One Milwaukee sales tax in the books, another on the way? Take it, then improve things

Less than a month after state lawmakers made it a possibility, the City of Milwaukee now has a new sales tax, after action by the City Council last week.

What began as a tense and unpredictable day at Milwaukee City Hall Tuesday ended with the Common Council's backing of a 2% local sales tax by a wider margin than required.

The critical vote offers the city a new revenue source to avert major service cuts in 2025 even as some council members said it would put additional financial pressure on residents living in poverty....

Even as the new law offers the city a financial lifeline — potentially $200 million-plus in new revenue annually, with the sales tax — it also comes with significantly increased costs for public safety and the city's annual pension payments.

Milwaukee's fiscal challenges have been caused by the state's decision to return a stagnant amount of shared revenue to the city for more than two decades and state-imposed limits on local governments' ability to raise revenue through other means such as sales taxes or by increasing property taxes. At the same time, the city's annual pension contribution is spiking while other costs are rising and reserves are dwindling, including the nearly $400 million Milwaukee received in pandemic aid.

A sales tax was something local Milwaukee officials had requested for years, and used charts such as this one to illstrate the squeeze they were under from both the revenue and spending sides.

But the 2% tax comes with plenty of strings attached, as all funds raised first go toward paying off the City's growing pension liabilities, and if that can be fully funded in a given year, the Legislative Fiscal Bureau points out that any extra funds go toward growing the number of police and fire fighters beyond the already-costly level that exists today.

Specify that the City of Milwaukee must attain a staffing level of no fewer than 1,725 law enforcement officers, including 175 detectives, and attain a daily staffing level of no fewer than 218 members of the paid fire department by December 31 of the 10th year beginning after the City first imposes the municipal sales and use tax.

Further, specify that the City of Milwaukee would have its supplemental county and municipal aid payment reduced by 15% if the City fails to meet the requirement that it increase its law enforcement and fire department staffing levels by December 31 of the 10th year beginning after the City first imposes the municipal sales and use tax.

Under the bill, the City of Milwaukee would have its current law county and municipal aid (shared revenue) payment and supplemental county and municipal aid payment each reduced by 15% if the City fails to meet either the City of Milwaukee-specific maintenance of effort requirement relating to law enforcement and fire protective and emergency medical service or the more general maintenance of effort requirements applicable to all municipalities with regard to law enforcement and fire protective and emergency medical service. Under the amendment, if the City failed to meet the specified staffing increase requirement and additionally failed to meet either the general maintenance of effort requirement applicable to all municipalities or the City of Milwaukee-specific maintenance of effort requirement, the City would have its current law county and municipal aid payment reduced by 15% and its supplemental county and municipal aid payment reduced by 30%.

As Jeramey Jannene notes in Urban Milwaukee, alders accepted the sales tax and the GOP's many conditions because not accepting them would have led to something worse.

We were presented with a bad deal,” said Alderman Russell W. Stamper, II. He said the deal negotiated by Mayor Cavalier Johnson let Republicans take advantage of the city. “This was already premeditated, they are taking advantage of the money they know we need.”

A city budget office report says that, without the new funding, the city would need to eliminate 700 of the approximately 1,600 police officers, 250 of the approximately 700 firefighters and 400 general city employees. A pandemic-era federal grant has delayed the fiscal cliff for a handful of years, but it will run out next year. [Mayor Cavalier] Johnson made getting a revenue solution for the city a cornerstone of his campaign for mayor and said he would get a “cot in the Capitol” if necessary....

Stamper said, despite his concerns, he “weighed the options of what could happen” and voted for the proposal. “I made the decision based on what I thought was the best for the city of Milwaukee,” he said in an interview.

Council members found public support from other political leaders [Monday]. Independently elected Comptroller Aycha Sawa, the city’s fiscal watchdog, endorsed the tax in a rare press release. Congresswoman Gwen Moore also endorsed the proposal.

The City's sales tax will start on January 1. Now we move to the County's sales tax, which was included as part of the same bill but is technically a different item, as the County Board and County Exec have to sign onto a countywide tax of 0.4%. In theory, the County doesn't have to follow the City's lead, although state lawmakers reduced the bump in shared revenue that Milwaukee County will get with the idea that the sales tax will make up for it.

And it looks like full County Board is slated to take that up next week, which would mean that sales tax would also be in place at the start of 2024.

Milwaukee County committees advance sales tax increase to full County Board vote on July 27 https://t.co/0NDKnEiwjs via @journalsentinel

— BillGlauber (@BillGlauber) July 17, 2023

Interesting choice of visual by the JS there.

Here's Urban Milwaukee's rundown of the committee debate, and some of the opposition that some members of the County Board have.

