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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ARPA is NOT the same as Shared Revenue

If you’re a local leader, you are undoubtedly hearing all of these “voices” in your head:

“Don’t spend ARPA dollars on ongoing expenses. It’s not a replacement for property taxes, shared revenues or transportation aids. Think “one-time” money. Take your time. Gather ideas from a range of sources. Pay particular attention to the quieter parts of your community, those areas or residents who may have critical needs, but are unlikely to show up at the municipal podium. Keep good records.”

Cities, villages, towns, counties and the state itself are wrestling with how they can–and how they should–spend the unbudgeted $5.711 billion coming their way as a result of the American Rescue Plan Act (ARPA). The U.S. Treasury Department is scheduled to announce the rules for the program soon, and the dollars will begin arriving shortly thereafter. You have until the end of 2024 to spend your allocation. Perhaps the best thing to do with 2021 is to spend it doing careful planning.

While you’re planning for this short term shot of resources, take the time to speak up for your long-term needs. The state Legislature is putting together the state’s two-year budget, including deciding whether to increase long-neglected shared revenues. This billion-dollar budget item is a significant part of the state budget, but over the last 30 years it has lost ground, a lot of ground, to inflation, education, prisons and Medicaid. Since the 1970s, those four have taken ever-larger shares of the state general fund while police, fire, ems and other local services have received less. Make this the year that local services get their due.

The League is calling on its members to talk to lawmakers about shared revenue. Make a phone call, pass a resolution, give lawmakers a tour of your favorite local potholes. Spread the word: local government matters; it’s time for an increase in shared revenue.

Legislators have a job very similar to your own. They have more needs than resources, so they do their best to make the dollars go as far as they can. Your job is to help them understand where police, EMS and snow plow drivers fit into that priority scheme.

So, when it comes to finances, you have to have your eyes on the present and on the future. How you will allocate the valuable, one-time ARPA resources matters a lot right now. How the Legislature will treat shared revenues matters a lot next year and every year thereafter.  And your job is to balance both.

Another assessment win

If you tell a bank that your property is worth $450 million, chances are you won’t win an argument claiming your property tax assessment of $400 million is too high. That’s one of the morals of this most recent property assessment story. On May 9 the City of Wauwatosa won the largest, most complicated retail property assessment challenges to date. By order of a judge, super-regional Mayfair Mall is worth what the assessor said it’s worth (and probably more), not what 20 less attractive malls are worth.

The Mayfair Mall property tax saga began in 2013 when the city of Wauwatosa pegged the property’s value at $400 million. The city’s data suggested the property was worth about ten-percent more than that amount, but the assessor went with the more conservative figure in part because he didn’t have access to income information that had been repeatedly requested from the owner. The assessment was the same for 2014 and raised by roughly 5-percent for 2015. The real estate investment trust that owned Mayfair sued, claiming the city assessments were in error.

A four-year court battle ensued. A year ago, both sides met in Milwaukee County Circuit Court for a six-week trial. The trial became a dense and complicated contest of competing experts. Milwaukee County Circuit Judge Marshall B. Murray issued his written decision in favor of the city this month. His 34-page written decision carefully details how Wauwatosa Assessors Steve Miner and (later) Shannon Krause repeatedly used correct data, scrupulously-followed the Wisconsin Property Assessment Manual and assigned values that were conservatively-beneath the actual value of the property.

On the other side, the experts hired by Mayfair to justify its claim that the assessment was wrong were repeatedly found to be “inconsistent and not credible” by the judge. In some instances, the judge’s decision points out that the owner’s experts contradicted their own previous work. Mayfair had an appraisal done to finance the mall, putting its value at about $460 million. One of the experts who challenged the $400 million assessment worked for the firm that had done the appraisal. (Just one of the facts that Judge Murray pointed out in his “inconsistent and not credible” finding.)

Although Mayfair’s challenge did not turn on the “dark store” theory directly, the decision is an important element in the ongoing legislative debate. It is unquestionably the largest, most complicated retail assessment challenge in the recent string of property tax decisions. Two of Wisconsin’s best municipal assessors, Miner and Krause, were central figures in assigning the values to the property and the case was defended by expert municipal tax attorneys Amy Seibel and Ryan Braithwaite. The other side brought its legal A-team as well, and both sides relied on leading national experts in assessment and appraisal. The case was as expertly-argued as an assessment case can be…and the municipal side won on all points.

Despite the importance of this win, the fight continues. In Wauwatosa, there are related cases from more recent tax years still under appeal, and this decision may be appealed to a higher court. Wauwatosa Mayor Kathy Ehley has said her city budgets more for assessment-related legal fees annually than it receives in shared revenue payments; more than a quarter of a million per year.

Ironically, the same week Judge Murray rejected Mayfair’s appeal the Wisconsin Legislature’s budget-writing committee rejected a proposal to clarify the law. The Joint Committee on Finance voted 11-3 against League-supported Dark Store language in the state budget. Apparently, legislation that would help Wauwatosa and other Wisconsin municipalities not spend $250,000 per year on legal fees is not “fiscal policy” suitable for a state budget.

Stay tuned.

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.”