For the first time since 2000, Milwaukee’s 2024 budget does not include a transfer from the city’s transportation fund to its general fund to support core city functions, a sign of the transportation fund’s weakened state. Ongoing obligations to pay for parking and streetcar operations, the desire to build a sufficient balance to resume general fund transfers, and pressure to fund additional transportation priorities may cause city leaders to contemplate new ways to support the fund.
The arrival of COVID-19 dealt a severe financial blow to the city of Milwaukee’s transportation fund from which it is still struggling to recover.
As the initial lockdowns and work from home policies disrupted commuting as well as leisure activities such as concerts and sporting events, revenues to the fund from parking citations, meters, and payments to city-owned parking lots and structures fell sharply. They have since improved, but are still projected this year to remain below 2019 levels. With revenues sinking, the city drew on the fund’s once healthy balance to help meet its obligations, lowering it by tens of millions of dollars since January 2020.
How the city will meet several of its transportation objectives – and whether parking fee revenues can continue to provide meaningful support for other city needs – have become critical questions for policymakers and residents.
With the fund balance low and Milwaukee benefiting from a recent boost to its local sales tax and one final year of federal pandemic relief aid, the city is not making a transfer out of the fund this year to help pay for city services – a major shift in policy that should help to rebuild the fund balance for at least one year (see Figure 1).
Going forward, however, city leaders must assess whether the fund’s ongoing revenues can support both its obligations to pay for parking and streetcar operations in Milwaukee and some of its broader non-transportation needs. They also must determine whether the fund could contribute to efforts to address other more recent transportation priorities, such as expanding bicycle and pedestrian initiatives or combatting a wave of reckless driving and roadway fatalities.
This brief assesses the challenges facing Milwaukee’s transportation fund and how they impact the city’s overall fiscal health and transportation priorities. We focus primarily on budgets from 2014 to 2024, comparing the fund in pre-pandemic years to how it has been used and replenished during and following the height of the pandemic. We then consider what options city leaders may have to increase revenues in the transportation fund if they decide this is a priority.
Background
The transportation fund functions as an enterprise fund in the city of Milwaukee budget, which means it is segregated from other parts of the city’s operations and is entirely supported with its own dedicated revenues.
The fund’s fundamental purpose is to pay for expenditures required to operate city parking facilities (structures, lots, meters, on-street permits), including the issuance of citations to manage parking infractions. More recently, it has also been tapped to support the operations of the Milwaukee Streetcar, otherwise known as The Hop.
Those expenditures are supported by parking and other transportation-related fees that flow into the fund (as opposed to general city coffers). Enterprise funds are common in municipal operations; as in the case of utilities or water works, they provide a basic city service with users paying for related expenses.
The fund also has historically generated sufficient revenue to accommodate an annual transfer of several million dollars to the city’s general fund, which is the fund in the city budget that pays for core city services such as public safety, libraries, and neighborhood services. Such a transfer is justified, in part, because the transportation fund and the city staff who deliver its services benefit from city administrative staff in areas like accounting, human resources, and information technology.
The transportation fund was originally named the parking fund, but with the implementation of the streetcar in 2019, the name was changed. At that time, the mission of the fund was expanded from its focus on parking to include streetcar operations. The fund receives revenues from and pays for expenses related to four parking structures, a few dozen lots, about 6,200 metered spaces, over 100,000 parking permits, and hundreds of thousands of citations each year in addition to now receiving revenues from and paying for streetcar operations.
Milwaukee’s 2024 adopted budget projects transportation fund operating revenues of $42.5 million in the current year. That would be an increase from the 2023 adopted budget ($39.8 million) and actual operating revenues in 2022 ($35.8 million), but still 8.3% below the $46.3 million the fund generated in 2019 even before adjusting for inflation (see Figure 2). In 2020, due to the pandemic, revenues cratered to just $24.5 million and have not fully recovered.
In a typical pre-pandemic year, the fund would generate far more revenue than was required to support its parking-related operations. That would allow for a sizable transfer to the general fund and, ideally, some money left over after that to build the fund’s balance. However, as a result of the pandemic, in 2020 the fund’s revenues were not sufficient even to cover its operations.
