Highway department facing $9.5M three-year shortfall

If Oneida County sticks with its current approach to funding its highways, the county’s highway department will face a funding shortfall of about $9.5 million for its capital renewal and replacement needs over the next three years.

That was the message in a July 23 memo to county executive committee members from Oneida County finance director Tina Smigielski as the committee headed into discussions late last month. 

According to Smigielski, the Oneida County Highway Department provides roadway maintenance and construction services to county residents, local governments within the county, and the state of Wisconsin, and, to provide those services, the department must sustain adequate staffing, appropriate facilities, and a fleet of heavy equipment, vehicles and related attachments in good repair.

To fund capital asset expenditures, Smigielski wrote, the department taps into state and federal funding, as well as department-generated revenues.

“In addition, the county has used a combination of property tax levy, general fund reserve transfers or loans, and ARPA [Covid] fund allocations to underwrite equipment replacements, facility improvements and construction projects,” she wrote. 

Right now, Smigielski wrote, the highway commissioner, in conjunction with the public works  committee, has identified capital needs totaling an estimated $27.3 million over the next three years.

“In total, it is estimated that the funding required from the county is $15.4 million,” she wrote, after factoring in other revenue sources such as state and federal funding. “By continuing the status quo approach of holding the highway portion of the tax levy dedicated to construction, and contributing $1.2 million in general fund transfers, a shortfall of approximately $9.5 million remains.”

Specifically, the estimated tax levy for 2025-27 would total $2.37 million for highway capital projects, while estimated general fund transfers would come to $3.6 million, leaving the county  $9,447,000 short of the $15,417,000 needed.

For 2025, Smigielski estimated the department would need $6.8 million in construction and design, $1 million in equipment/vehicles, and $2 million in facility improvements, or $9,819,000 in 2025 alone, with the county share totaling about $4.5 million.

Equipment Fund

Equipment needs over the three-year period would total $3.75 million, Smigielski estimated, and that leaves the county in the red by $2.25 million.

Smigielski wrote that the Highway Equipment Fund sets aside highway generated net revenues for the purpose of replacing equipment before the cost of maintenance and repairs exceeds the asset net value. 

“On average, the equipment fund allocation has been just under $500,000 since 2017, and the uses of the funds — including repayment of general fund loans — has averaged $400,000 over the same period,” she wrote. “Yet, the highway department and public works committee identifies the needs of the department to be $1 to $1.5 million annually, or a total of $3.75 million over the next three years.”

Those estimates yield a shortfall of $2.25 million in the equipment fund, Smigielski wrote.

“A delay in replacing equipment when in poor condition coupled with escalating costs in the marketplace are driving this imbalance between equipment fund sources versus needs,” she wrote. “The county may consider diverting an ongoing revenue stream from the general fund to the highway fund in order to allow the highway department to match equipment and vehicle replacement schedule to a continuing source of funding.”

Smigielski said two revenue sources were recently discussed by and between the highway commissioner, county board leadership, and herself as possible solutions: Sales tax and shared revenue.

County sales taxes have averaged $5.5 million per year, Smigielski wrote, growing from $4.8 million in 2019 to an estimated $7 million in 2024. 

“The county may consider diverting $750,000 of sales tax per year to the highway fund starting in 2025,” she wrote. “This boost in resources should provide the Highway Department an opportunity to move toward an improved renewal and replacement schedule which will — over time — generate higher contributions to the equipment [fund].”

That is to say, improved equipment will lead to improved revenues, and, Smigielski wrote, generating more monies via highway operations back into the equipment fund reduces or eliminates the need for additional county subsidies.

There were risks to the strategy, Smigielski wrote.

“It should be noted, however, that sales tax is an economic sensitive revenue positively impacted by the uptick in tourism in Oneida County during the Covid-19 pandemic and inflationary pressures driving the costs of goods upwards,” she wrote. “The current levels of collections may not be sustainable.”

What’s more, Smigielski wrote, sales tax is a key revenue annually in balancing the general fund budget.

As for state shared revenues, Smigielski wrote that the amount the county receives includes county and municipal aid, utility aid, and new supplemental county and municipal aid. 

“The supplemental county and municipal aid, which was added in 2024, increased the overall funding from a base of $183,000 to $634,000,” she wrote. “The $451,000 in supplemental aid is restricted, per Act 12, to ‘law enforcement, fire protection, emergency medical services, emergency response communications, public works, courts, transportation.’ These funds may be considered for reallocation to the highway fund instead of the general fund starting in 2025, but will not fully address the identified funding gap.”

Nonetheless, Smigielski wrote, it would partially address the shortfall and be a step toward more appropriate renewal and replacement schedules. 

“The Supplemental Aid is subject to appropriation by the state of Wisconsin and may not be a long-term and recurring revenue source as a result,” she wrote. “Finally, like sales tax, the revenue is currently used in balancing the general fund budget.”

Construction and Facilities

In her memo, Smigielski wrote that the highway department and public works committee seeks to replace seven miles of roadway annually to maintain the county’s road system to industry standards. 

“The county has the opportunity to parlay federal funding into significant roadway and bridge improvements that otherwise would not be accomplished in the next few years,” she wrote. “The county’s normal construction plan plus the federal match requirements are estimated to cost $17.5 million over the next three years, with a funding gap estimated at $9.5 million.”

In addition, Smigielski wrote, the highway department facility is outdated and in need of significant repairs totaling an estimated $10.8 million over the next three years. 

“There is no current funding source identified to make these repairs, and delays will cause the costs to escalate if not addressed,” she wrote.

While some of the funding gap for construction can be met with county tax levy and general fund transfers, Smigielski wrote, it does not address all of the funding needs. 

“In addition, this assumes that general fund reserves will be able to sustain transfers-out to highway through 2027 without consideration of other pressures such as operating budget shortfalls, capital projects for other departments, and/or emergency funding needs,” she wrote. “The county may consider debt financing to augment available state and federal funding, replace and/or add to the amount of levy dedicated to highway purposes, and leave general fund reserves for general government purposes.”

When issuing notes or bonds, the repayment more closely matches the useful age of the roadway and/or facility being improved, thereby leaving cash reserves for other needs, Smigielski observed. 

“Additionally, paying for construction and facility improvements over time via a debt repayment schedule spreads the cost of the project over several years so no one group of taxpayers will be unfairly burdened,” she wrote. 

If there is an interest in pursuing debt financing as an option for highway capital project funding, the county’s financial advisor should start working on options with the county soon to meet legal notification, budget and tax levy deadlines, Smigielski wrote.

Richard Moore is the author of “Dark State” and may be reached at richardd3d.substack.com.