The reason: The largest revenue source for the district's proposed $352.9 million budget is money borrowed for capital projects. The proposed spending for capital improvements in 2007 will be $285.4 million, up from $206.9 million in 2006.

In addition to tax income, low-interest state loans would account for 30.8% of the district's proposed revenue stream next year; 19.2% would come from bonds issued and federal or state aid. The remainder of income would come from interest earned on money and things such as the sale of Milorganite, a fertilizer produced from sludge.

Eventually, the borrowed money will come due, said Mark Kaminski, the district's acting comptroller. Most of it would be paid back over 20 years with tax dollars. In part, that will be offset by debts for earlier projects that are being paid off. Nonetheless, taxpayers are likely to feel the crunch when the 2008 budget is adopted, he said.

To offset costs for 2007, the district has proposed using $500,000 from a user stabilization fund, money set aside to protect against large tax increases. The fund will have $13 million by the end of the year, Kaminski said.

The proposed budget calls for a 3% increase in the tax levy, but the amount a property owner will pay is based on equalized value - how much a property is deemed to be worth. In Milwaukee, equalized - sometimes called fair market - value increased about 10%, Kaminski said.

That means a house valued at $150,000 last year is judged to be worth $165,000 on average. The sewer portion of the 2006 tax bill on that house was $213; the proposed budget would increase that to $214 for 2007 because the tax rate would decline from $1.42 per $1,000 of assessed value to $1.30, Kaminski said.

In addition, the average household in Milwaukee County will pay $84.06 on its water bill for using the sewers, up from $83.84 in 2006, officials said.

Suburban communities outside Milwaukee County pay user fees, and proportionately for capital improvement projects they use. Their capital improvement costs will decline $1.4 million to $22.6 million in the proposed budget for next year.

The district has come under increasing pressure to hold down spending while at the same time it is forced to make massive capital improvements in an effort to reduce sewage dumping.

A court-approved settlement with the state has required the district to spend $900 million on improvements, but that is not the end of the district's legal woes. Retired Judge Michael Skwierawski was appointed by a circuit court to mediate a lawsuit brought by the state Department of Justice that asserts that the $900 million agreement won't solve the problems. Environmental advocates also are suing the district in federal court regarding the dumping of untreated sewage.

"Taxpayers in this region face potential higher bills from two lawsuits filed against the district," said Kevin Shafer, the district's executive director.

Owners of a downtown building are appealing a recent court decision related to the deep tunnel project that reduced a $9 million jury verdict to $100,000.

Also, district officials said they are preparing for dramatically higher energy costs beginning in 2008. United Water Service, a private firm, has been under contract to operate the sewerage system and plants since 1998. Under the terms of the contract, UWS was required absorb energy costs that have dramatically increased over the past few years.

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