The city used a $10.4 million withdrawal from the fund’s reserves in 2021 to make ends meet and continue its practice of supporting the general fund, a maneuver that cannot be replicated at present given that those reserves have now largely been depleted. For the first time post-pandemic, however, the 2024 budget projects about $6.6 million in excess earnings to rebuild its fund balance, largely because the general fund transfer was eliminated.
The transportation fund consists of six primary revenue sources that are derived from city-owned parking structures and lots, meters, citations, permits, towing, and the streetcar. Parking citations provide, by far, the greatest share of revenue for the transportation fund, amounting to 35.3% of its funding in the 2024 budget. However, this reflects a proportional decline since 2014, when parking citations generated 46.1% of revenue. Parking structures and lots, as well as meters, each make up just over 14% of revenue, and permits and towing constitute another 9.4% each. In 2024, The Hop is projected to bring in just over $4.5 million (10.6% of revenues), through a combination of federal grants, sponsorships, and advertising.
Parking citation revenue for the transportation fund was nearly halved from $16.0 million in 2019 to $8.1 million in 2020. This resulted from both decreased driving and the city’s decision to not enforce meters during the early months of the pandemic. Revenues from towing, meters, structures, and lots also decreased by nearly half in 2020.
Revenue from permits took a slight hit in 2020, but has since recovered and is budgeted at $4.0 million in 2024, which is 1.1% above its 2019 levels. However, revenue from citations was projected at $15.0 million in both the 2023 and 2024 budgets, still 6.4% below the 2019 amount. Meanwhile, revenue from parking structures and lots – previously the second-largest source of revenue – totaled $7.4 million in 2019, dropped to $4.6 million in both 2020 and 2021, and is budgeted to reach just $6.0 million in 2024 – a 19.4% decline from the year prior to the pandemic (see Figure 3).
Because streetcar revenue is generated through a combination of grants and advertising, these revenue sources were not directly affected by changes in ridership or operations in 2020. Starting in 2022, these revenues rose above 2019 and 2020 levels and are budgeted at $4.5 million in 2024.
From all of these sources, the transportation fund historically has had revenue in excess of that required to pay for parking and streetcar operations that can be transferred to the general fund. In every year from 2008 to 2021, the general fund received at least $16 million from the transportation fund. In 2022 and 2023, reflecting the fund’s diminished revenue capacity and reductions to the fund balance in previous years, the transfer was reduced to $10 million.
The transportation fund also makes an annual Payment in Lieu of Taxes (PILOT) to the general fund of around $1.5 million. This payment recognizes that city-owned parking facilities do not pay property taxes but ostensibly should since they benefit from services such as law enforcement and street repairs. Though the general fund transfer was eliminated in the 2024 budget, the payment in lieu of taxes is included, as shown earlier in Figure 1.
While the city’s general fund will experience a significant boost in 2024 due to the adoption of a new 2% city sales tax and one final year of funding from the federal American Rescue Plan Act (ARPA), the city’s improved fiscal health was not the only factor behind the decision to eliminate the transportation fund transfer. The transportation fund’s year-end balance declined significantly over the course of the pandemic. It sat above $20 million in each of the six years prior to the pandemic and rose to as high as $42.7 million by the end of 2018. In each year since 2021, however, it declined by at least 40% compared to the prior year, dropping to just $4.9 million at the beginning of 2023 (see Figure 4).
Meter Revenue Changes Ahead
In 2018, the Milwaukee Common Council approved a proposal that recommended updating parking meter rates and providing flexibility to allow them to match market demands. The ordinance allowed the city’s Department of Public Works (DPW) – which administers the fund and its operations – to raise the rates at which drivers can be charged for a metered spot at their discretion. Spots that previously had a rate of $1.50/hour were increased to $2/hour, and spots with hourly rates of $1 or 50 cents had prices raised by 25 cents.
Since the passage of this ordinance, DPW has also expanded the hours during which meter payments are required at 200 spaces near the Fiserv Forum, as well as in some other limited areas in the city. Near the Fiserv Forum, not only have meter hours been extended beyond 6 p.m. and to weekends during events, but pricing also is adjusted so that payments are at or closer to the market rate of nearby off-street paid parking options. The maximum hourly rate per the ordinance is $5 for high-demand events. While DPW plans to implement a dynamic pricing model in the future – which would allow hourly rates to be adjusted quarterly based on previous occupancy data – the city does not currently have the resources to compile and analyze occupancy data, which would be needed in order to accomplish this.