Sup. [and State Rep.] Ryan Clancy, who has opposed the sales tax since before enabling legislation was signed by the governor, once again shared his position. “What it comes down to is that sales taxes, despite the weak exemptions that Wisconsin have, fall disproportionately on the poor and working class,” Clancy said. “This sales tax is regressive.”

Clancy indicated that he thought the county should hold out for new Wisconsin Supreme Court Justice Janet Protasiewicz to be seated and for a potential future when the court invalidates the state’s legislative maps and they are redrawn fairer. The supervisor said he thought the county’s financial troubles aren’t as time-sensitive as the city’s. “The breathless list of concerns that we’ve heard are years away,” he said.

Sup. Willie Johnson, Jr. responded to Clancy saying, “There has been a delay since 2008.” The supervisor said the county should have had a sales tax increase long ago.

I know that 2008 reference, which was when Milwaukee County voters backed an additional 1% sales tax to fund transit, parks, EMS and property tax relief. The local County Executive opposed it, and after Dems and Governor Doyle dawdled in the State Legislature in 2009-10 and failed to take care of it, the sales tax topic was removed from consideration after 2010, when that same County Exec became Governor.

And while the economy may be much more stable since 2008, the funding streams for Milwaukee County certainly have not become more sustainable. The County’s transit system has had numerous cutbacks since 2008, and most recently has cut services for many special events such as lakefront festivals and Brewers games.MCTS says numerous routes will be eliminated in the next 2 years without fiscal changes, and with no more help from DC coming, there’s going to need to be a better option out there.

I also noted this part of the Urban Milwaukee rundown of Monday’s county committee meeting, which is in reply to Sup/Rep. Clancy’s argument that there is no need to rush.

Milwaukee County Corporation Counsel Margaret Daun was invited to offer her opinion on the potential for fair maps being a gateway to a better deal on shared revenue and funding with the state. Daun told supervisors that such a future relies on a number of assumptions about the court taking up the matter, the federal appeals process, the outcome of potential review by the U.S. Supreme Court, lawsuits and the actual process of redrawing the maps among other things. “My best professional estimate, assuming every case were to be won, in favor of more fair maps, as opposed to legislative autocracy, would be at least five years,” Daun said.

I don’t agree with Maggie Daun (she goes by Maggie on the radio) in the sense that it would take 5 years for the maps to be redrawn – I think the new majority on the Wisconsin Supreme Court would recognize the need to correct the wrongs of gerrymandering as soon as possible. But I think she’s right in that Milwaukee County is not in a position to roll the dice and hope for a better outcome 2-4 years down the road. Take the 0.4% sales tax to keep things afloat in the short term, and have the conditions and other GOP-imposed handcuffs removed after that through the courts and a fairer Legislature in the future.

The “regressive” argument makes more sense to me on the 2% City tax than this 0.4% countywide tax. I don't see where spending another 0.4% on non-groceries would do much to burden people (unless you’re buying a car), but I certainly see where cutting transit routes and mental health services and other needs would hit poorer people the hardest. You know what else is regressive? Having a $30 Milwaukrr County wheel tax (and $30 more in the City) that had to be put in place to pay for roads, transit and other transportation because of a lack of other methods to pay for those needs - a wheel tax that is levied on ALL vehicles owned by residents, regardless of income levels. Maybe let's work on reversing that Fitzwalkerstan-era trend of more wheel taxes - both in Milwaukee and in the rest of the state.

And as mentioned before, with Milwaukee County being the largest attractor of tourism dollars in Wisconsin, shouldn’t they be allowed to keep more of those dollars up-front and provide the extra services and needs that result from having so many extra people coming into the community? Sure beats pawning it off on homeowners and fees-for-services, and it really beats the mess that results from not being able to raise property taxes OR sales taxes as costs and needs continue to rise.

I get that many Milwaukeeans are unhappy with being singled out for these handcuffs and the racially-tinged garbage that comes with a WisGOP Legislature, and we can debate how many conditions are worth the benefit of a long-overdue sales tax. But I’d say take what you can get, and then use the coming months and years to make it into a more typical sales tax, and to have a better chance of making Milwaukee into the community its people want, without the interference from state lawmakers that has long hampered the state’s largest city, tourist destination, and economic engine.

Getting rid of the conditions (either through the courts or through the results of elections from fairer maps) would make for the best of both worlds - new revenue streams that aren't state tax dollars or property taxes, and the City having more ability to use the funds as they see fit. And by the way, given how rapidly Dems are gaining in the Milwaukee suburbs, I don't think that Boomer-based "bash Milwaukee" strategy for WisGOP is the winner they think it still is.