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. 

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They were listening, but did they hear?

Over the last few weeks, the Legislature’s budget-writing Joint Committee on Finance held hearings in Oak Creek, Janesville, River Falls and Green Bay.  At each location local leaders welcomed the committee and offered comments about the challenges municipalities face in dealing with the triple-whammy of sub-inflationary levy limits, declining shared revenue and increasing costs for infrastructure and essential services. Or, as Oak Creek City Administrator Andrew Vickers put it, the parent state demanding that its local children do more chores with less allowance.

The hearings were recorded by WisconsinEye, a nonprofit public-service digital television channel. For a “Local Perspective” on the state budget, follow the link embedded in each local leader’s name below.

One week into his job as the new Mayor of Green Bay, former state legislator Eric Genrich (comments begin at 5:40) told his former colleagues, “I can’t tell you I have everything figured out, but I know this much: our community is incredibly strong, but our city’s fiscal foundation could be stronger. We have significant infrastructural needs, and the tools we have at our disposal are not adequate to meet the challenges we face.” Genrich urged the committee to support Governor Evers proposals to increase shared revenue and transportation aids and to restore an inflationary “floor” for levy limits. Genrich also told them it’s time to look at diversifying local government revenue sources.

“Wisconsin’s municipalities are overly reliant on property taxes and we’ve seen a dramatic reduction in state aids over the last twenty to thirty years. Adjusting for inflation, the city of Green Bay receives about $20 million on an annual basis less than we did in the year 2000. That’s nearly 1/5th of our city budget. We are doing less with less, and the most glaring example of that is the condition of our streets.”

At the Oak Creek hearing, City Administrator Andrew Vickers (comments begin at 6:18) spoke up for diversifying the resource base for cities, but also for keeping property taxes fair. Oak Creek has a robust retail economy, including a greater than average number of medium- and big-box retailers. Like many communities, Oak Creek is beginning to be challenged by “dark store” loophole arguments from some of those retailers and Vickers urged the committee to close those loopholes via the budget bill.  He said, ”If we are asked to rely on property taxes, loopholes allowing [certain] segments to avoid paying their fair share should not stand.  The burden should not be shifted to residential property owners.”

Also in Oak Creek, the President of the Milwaukee Common Council, Ashanti Hamilton, (comments begin at 19:55) reported that the decline of shared revenue and imposition of levy limits that do not keep up with inflation has put his city in a situation where the police department’s budget alone exceeds the total amount of property taxes the city will receive.

South Milwaukee lies between Oak Creek and Milwaukee. South Milwaukee Mayor Erik Brooks (no video link available) said his small city of 21,000 is long past the point of “cutting the fat. He walked through some sobering numbers for the committee. “For 11 straight years, our “net new construction” figure – used to calculate how much we can increase our base levy, our largest source of revenue – has measured less than 1%. For 2019, it was 0.3%, meaning we were only able to increase our levy by approximately $22,000, on a $19 million budget. And it was worse in previous years. This is not sustainable. Costs go up, and we’re not allowed to reflect that in our budgets because the state has hamstrung us on revenue. And what if we want to give our people a raise, or if we want to add services? What do we do then? I’ll tell you one thing we can’t do: Cut fat. We did that long ago. Cuts now are cuts to people, and services. The days of Cadillac benefits are long gone too. We certainly seek ways to do things better through efficiencies and partnerships, but those only go so far.”

South Milwaukee went to referendum in 2017, to ensure it could adequately fund paramedic services and add two new police officers. The referendum passed 2-to-1. Brook said, that was a success, but “One-off” solutions like this don’t solve the problem.

In River Falls, City Administrator Scot Simpson (comments begin at 12:27) said the current revenue system is simply “unsustainable.” Simpson pointed out that the state needs to partner with local emergency services providers to meet a growing need for emergency detention beds for persons experiencing mental health crises. Under current rules and funding, police and sheriff’s departments have no choice but to transport such a person all the way across the state to a facility in Oshkosh. The Administrator said a facility in the western part of the state is needed to reduce skyrocketing transportation costs; costs that cannot be paid under the existing levy limits.

Janesville City Administrator Mark Freitag (comments begin at 7:48) offered thanks to the committee. The last state budget created a five-year added Expenditure Restraint payment for Janesville, to partially address an anomaly that put Janesville on the low end of both levy capacity and shared revenue payments. With the payment, Janesville was able to hire badly-needed first responders, double its street repair budget and reduce bus fares, in addition to implementing a number of internal operating efficiency programs.

This month the Joint Finance Committee will start the long process of working through the state budget agency by agency and program by program. It will vote on everything from base funding for prisons to local shared revenue and levy limits. The state budget document is typically around 1,000 pages long and lays out how the state will raise and spend roughly $83 billion in state income, sales and corporate taxes and federal funds. The budget also dictates to local governments how much they may raise in local resources. The city and village leaders who spoke up asked the committee to remember; they serve the same public. In Andrew Vicker’s words:

“We have a shared constituency.  There is not a single state resident that is not also a resident of a local government entity.  What’s good for the state is good for local government, and what’s good for local government should be considered good for the state.”

Columbus makes the levy limit case

The City of Columbus is a typical Wisconsin community. It’s an attractive, small-but-not-too-small city of 5,000 people straddling the Columbia-Dodge county line. They have an interesting downtown, a great library, an Amtrak station, the Christopher Columbus Museum, an aquatic center and a river (the Crawfish). They’re also being strangled slowly by state-imposed levy limits.

In 2018, the state granted Columbus permission to increase its levy by the percentage of “net new construction” that took place the year before. In this case, the allowable increase was 1.861 percent (inflation in 2018 was 2.44%). That translates into an additional $45,000 in spending authority for the City’s $4 million budget. Put another way, it’s almost enough to pay just about half of the increased health insurance premium for city staff and nothing more. And 2018 was a typical year.

Columbus, like most Wisconsin cities, villages and towns, has not seen a levy increase equal to inflation in over six years. As a result, the city has been slowly but surely reducing its long-term maintenance and services to residents. The changes have been subtle, but they’re starting to show.

“We are running our Public Works Department with equipment we purchased in the 1990’s,” says Kim Manley, the City’s Director of Finance and Treasurer. “It should be replaced, but there’s just no budget for that. We are, however, spending thousands of dollars each year on maintenance to keep that out-of-date equipment working.”

The city’s street repair budget is almost non-existent, and the roof over the Senior Center should have been replaced years ago. As for personnel, the city hasn’t been able to offer meaningful raises to its employees for years, and all of its salary ranges are lagging behind the already-competitive labor market.

“In the real world, we should be setting aside a little money each year so that larger purchases or projects can be funded, or at least partially funded without the city going deeper into debt. But with levy limits, I can’t set aside any dollars for needed new police squad cars, the roof or that old equipment. We scrimp and save every penny.”

Manley told us that the problem is building on itself. “Every year we have to say we can’t afford to do something or maintain something – then another year goes by and we are still trying to maintain the core services at our minimum levels. Our debt continues to grow and it’s concerning to me as a Finance Director to know that we’re putting our community in this type of situation.”

In the Governor’s proposed budget, cities, villages, towns and counties would be able to come closer to keeping up with inflation. The budget proposes restoring a 2% “floor” for property tax levies.  The League supports that change for the sake of cities like Columbus.

You can read more stories about the many communities in Wisconsin that are in Columbus’s shoes (or worse) on our web site https://www.lwm-info.org/1552/Levy-Limits-Time-for-a-Change.