Support for cities & villages shouldn’t be “Red” or “Blue”

Mayors representing two politically-different communities recently spoke with one voice regarding the need for the state to re-commit to the success of local governments. Brookfield Mayor Steve Ponto and Madison Mayor Satya Rhodes-Conway distributed a joint Op Ed to the media throughout Wisconsin, calling for a reversal of decades of reduced state support for city and village government, and a recognition that cities and villages are critical to the state’s success. It’s a good read; take a look.

The State Needs to Re-Commit to Cities

By Brookfield Mayor Steven Ponto & Madison Mayor Satya Rhodes-Conway

The cities of Brookfield and Madison are different in many ways.  In one the majority votes red, the other blue. One is a suburban enclave, mostly white and upper middle-class. The other is the state’s second largest city and has a more diverse mix of people and incomes.

As the mayors of these two communities, we may disagree on many issues, but we both firmly agree on this: The Wisconsin Legislature needs to re-commit to helping cities flourish. Thriving municipalities are crucial to Wisconsin’s long-term economic success. To compete nationally and globally Wisconsin needs high quality communities that can attract and retain talent and enterprise and spur job creation. 

The state should increase its investment in cities because if cities are not doing well, neither is the state. We suggest three policy changes for accomplishing this: reversing cuts in state aid to cities, easing property tax levy limits, and allowing municipalities to create new revenue streams, such as a local sales tax, provided voters approve in a referendum.

Wisconsin’s cities and villages are home to:

  • 72% of the state’s population
  • 90% of the state’s commercial value
  • 87% of the state’s manufacturing value 

Most of the small businesses created in Wisconsin get their start in cities and villages.

Yet, the state government continues to disinvest in cities. In the last two decades, under both political parties, the state’s financial commitment to cities has been on a steady downward trend. At the same time, the state tightly restricts the ability of municipalities to raise their own revenues to fund the services people and businesses expect.

The largest state aid program for municipalities, called shared revenue, has been cut incrementally by $94 million since 2003, a 12.3% reduction. In 2003, Madison received $9.2 million and Brookfield just over $1 million in shared revenue from the state.  In 2021, Madison will receive $6.1 million and Brookfield just over $570,000. Meanwhile, the cost of providing services has, like everything else, increased substantially since 2003. 

Unless these policies are changed, municipalities in Wisconsin will be unable to provide the same level and quality of local services that they have. Lower quality services will eventually lead people and businesses to locate in other states with more prosperous and attractive cities.  

We call on the Legislature to use the state’s 2021-2023 budget to renew its partnership with municipalities by increasing its financial commitment to communities. We also urge the Legislature to ease the nation’s strictest property tax limits. Let municipal elected leaders have more control over local budgets and finances by providing flexibility on levy limits – perhaps by allowing communities experiencing little growth to increase their levy by at least the rate of inflation.

The Legislature should also expand local revenue options for municipalities to consider. The state can best help cities prosper, protect residents, and relieve over dependency on property taxes by giving communities other revenue options to pay for critical services like police, fire, streets, libraries, and parks. One obvious choice is to give communities the option of going to the voters with a referendum seeking permission to impose a local sales tax. While some communities like Brookfield would likely not pursue this option, other communities would.   

We may not agree on much, but we both love our communities and we both know we need the state to begin partnering with its local governments. This can best be done by reinvesting in communities, easing the strict limits on property tax collections, and providing more local revenue options. A great state needs successful cities. The state Legislature must do more to help municipalities succeed. 



Don’t screw up your ARP windfall

One of my favorite thought leaders on local government matters is Mark Funkhouser. Funkhouser is the former Mayor of Kansas City, Missouri and onetime publisher of the influential “Governing” magazine. Funkhouser is now the President and CEO of Funkhouser Associates, a consulting firm that specializes in local governments. I enjoyed his recent blog post on ARP funding so much that I asked him for permission to reproduce it. Take the time to ponder “Mayor Funk’s” advice before deciding how to spend the one-time money coming your way. -Jerry D.

As state and local governments celebrate the latest federal stimulus package, I’m struck by what I heard recently from Uri Monson, CFO of the Philadelphia School District: “The hardest thing to do in government,” Uri told me, “is to deal with one-time money and not waste it.”

I’m happy to share my own perspective with a little less elegance: State and local governments had better not be stupid with this money.

Our consultant Liz Farmer, a municipal finance expert, wrote the “The 7 Deadly Sins of Public Finance” several years ago. It should be required reading for anyone in government right now. At the top of the list is the commandment to avoid using one-time funds to fix long-term problems. Frankly, it’s a good thing that governments are barred by the American Rescue Plan from using stimulus dollars to pay down pension debt. But there are other places where it may be tempting to plug gaps with stimulus dollars. If you use that money to paper over this year’s structural problems, you’ll have squandered your cash – and still be in a financial rut next year.

Another trap governments should avoid is using the stimulus to build new assets or launch new programs that will saddle them with new, unfunded operating costs. If you create new long-term operating expenses, you may be in a worse position than if you hadn’t spent the money at all.

The $350 billion heading to state and local governments to backfill revenue deficits and stimulate additional public spending is an incredible opportunity for not only relief but for growth. Localities have wide latitude on their use the money, and the money coming their way is significant. For example, Atlanta, a medium-sized city of about 489,000, will get $178 million. Alpharetta, an Atlanta suburb with a population of 65,000, will get $21 million. Fulton County, where both cities are located, will get $206 million. Given this windfall, what should localities do?

For many of us, it’s been a while since we traveled by air. But we all remember the instructions to “secure your own mask first before assisting others.” The same rule applies for local government. First, fix your own emergency before tackling anything else. Replenishing depleted reserves would be responsible, for example, even if it wouldn’t generate the same headlines as a groundbreaking for a new community center or light-rail line.

Second, consider investing some of that money to reduce your operating costs. We all know deferred maintenance costs more the longer you put it off. Now is an opportunity to make those long-overdue investments in infrastructure. Think of a deteriorating school with major maintenance expenses as the HVAC system fails, the parking lot crumbles and the pipes leak. A new school that doesn’t require frequent, costly Band-Aids could reduce maintenance costs for decades to come. Nailing down this balance – how to spend money today to save money down the road – requires a careful analysis of your data, along with a serious commitment to citizen engagement.

Next, think beyond your borders. Cooperate on regional projects that wouldn’t have been possible before but are now within reach, thanks to everyone’s infusion of cash. This may seem to violate my rule about avoiding new operating costs. But quality infrastructure is a driver of economic growth, allowing governments to get an ROI on these dollars.

And finally, making those overdue investments in technology and cybersecurity is another way to save costs down the road while simultaneously better serving your constituents. During the pandemic, scores of governments invested in technology like video conferencing to keep public meetings accessible or mobile hotspots to provide internet access to underserved residents. In addition, with governments conducting more business online, there has been an increased concern about cyber-threats. Thoughtfully investing in areas such as these can save unnecessary pain in the future.

Of course, some of the money should and must be spent on social services and small businesses in a way that helps avert short-term disaster. And we should pursue all of this work through the lens of social equity. We’ve seen all too often that when governments run into fiscal headwinds, the first people who get hurt are those in marginalized communities. Let’s not repeat those mistakes. Instead, let’s use this unprecedented infusion of cash to make an equally unprecedented commitment to equity. We’ve only got one shot to get it right.

Have you found a creative way to leverage your community’s stimulus dollars? Please send me a note, and we may feature it in the next newsletter.

Thanks, and please stay in touch!