 150,893,080
0.957%

$ 10,723
89.85%
$ 9,634

PMS payments since 1998 (paid in 1999) are shown below. Under a provision budget, the PMS appropriation is currently set at $21,998,800 for 2006 (paid in 2007) and thereafter. The appropriation is subject to change by future legislatures.

Payments for Year Number of Recipients Total PMS
Payment		 Payment
Proration
1998 260 18,065,300 87.68%
1999 269 18,065,300 82.47%
2000 293 21,565,300 94.52%
2001 269 21,781,000 89.85%
2002 282 21,998,800 86.25%
2003 293 21,998,800 87.93%
2004 295 21,998,800 88.21%
2005 290 21,998,800 88.13%
2006 302 21,998,800 79.99%

Division of Research and Policy
P. O. Box 8933
Mail Stop  6-73
Madison, WI 53708-8933
Phone:  (608) 266-2700
Fax:       (608) 261-6240

Last updated January 11, 2007