Sunday, February 24, 2019

Severe, costly winter is more proof your property taxes pay for too much in Wisconsin.

It seems like Wisconsin hasn't gotten a break from brutal winter weather over the last 6 weeks. Over 1/3 of the state's counties are under a blizzard warning today, and it seems like ongoing cycle of cold/then warmer so it snows/cold again keeps happening.

Madison was just warm enough to avoid most of the snow in this latest storm, but city trucks had to dump a lot of salt to avoid ice being all over the roads yesterday, and there will likely be more costs throughout the state as we drop below zero and see more snow in the coming week.

Channel 27 in Madison recently had this report that shows the city is already being stretched to its budgetary limit to keep things running during this awful winter.

The City of Madison sets aside $6.2 million for snow removal operations every year, according to [Finance Director David] Schmiedicke. He said that would cover five and a half snow storms per year.

However, barely two months into 2019, the city has already spent nearly half that amount: $2.8 million.

“That includes staff out there operating vehicles. Those vehicles have to be repaired by other staff and we have to augment what we have with city assets with private companies so we can clear streets,” said Schmiedicke….

Mother Nature may make the ultimate decision, but with every storm that dumps about five inches of snow, it costs Madison roughly $230,000, according to Schmiedicke.

The city will take money from a reserve fund to cover the extra cost, according to Schmiedicke. The reserve fund currently has a balance of $1.9 million. He doesn’t predict the city should need that much, but if it happened another reserve fund would be tapped.
Even in a growing city like Madison, it's difficult to find enough money to take care of these snow-removal needs and handle all other needs and services over the next 10 months of the year. And other municipalities in Wisconsin are having it worse than the Mad City.

That ties in to a report released last week by the Wisconsin Policy Forum on local government funding. That report showed that while local governments in Wisconsin are in the middle of the pack in the US for spending and taxes, the way they collect that money is quite different than communities in other states.
According to U.S. Census data compiled by Willamette University, in 2015 Wisconsin municipalities received 42.2% of their revenues from the property tax but only 1.6% from sales and income taxes combined. Nationally, municipalities got only 23.3% of their revenues from the property tax with an additional 21.3% from sales and income taxes.

• Wisconsin municipalities rank seventh nationally among states for being the most reliant on the property tax for their revenues. No other Midwestern state relies so heavily on the property tax and so little on other taxes to pay for municipal services. (See Figure 1 on page 4.)

• The state ranks much lower nationally for its reliance on municipal sales taxes (43rd) and total municipal taxes (26th). The combined state and local sales tax rate in Wisconsin (5.44% on average) is also the lowest in the Midwest.

In addition, the Policy Forum says that the State of Wisconsin has had to pay more for “in-house” duties, and has been particularly hit by the increasing costs of Corrections and Medicaid. Add in the increased usage of state money to give tax cuts (either with tax credits or through a shell game that reduces property taxes paid by homeowners and businesses), and there is a squeeze on how much money can be passed down to the local level.
State aid to municipalities also has declined as a share of the state’s overall spending from its general fund, or main account. To show that, we looked at three forms of general aid to local governments: shared revenue to municipalities and counties, expenditure restraint (state aid that rewards municipalities for limiting spending increases), and payments for municipal services (state payments to defray the cost of local services for and around state properties). Data from the Legislative Fiscal Bureau show that after adjusting for inflation these state aids to local governments fell 40.9% between 1998 and 2018. The share of the state’s general fund devoted to these local aids also dropped from 8.5% to 4.5%.

Put those two facts together, and the Policy Forum notes that property taxes have increasingly replaced state aids as the method to pay for local services over the last 30+ years.

An extra complication is that the Wisconsin GOP has limited the annual increase in a community’s property tax levy to the amount of “net new construction”, as part of a strategy to claim property taxes are going down. But many communities don’t have much new construction, especially rural communities in Northern Wisconsin. So they have no ability to have the funding available to fix the roads and pay for services in their community outside of imposing a new wheel tax. And as the Policy Forum reminded us last May , many communities have indeed done that, to the tune of $13 million in additional taxes levied between 2011 and 2017.

So if the contract has been broken between the state and the locals, maybe it’s time to allow local governments to raise more of their own money. Some of this may be remedied through higher revenue caps, so communities aren’t as reliant on new construction and are allowed to keep up with the cost of inflation. And it is also time to realize that the revenue sources local communities can choose is something to be opened up and shifted.

By law, only Wisconsin counties can levy a local sales tax in most places, and even then, it’s limited to 0.5%. There are some minor exceptions, with a few tourist-related small towns like Wisconsin Dells, Eagle River and Bayfield being designated as “premier resort areas”, which allows them to add an additional sales tax of up to 1.25%.

But that leaves out the overwhelming majority of Wisconsin, including its largest city. Milwaukee would be uniquely positioned to benefit from a higher sales tax, as Milwaukee County is the largest draw of tourism dollars in the state by a wide amount, and also has had sizable amounts of state aid taken from it over the years.

Even with residents paying $50 in wheel taxes, there are many needs that go unmet in Milwaukee, and a whole lot of people who use the amenities and services of the city that don’t pay a lot toward them. Oddly, the local sales tax on restaurant sales to pay for the needs of all of Milwaukee County is no larger than the one that goes to the handful of blocks and facilities that make up the new Bucks arena district.

At the same time, the City of Milwaukee has no direct sales tax that pays for cops, fire fighters and street repairs. I know the Bucks are playing well, but that seems out of wack.

That allowance for more local revenues could also apply for the rest of the state, particularly since it’ll be difficult to add to local aids when the state has to catch up on aids for K-12 and higher education, fix the Scottholes, and deal with the increased needs of social services such as the shortfall in caregivers, public defenders and prison guards (yet another reason why taking the expanded Medicaid money would help, by the way).

Many areas would probably consider reducing or removing their wheel taxes if they had more of an ability to get the money in another way, making for a win-win that legislators and local officials could both take credit for.

Lastly, the GOP Tax Scam is keeping many Wisconsinites from being able to write off their property taxes on their federal 1040 return, due to the limiting of the SALT (State and Local Tax) deduction and the increase in the standard deduction. So the net cost of property taxes has just gone up for a lot of Wisconsin residents, which seems to make substituting sales taxes or charges at the local level a better option.

I'd like to see Tony Evers admit that our system of funding local government in Wisconsin has broken down, and use the budget that he releases this week as a place to ask for reforms that remove the handcuffs that WisGOP has placed on local government since 2011. And our severe and volatile winter is yet another reason this needs to happen sooner than later.

In the process, Evers could also start a return to local government funding and autonomy. What a great change after 8 years of big government GOP rule!

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