The department also has plans to implement an ordinance unanimously passed last year that authorizes extended hours on the 4,000 downtown metered spots to 9 p.m. and the establishment of paid meter parking on Saturdays, which has already been implemented at the aforementioned spaces near the Fiserv Forum and some other limited areas.
Meter revenue in 2023 was budgeted at $4.8 million, but the city’s 2024 budget projects a 26.3% increase to $6.1 million in 2024. This reflects, in part, implementation of extended hours on those 4,000 downtown spots, although it is still uncertain when that will fully occur.
How Transportation Funds are Spent
The 2024 budget for operating spending in the transportation fund totals $35.9 million. Just under $10 million will fund the salaries and benefits for 135 full-time equivalent (FTE) staff who are paid out of the fund. This is an increase from 123 in the 2023 budget. Most of the remaining amount – $20.2 million – will pay for contracted maintenance and repair work for parking meters and facilities and other parking- and streetcar-related operating expenditures, with the remaining $6.0 million directed to debt payments, the payment in lieu of taxes to the city’s main fund, and equipment.
Parking Operations and Maintenance. The transportation fund involves major infrastructure that requires regular ongoing maintenance and occasional major investments. For instance, the city’s parking structures require regular maintenance to ensure their longevity.
In 2024, the city will spend $14.7 million on parking operations and maintenance, the majority of which – $9.5 million – will pay for services contracted to outside vendors. Nearly all of the city staff whose salaries and wages are paid from the transportation fund are involved in parking operations and maintenance, with almost half (58 FTEs) working as parking enforcement officers.
Streetcar Operations. As previously noted, The Hop is projected to generate $4.5 million in revenue in 2024 from a mix of advertising and federal funding. It is expected to cost $5.5 million to operate, most of which will go to a contracted vendor that is responsible for daily operations. The budget assigns just three full-time city staff to streetcar operations.
As shown in Figure 5, the gap between the streetcar’s revenues and expenditures has narrowed in recent years. However, ARPA funds – which are temporary, and must be obligated by the end of 2024 – have played an important role, and will provide $2.4 million to the streetcar in 2024. Though future federal grant opportunities may also narrow this gap, support for The Hop represents a relatively new and not insignificant draw on its resources.
Active Transportation. Recently, the transportation fund also has added both expenditures and revenues from active transportation (such as bike share systems and dockless scooters) to its mix. This included an allocation of $110,000 to support Bublr Bike Stations in 2019; that appropriation has not been repeated, but a similar contribution has been discussed by city officials in subsequent budget deliberations. The city also expects to generate $253,500 in revenue from dockless scooters in 2024 from an agreement that provides it 25 cents in revenue per ride.
Since the pandemic, the city also has allowed or accommodated the transformation of some street spaces into outdoor patios for dining, as well as temporary or permanent plazas. In doing so, it has effectively provided an in-kind contribution of the street space it may have otherwise been using or potentially could have used in the future to earn revenue from meters. Use of streets as plazas supports walking and social gatherings, drives support for local businesses (and therefore adds to city, county, and state sales tax revenue), and potentially reduces maintenance costs related to plowing and street sweeping.
While these examples represent a relatively small share of the overall fund’s budget, they illustrate how its mission may be further expanded in the future to address transportation needs and priorities that extend beyond parking and the streetcar.
Potential Revenue Options
With its fund balance at its lowest level in years and revenues that have not fully recovered since the onset of the pandemic, Milwaukee’s transportation fund faces an uncertain future. The city still owns a number of lots and structures, and it faces ongoing obligations that could include further boosts in streetcar service. (The Hop’s lakefront loop opened in April and other extensions have been proposed.)
Milwaukee’s challenges are not unique – parking and other forms of transportation revenue have failed to recover fully from the pandemic in many other cities. However, strategies exist for Milwaukee policymakers to consider if they wish to boost the transportation fund’s revenues.
