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Madison leaders warned of multi‑year local revenue loss after state property‑tax overhaul
Summary
City financial advisers told the Madison Common Council that recent state legislation will cut the city’s certified net assessed value and create a multi‑year gap in property‑tax collections; alternatives such as a local income tax and other local levies will be needed to replace revenue.
Madison financial advisers and city leaders on Tuesday warned the Common Council that Senate Enrolled Act 1, enacted in the most recent legislative session, will reduce the city’s certified net assessed value and lower property‑tax collections over several years, creating a cumulative shortfall the city must address in the 2026 budget and beyond.
Gary Smith, the city’s financial adviser with Reed Financial Group, told the council that "the city's projected to lose about 142,000,000 in total net assessed value under Senate rollback 1" and that the changes will be phased in over several years. He said the new residential supplemental deduction and other changes will reduce taxable value and cited an example that net assessed value under the new rules would be roughly 34% lower than if the changes were implemented today.
The mayor and other city officials emphasized the practical effect: reduced property‑tax collections that fund police, fire, streets and other general fund services. The council was told the next five to seven years will see progressively larger annual revenue losses, and staff are already incorporating the changes into planning for the 2026 budget.
Why it matters: property taxes are a core local revenue source for Madison. Smith and the mayor said the legislature preserved a 4% maximum levy growth quotient for next year but also created a residential homestead tax credit (up to $300) and other deductions that lower taxable value. The legislation also changes local income tax (LIT) rules and distribution, creating a new option for municipalities to levy LIT within city boundaries beginning in 2027 and collected later under the new certification schedule; the city could impose up to 1.2% as a municipal LIT, Smith said.
Supporting details: Smith presented projected dollar impacts for the city, saying the city would see a roughly $216,000 reduction in net property‑tax collections in 2026 compared with the pre‑reform baseline and larger annual losses thereafter; he said cumulative losses could reach the low millions by the time the phase‑in is complete. The presentation also described changes to business personal property exemptions and to multifamily and agricultural assessment formulas; Smith said business personal property exemptions for new property rise significantly and that could affect Madison’s exposure.
City response and next steps: Council members and staff pressed for local analysis and said the administration will study options including local income tax adoption, narrow local levies, and other revenue sources while seeking to protect core services. The mayor said staff will continue budget‑workshop briefings and bring more detailed levy and LIT scenarios to the council before finalizing the 2026 budget.
A note on authority and limits: the discussion repeatedly framed the changes as state actions: Smith and the mayor referred to "Senate Enrolled Act 1" and to the state’s new certification and LIT structure as the legal source of the shift. The council did not take a formal vote on any fiscal remedy at the meeting; staff were directed to continue analysis and report options to council during budget workshops.
