Monday, May 23, 2016

Tourist season should remind us of need for better local govt financing

After spending the weekend in Green Bay doing tourist-related things as my wife and friends ran in a half-marathon, I was led to flash back to a document which discussed the impact of tourism on Wisconsin’s economy. This came out from the Wisconsin Department of Tourism last month, and with the Summer Tourism kicking off full-force this weekend, I wanted to go into the places in Wisconsin where tourism is important, and where there is very little of it. This is the type of information that should drive certain fiscal policy decisions in the state, but generally doesn’t when it comes to funding local governments, and I think that needs to change.

First of all, how do we define “direct tourism spending”? The Wisconsin Department of Tourism says it starts with the following:
Domestic visitor expenditure estimates are provided by Longwoods International’s representative survey of US travelers. These are broken out by sectors (lodging, transport at destination, food & beverage, retail, and recreation), by purpose (business and leisure), and by length of stay (day and overnight).
Then this information is cross-checked with items such as sales tax receipts, gasoline purchases, and local economic and employment data.

Based on those measures, here are the counties that the Tourism Department said are the ones that grab the highest amount of direct tourism spending in Wisconsin.

Top 10 counties for tourism spending
1.Milwaukee Co. $1,858.2 million
2.Dane County $1,154.1 million
3.Sauk County $1,005.3 million
4.Waukesha Co. $721.7 million
5.Brown County $613.7 million
6.Walworth Co. $509.6 million
7.Outagamie Co. $335.4 million
8.Door County $332.8 million
9.La Crosse Co. $236.1 million
10.Marathon Co. $235.9 million

Basically it’s the largest-population counties in Wisconsin along with traditional attraction areas like the Dells-Delton area (Sauk Co.), Door County, and Walworth County.

Another way to slice this impact is by adding population to the equation, as a way to see how reliant an area may be on tourism spending. If you work it out that way, you can see where many small-population communities have a strong reliance on tourism to stay afloat.

Top 10 counties, tourism spending per capita
Door County $12,079
Sauk County $11,488
Adams County $10,500
Vilas County $9,928
Oneida County $6,069
Sheboygan Co. $5,203
Walworth Co. $4,957
Shawano Co. $3,780
Marinette Co. $3,775
Iron County $3,296

(Quick note, Sheboygan County hosted the PGA Championship at Whistling Straits last year, and that in itself may have caused them to get a spot on this last. The spending in that county was significantly up from last year).

These top counties would be the ones most likely to benefit from a sales tax on goods and services, as non-residents bring in large proportions of money into the area, and take advantage of the goods and services a community offers. In addition, this could create a positive feedback loop where the extra sales taxes go back into amenities and services which enhance quality of life, and continue to attract tourism dollars.

While larger communities aren’t generally on this list when broken down per capita, I’ll note that Brown and Dane Counties were still in top 20 of Wisconsin counties for tourism spending per capita, and Milwaukee, La Crosse, Outagamie and Waukesha Counties were all in the upper half, despite their larger size. The counties which hold cities that get large amounts of tourism dollars (like Milwaukee, Dane and Brown) would also seem to benefit from a local funding shift away from property taxes and into sales taxes as a result.

Interestingly, the areas that are least reliant on tourism in Wisconsin also are relatively small-population, and all are located either near Green Bay/Appleton or are in the western half of the state. I also find it a bit alarming that many of these counties are on the border with other states, which you’d think would make them attract more tourist dollars just due to geographic proximity, and that isn’t happening.

Lowest 10 counties, tourism spending per capita
Menominee Co. $553
Calumet Co. $599
Pierce County $608
Lafayette Co. $706
Clark County $813
Grant County $827
Buffalo Co. $842
Pepin County $844
Kewaunee Co. $856
Trempealeau Co. $857

Without the boost in spending from outsiders, it makes these areas more likely to need sizable amounts of shared revenue and other non-sales tax sources to maintain local government spending levels. Either that, or they must continue to grow in population and/or tax base to keep the property taxes and other aids flowing. Some have been able to do this, like the counties of Menominee (population up 8.06% since 2010), Trempealeau (+2.55%), Grant (+2.03%) and Calumet (+1.62%). But the other 6 low-tourist counties have been hit with population losses since the start of the decade, with Buffalo (-2.91%) and Pepin (-2.40%) getting the worst of it.

You put these two issues together, and it indicates that perhaps a logical funding reform in Wisconsin could involve redirecting more resources to rural, low-tourist areas, with an extra emphasis on those places with declining population, as they are less likely to be able to raise revenues for services on their own. In particular, General Fund revenues like income taxes and state sales taxes could be the source for those communities to receive those funds, which evens the playing field throughout the state and could reduce the concerning trend where half of the state’s counties have lost population in the Age of Fitzwalkerstan, and most are in rural areas.

On the flip side, high-tourism and population growth areas would have some of their shared revenues reduced and/or redirected. But this can be made up for by freeing them up to use their community’s amenities to raise more revenue on their own. This could include an expansion of initiatives like the Premier Resort Tax and the Wisconsin Center Tax - added sales taxes that can be installed in places that require additional services due to large tourist populations, or earmarked for specific facilities designed to attract conventions and events that cause people from out of town to visit the area. The increased tourism of those areas also makes it more likely that the regressive sales tax is spread around to non-residents, and could be offset with lower property taxes and a lack of cuts in services that benefit local residents (streets, schools, etc.).

Wisconsin’s outdated local financing system relies heavily on statewide revenues being redistributed. This may help certain areas that are not large enough to generate top-flight services on their own, and some of this should even be expanded for low-income, low-growth areas of the state, to allow those citizens a legitimate chance of succeeding. But this has often come at the cost of reduced options for revenue at the local level. We only allow a 0.5% sales tax for local governments to take advantage of, and only on the county level. This has resulted in property taxes and sprawling growth to be the main source of support to local governments, and it is a system that has hamstrung large cities in particular, since most have fixed borders and much of its land has already been developed.

As a result, my modest proposal would allow cities and high-tourist areas more freedom to impose their own sales taxes and keep more of the funds that are being generated in their own communities. Likewise, this can be accompanied with property tax restrictions and perhaps targets on what the added sales taxes can be used for (like the proposed 0.5% sales tax for local roads that failed to pass the GOP Legislature this session).

If done right, this can be a win-win for the vast majority of communities in Wisconsin, and allow a better chance for the state to keep up the quality of life and natural beauty that attracts those tourists in the first place.

1 comment:

  1. Here's a related story from State Sen. Kathleen Vinehout on how Prescott, Wisconsin in Pierce Co (number 3 on lowest tourism dollars per capita) is looking at closing schools and laying off teachers since it cant get the revenue needed to operate at the same levels.

    Oh, and Vinehout notes the $3.5 million in WEDC-style giveaways to lure a company to Prescott from the Twin Cities didnt help, and didnt increase the tax base or population