Moving the Ball Across the Goal Line: Numerous State Budget Victories for REALTORS® and Property Owners

 Tom Larson  |    October 11, 2017

After a two-month delay in the state budget process, Wisconsin lawmakers finally wrapped up the 2017-19 state budget. Gov. Walker introduced the state budget in February, and the legislature’s Joint Finance Committee made a number of modifications to the budget before approving it in early September. In total, the budget consists of $76 billion in total spending over the biennium to fund over 50 state agencies, the state’s highway and transportation infrastructure, the University of Wisconsin system, K-12 schools, and much more. In addition to the money spent on state programs and services, the final budget adds $196 million to the state’s rainy day fund.

The WRA actively lobbied on various aspects of the state budget, which included a number of provisions affecting the real estate industry. While most of the WRA’s lobbying efforts were successful, Gov. Walker made a last-minute veto of some favorable provisions in the state’s historic rehabilitation program that will hurt the viability of the program. The following is a list of top state budget priorities for the WRA:

  • State property tax: Permanently reduces property taxes by approximately $90 million per year beginning in 2017 by eliminating the state portion of the property tax, which is used to fund the state forestry program, which is the only state program currently funded by the property tax. By permanently removing the state’s forestry program from the property tax, the proposed budget takes a step toward permanent and meaningful property tax reform. As a result, property taxes for the median value home will decline by approximately $25 per year and will decline further in the future as the value of the home increases. 
  • School funding: Increases funding for K-12 schools by approximately $639 million over the biennium, which would be the most state aid provided to K-12 schools during the last decade. Includes increasing the per-pupil aid payment by $200 in fiscal year 2017-18 and another $204 in fiscal year 2018-19 to $654 per student in the final year of the budget. In addition, the revenue limits for low-spending districts, now $9,100 per student, would increase to $9,300 per pupil in 2017-18 and $9,400 in 2018-19. The limit would then increase $100 per year through 2022-23, when it would be $9,800 per student. 
  • Right to rent: Protects the rights of homeowners to rent their homes for seven days or longer subject to local regulations. Specifically, the proposal would prevent local governments from enforcing or adopting ordinances that prevent homeowners from renting out their homes for periods of seven days or longer. However, municipalities would continue to be allowed to: (a) ban the rental of homes for less than seven days; (b) impose regulations on all rentals regardless of rental period — such as registration requirements, fees, inspections or nuisance regulations; and (c) limit the total number of days a home may be rented out within a year to 180 days or more. Moreover, lodging marketplaces would be required to collect sales tax and any local room tax owed and then distribute it to the appropriate governmental entity. 
  • Rental weatherization program: Eliminates the rental weatherization program, which requires weatherization of rental units to save energy and requires certification before the property is sold or transferred. Note: The program will sunset on January 1, 2018. The weatherization program, adopted in 1979 and amended in 1999, is largely considered outdated because of the prevalence of property inspections, increased energy efficiency standards, and the fact that most rental properties have likely been certified. Nevertheless, the certification requirement has created tremendous confusion for buyers, sellers and REALTORS® due to the significant number of exclusions in the law, and the fact that most parties are unaware of the requirements when a home is purchased and used as a rental. 
  • Historic rehabilitation tax credits: Places a $500,000-per-project cap on the HTC program, which will go into effect on July 1, 2018. Proposed HTC projects with pending applications would not be subject to the new project caps. In addition, nonprofit entities would be ineligible to receive HTCs unless they obtain a waiver from the JFC under a 14-day passive review process. In the meantime, the WRA will be working with lawmakers to find an alternative, long-term solution that continues to make the HTC program an effective economic development tool.

Other state budget provisions impacting the real estate industry

The budget includes several other changes that will impact property owners and the real estate industry:

  • Transportation: The transportation package adopted in the state budget includes: (a) approximately $402 million in bonding over the biennium, including $252.4 million as part of the Foxconn bill for the I-94 north south mega project, which is contingent upon receipt of federal matching funds; (b) a $100 registration fee for electric vehicles and $75 fee for hybrid vehicles effective January 1, 2018, which would be in addition to existing annual registration fees; (c) spending $2.5 million on a study regarding the possibility of interstate tolling with a report due to the legislature in 2019; (d) a prohibition on the enumeration of the I-94 east-west and the north leg of the Zoo Interchange during this biennium; and (e) the elimination of prevailing wage for all state building and highway projects. 
  • Riprap permit exemption: Exempts from permitting requirements the placement of riprap of up to 200 linear feet in rivers and inland lakes, or 300 feet in a Great Lakes water body, as long as the following conditions are met: (a) the riprap is a clean fieldstone or quarry stone with a diameter of at least six inches and no more than 48 inches; (b) the toe of the riprap does not extend more than eight feet waterward of the ordinary high water mark (OHWM); (c) the riprap slope is not steeper than one foot horizontal for each 1.25 feet vertical; (d) the riprap does not rise above 36 inches of the OHWM, or above the storm-wave height as calculated using a method established by DNR rulemaking, whichever is higher; (e) the riprap follows the natural contour of the shoreline; (f) filter fabric or clean-washed gravel is used as a filter layer under the riprap; (g) no fill material or soil is placed in a wetland; (h) no fill materials or soil is placed below the OHWM of any navigable waterway, other than riprap and clean-washed gravel as a filter layer; (i) the riprap is not in an area of special natural resource interest; and (j) the riprap does not interfere with the riparian rights of other riparian owners.
  • Eminent domain: Prohibits local governments from condemning private property to build recreational trails, pedestrian ways or bike paths. Also, the budget increases the threshold under which condemnees may recover litigation expenses from $700 and 15 percent of the previous offer or award to $2,700 and 15 percent of the previous offer or award. Beginning January 1, 2018, the $2,700 dollar amount threshold would increase by inflation.
  • State preemption of local ordinances: Prohibits local government enforcement of any ordinance that conflicts with the state law. Specifically, a local ordinance would be invalid if:
    • A statutory provision expressly prohibits the ordinance.
    • The ordinance logically conflicts with a statutory provision.
    • The ordinance defeats the purpose of the statutory provision.
    • The ordinance violates the spirit of the statutory provision.
  • School and municipal levy limit referenda: Limits school referenda to regularly scheduled spring and fall elections, except for those school districts that have had buildings damaged in a fire or natural disaster. Also requires a municipal levy limit referendum to include language identifying the specific purpose for which additional funds levied would be used.

Tom Larson is Senior Vice President of Legal and Public Affairs for the WRA.

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