Yes, End the Residency Requirement
But in return the legislature must give Milwaukee the powers it needs to create a great city.
You can certainly make a case for ending the City of Milwaukee’s residency requirement. The rule is archaic. It seems unfair. And Milwaukee shouldn’t need this requirement to retain its residents.
However, over time the elimination of residency will effectively grab millions of dollars in property values and economic activity from the city and sprinkle it onto the surrounding suburbs. Ending residency might be a good policy, but only if Milwaukee is adequately compensated for its removal. To avoid another case of “sticking it to Milwaukee,” the city needs to take a more aggressive posture to ensure it gets value in return for eliminating residency.
The residency requirement is not a case of Milwaukee unfairly treating its employees or, as recently argued in a Journal-Sentinel editorial, failing to “encourage the professionalism, talent and bravery of first responders.” The requirement is one element of a bargain long agreed to by city taxpayers and city employees. Despite having a remarkable number of qualified applicants whenever police officer or firefighter positions open up, we provide our public safety employees with benefits and job security that are otherwise near extinction in today’s economy. Additionally, Milwaukee police officers and firefighters earn an average of $65,000 per year, nearly three-and-a-half times the per capita income of the Milwaukee residentswho pay their salaries. In exchange for our generosity, we ask that our employees live amongst us. Many fight for the opportunity. And once they have it, public safety employees rarely leave. Last year just 2 firefighters and 12 police officers voluntarily separated from city employment. That’s because, for most, we offer the best deal they will have in their working lives.Milwaukee uses the residency requirement as a crutch. It is ongoing stimulus spending to directly keep certain citizens in the city. Critics of the rule make a fair argument, that rather than bribing people to stay in the city, Milwaukee should improve the city enough to attract new residents. Milwaukee is doing what it can, shaking off the Great Recession with community-driven efforts to stem the foreclosure crisis, creating partnerships that impressively reduce teenage pregnancy, and seeing growth in housing in and around downtown that highlights Milwaukee as a place to live, work, and play.
But Milwaukee must do much more to fulfill its potential. The clearest way to attract more residents to the city is to reduce property taxes, the source of so much perceived oppression. Mostly, that means reducing spending. And to save real money, we have to go after those parts of the budget that are the most costly. In Milwaukee’s case, the city spends more than half of its operating budget on the salaries and benefits of the firefighters and police officers that are behind the effort to eliminate residency. These expenditures add up to $319 million in 2013, much more than Milwaukee’s entire property tax levy of $250 million.(The rest of the city budget comes from state and federal funding.) But these unions are exempted from Act 10, all but eliminating any chance of reducing spending enough to materially lower property taxes. If the state eliminated Milwaukee’s public safety unions’ special treatment under the law as part of a deal for lifting residency, Milwaukee would be in a position to cut property taxes.
The other reason Milwaukee’s property taxes are so high is because, unlike most other major cities, Milwaukee is overly reliant on state shared revenue and barred by the state from having a sales or income tax. If state government allowed Milwaukee to diversity its revenue structure, the city could also decrease property taxes by raising sales or income taxes. Since sales and income taxes are more likely than property taxes to be paid by non-city residents, this would further decrease the overall tax burden of city residents.
So if the state were truly interested in giving Milwaukee the tools it needs to lower property taxes and create the kind of “Great City” Gov. Scott Walker says he wants to see, he and the legislature would extend Act 10 to our public safety unions and grant Milwaukee the same taxing authority most other major cities in America have long possessed.
This would be a good starting point for a deal to eliminate residency. Milwaukee would be able to fairly compensate city taxpayers for the loss we would suffer from a public safety employee exodus, the public employees would be free to live where they please, and a sales or income tax would allow suburban residents to pay something for their share of the economic benefits that come from living near a major city as well as for the likely increase in suburban property values stemming from the influx of city employees.
Of course, the state, suburbs, and public safety employees will only laugh at this proposal. After years of timidity and underwhelming state representation, Milwaukee lacks the bargaining power necessary to deal fairly with these groups.
However, Milwaukee still has constitutional home rule, which is sort of like a 10th Amendment for Wisconsin municipalities. It is a broad power, and any state law barring municipal residency requirements may be unconstitutional because of it. To be clear, the effort to eliminate residency without compensation by the state, suburbs, and public safety unions is an effort to steal from Milwaukee taxpayers. If they get their law passed, the city would best serve its taxpayers by pursuing a legal challenge to the constitutionality of a state residency ban.
The state, suburbs, and public safety unions will continue to abuse the city and its taxpayers until we stand up and do something about it. Meanwhile, we cannot adequately address the issues of taxes, poverty, education, and livability without their cooperation. The residency issue gives Milwaukee an opportunity to test the range of its home rule powers. We should seize that opportunity and continue to aggressively and creatively use all of the city’s powers to convince others to stop stealing and start negotiating for our mutual benefit.
Nathaniel Holton is an Urban Policy Consultant and proud Milwaukee resident.