Additional Changes to Meter Pricing. Except in spots outside the Fiserv Forum during events there, the city of Milwaukee charges between 75 cents and two dollars per hour for street parking in its approximately 6,200 metered spaces. As mentioned previously, per two recently adopted ordinances, demand-responsive pricing for large events has already been partially implemented near the Fiserv Forum, and the extension of metered hours to 9 p.m. and on Saturdays has begun in a limited fashion and should accelerate soon. The city also could consider increases in regular hourly rates when deemed appropriate.
Future plans to implement a dynamic pricing model – one in which price changes occur based on real-time data – is contingent on DPW having the resources to compile, analyze, and manage occupancy data for these spaces, which the department says is in progress. This approach would mirror Seattle’s Parking Program, which, for example, adjusts on-street parking rates to ensure 70-85% occupancy. At this level of occupancy, visitors and customers can quickly and reliably find a space near their destination, which can have a positive impact on congestion, pedestrian conflicts, and unnecessary emissions.
Selling Lots and Structures. In 2024, the city’s four structures and nearly 40 lots are budgeted to generate $6.0 million in revenue for the transportation fund, well below the $7.4 million generated in 2019. The fact that many downtown employees continue to work from home at least part of the week undoubtedly has contributed to this decline.
Should there be a market for buyers, city leaders may wish to consider the sale of some of these assets. Any push to do so would need to weigh the upfront, one-time revenue gain against the lost ongoing parking revenue. The financial calculus also would need to include consideration of savings from maintenance, repair, and operational costs associated with any lots or structures that are sold. Whether there would be a long-term fiscal benefit to selling lots and structures would have to be determined individually for each one. Absent a viable fiscal calculus, the city could also consider leasing spots in existing lots and structures to nearby businesses, a move it has executed in the past that could provide a small but consistent revenue stream.
Car Crash Cleanup Fees. In a growing number of municipalities across the United States and locally in Milwaukee County suburbs, policymakers are implementing car crash cleanup fees. These fees are charged to drivers involved in traffic crashes, with a goal of ensuring that the expenses for responding to crashes are not fully borne by the municipality.
Currently, Milwaukee is one of just three municipalities in Milwaukee County that does not charge such a fee. Different municipalities take different approaches, but they tend to follow similar practices. West Allis, for example, issues a $500 flat fee to any driver involved in a crash who is not a West Allis resident. The North Shore Fire Department issues a $500 flat fee to the driver of any vehicle – resident or non-resident – serviced by the fire department following a crash.
One equity concern is that drivers who are involved with the crash but not at fault may also be required to pay these fees. While drivers or insurers in theory may take action to determine fault and recover those fees, that may involve extra work on behalf of the drivers who were not at fault.
Streetcar Fares. The Hop has been free to ride in downtown Milwaukee since it began operating in November 2018. While there was initial discussion of charging riders $1 per ride, that was delayed during the first 15 months of operation. With the onset of COVID at that time, ridership numbers plummeted, and have yet to recover to pre-pandemic levels (see Figure 6). Total Hop ridership in 2023 was 494,445, or about 65% of the 2019 total.
In the 2024 budget, revenue for the streetcar sat just above $4.5 million. More than half of that total – $2.4 million – will come from expiring ARPA funds, and the next largest amount ($880,000) also comes from a temporary federal grant. Sponsorship and advertising revenue ($950,000) and a longer-term federal grant (just under $300,000) make up the rest.
Year-over-year streetcar ridership has grown in virtually every single month since April 2021, and The Hop is likely to see even higher ridership numbers going forward given the recent opening of its Lakefront extension. While city leaders may wish to continue to offer free rides in the hope of continuing to foster ridership growth, they also will need to consider the potentially finite nature of some federal funding and the likelihood that sponsorship and advertising revenue can be maintained and expanded.
More stable funding for the streetcar might come in the form of a regular fare. Cities with newer streetcar systems like Detroit, Cincinnati, and Kansas City all have free streetcar systems like Milwaukee, but slightly older systems in Charlotte, Dallas, Atlanta, and Salt Lake City all charge. One-way fares tend to range from $1 to $3, with reduced price or free options for certain populations and multi-use deals available.
Once city leaders deem streetcar ridership sustainable, a small fare might help to generate enough revenue to reduce or even remove reliance on one-time federal funding and allow at least a portion of transportation fund revenues currently used to support the streetcar to be spent elsewhere. That said, there would be administrative costs to implement fares, and even a small charge may drive away potential riders.
