3rd Quarter 2019 President’s Message

By Rob Henken

The recently announced plan by Milwaukee County municipal, county, and business leaders to push for a voter referendum on a one-cent county sales tax is significant on many fronts.

The most obvious is the impact a new 1% sales tax – coupled with property tax relief – would have on taxpayers and the finances of 20 distinct units of government in the county.

Almost as significant, however, is the remarkable level of collaboration between legislative and executive leaders of our region’s two largest local governments, and between those leaders and the region’s business community. Regardless of one’s views on this specific proposal, all county residents should be encouraged to see the region’s political and business leadership work this collaboratively toward a common goal.

The Forum, of course, has played a role here as well. While we were not involved in developing the legislation (other than providing data when asked), our research on the city of Milwaukee’s highly unusual reliance on the property tax and Milwaukee County’s deep-seated fiscal and infrastructure challenges was used by the proposal’s architects and has been cited repeatedly in media coverage.

We welcome the use of our research, but it is important to note that we take no position on the proposed legislation or possible referendum. Instead, our role going forward will be our standard one: we will provide data and perspective when it is sought by the news media and policymakers and otherwise try to constructively frame the debate.

So, in that spirit, I offer a few early facts and thoughts:

  • Our analyses of the city of Milwaukee’s budget and overall financial condition have revealed a “broken” revenue structure that is far too reliant on two sources (state shared revenue and property taxes); and that has not grown sufficiently to keep pace with intensifying cost pressures. At the same time, we have found Milwaukee is the only one of a peer group of 39 cities with populations between 300,000 and one million that does not levy either a general sales tax or a sales tax on selected purchases (such as entertainment or food and beverages).
  • Milwaukee County has a huge backlog of infrastructure needs that we have deemed “insurmountable” through current financing tools after cataloguing the problem in a series of reports over the past three years. Our final installment concluded that addressing this challenge likely will require both an infusion of new revenues and a willingness to trim the list of projects, even if that means liquidating some capital assets.
  • Similarly, while new revenues will be required at both the city and county level to avert significant cuts to operations, the structural challenges facing both governments are so great that the solution cannot simply come from the revenue side. We have argued that both governments also need to consider difficult options to reduce retiree health care and pension costs (as suggested by a county task force we recently facilitated) and new ways to share services among themselves.
  • And speaking of service sharing, the proposed distribution of several million dollars of sales tax revenue to Milwaukee County’s 18 suburban municipalities appears equitable, but we would be concerned if it further discourages their consideration of intergovernmental service sharing or consolidation opportunities. We have seen fire, dispatch, and public health consolidation work well in the North Shore and those options need to be seriously contemplated by other municipal governments in the county.
  • Finally, while considerable focus will be devoted to the proposed sales tax, the impacts and importance of property tax relief should not be overlooked. The proposal would use 25% of new sales tax revenues for property tax relief. Whether that is the correct amount could be debated, but the concept corresponds with our suggestion that municipal revenue structures in Wisconsin might be more equitable and reliable if they imposed less burden on property owners and more on the broader spectrum of municipal service users, such as commuters and entertainment patrons.

The merits and demerits of the proposal will now be deliberated by legislators and (perhaps) voters, and that’s the way it should be. We’re pleased that our research has helped prompt a long-needed and critical policy discussion and we’ll now work to ensure the debate proceeds on a factual basis in accordance with its importance to our region’s economic and social health.