Unpaid Citations. Annually, the city estimates that over 18% of parking citations go unpaid. More than 38,000 vehicles have five or more unpaid citations, amounting to over $16 million ($37 million of total debt) in outstanding payments that could boost transportation fund coffers.
When a car has five or more unpaid citations, it is considered eligible to be towed. Beyond the payment of those citations, it costs the car owner $150 for tow costs. The owner also must navigate hurdles to retrieve the car, which becomes legally “owned” by the city upon towing, thus requiring the owner to go through the process of registration and more in order to repossess the vehicle.
Towing, therefore, can be costly and burdensome, both for the resident and for the city. In early 2019, state lawmakers enacted legislation that would allow local officials to instead install a “boot” on cars to immobilize them as an alternative to towing. Milwaukee has not yet locally implemented this authority, however.
While booting obviously can frustrate vehicle owners, it may be a more practical and less costly option than towing for both the city and vehicle owner. New technology has paved the way for “smart” boots that weigh less and allow residents to remove the boot and return it themselves once payment is made online or over the phone.
The city also could consider changes that would allow it to reduce the scale of unpaid citations. This could be accomplished through further outreach that would make residents more aware of the payment plan options that exist. Additionally, Milwaukee could consider requiring payment of outstanding citations to obtain a vehicle once it is impounded – currently, residents can retrieve impounded cars from a tow lot simply by paying the towing fee and without fully paying or having a payment plan in place for their citations.
Other Considerations
Finally, any efforts to boost revenues for the transportation fund might be more politically acceptable if they are linked to other transportation priorities. For example, the city recently adopted a Vision Zero plan that seeks to “eliminate traffic deaths by 2037.” DPW has implemented new infrastructure and redesigned streets with this goal in mind, and transportation fund revenues could potentially further such efforts.
Smaller investments – such as those in the Bublr Bike system and dockless scooters – also could be made with revenue generated from the transportation fund if its revenue capacity is expanded.
Conversely, relatively inexpensive meter parking during weekdays and free street parking at night and on Saturdays may be encouraging patronage at downtown bars, restaurants, entertainment, and shopping venues. Any consideration of new or expanded parking revenues must also consider whether that would change, and whether residents’ general desire to come downtown would be affected by higher parking costs.
Likewise, it is possible that the sale of city-owned lots or structures to private entities could produce higher parking rates at those facilities, which could also have a chilling effect on patronage in areas of the city where the lots and structures are located. City officials may also want to take into account other factors, such as the development potential in the location and what development could mean for priorities such as expanding the number of housing units and expanding the city’s tax base.
Conclusion
For years, Milwaukee’s transportation fund has generated sufficient revenue not only to pay for parking operations, but also to contribute to the city’s general fund to support core city services. Now, because of reduced use of lots, meters, and structures – as well as the depletion of its reserves and its additional obligations – the transportation fund appears to be at a crossroads.
There are at least some causes for optimism when it comes to the future of the fund. Meter revenue has recovered somewhat, and the city has yet to implement variable pricing and extended hours, moves that are expected to raise meter revenues further above pre-pandemic levels. Additionally, The Hop continues to expand – a new Lakefront line opened in April – increasing the potential that ridership numbers will rise and may even support new fares.
Still, it is not clear when – or if – lot and structure revenue will fully recover, as the city’s parking infrastructure ages and area residents continue to work from home in far greater numbers than prior to the pandemic. ARPA revenues – which in 2024 are expected to fund more than half of the streetcar’s operations – are also expiring. Consequently, city officials may need to consider boosting revenues in ways that go beyond items already passed by the Common Council if they wish to build the general fund transfer to pre-pandemic levels or help finance new priorities, such as Vision Zero.
The transportation fund’s balance is expected to resume its upward trajectory this year with $6.6 million in excess revenue, and Milwaukee’s general fund will benefit from the city’s new 2% sales tax. Nevertheless, whether general city services will require the assistance they once enjoyed from the transportation fund, and whether the fund has the capacity to provide such assistance if needed, will be key questions for city policymakers in the 2025 budget and beyond.