Close the Libraries? Lease the Water Works?
Massive layoffs, extended furloughs, service cuts, significant tax and fee increases all are possibilities in the next year for the City of Milwaukee. I hate to be the bearer of bad news, but with the gap in the pension fund, a decline in the assessed value of property in the city, and a likely decline in state shared revenue the fiscal picture for the City of Milwaukee doesn’t look so bright. At today’s Common Council meeting the debate around a snow and ice fee increase and the furloughing of city employees were brought about by this startling economic outlook for the City of Milwaukee. These efforts are surely just the start of the city’s efforts to create a surplus this year with the goal of propping up next year’s budget. So it’s time to seriously think about how the City of Milwaukee can find $90 million to plug the hole. It easy to say layoff the workers and “cut programs,” but the realities of city government shows specific ideas are needed, not blanket talking points.
To alleviate next year’s pain the city has started taking actions to create a surplus in this year’s budget. The two day furlough is an unfortunate but necessary start, but the city must act more aggressively and immediately. Nobody has the magic bullet solution to the problem, but I’ll offer one small potential savings. Further, I’m no accountant, and I’m not a real estate developer, but it seems to me that by closing the East Side library, on North Avenue, the city can save money this year, sell what has to be valuable land, and put this land on the tax roles. It surely is a unfortunate thing to suggest a library closing, but the East Side can afford to be without a library more than some of our less-fortunate, inner-city neighborhoods. Further, when the economy improves and the budget issues are resolved a new library would be great tenant as part of a mixed-use development, but right now it’s time to save money. Clearly, this isn’t the magic bullet but as it’s likely all sorts of across the board cuts are coming next year small ideas like this are needed. What’s yours?
Eliminate all overtime pay for one year.
@Urban Advocate The two categories of overtime I know a little bit about are the police department overtime, and within the Department of Public works there is a strange automatic overtime related to snow removal. I don’t think anyone will touch the MPD budget but last year there was debate about this overtime payment within DPW, and maybe they’ll look at that one again.
I think the pension benefits for current and future retirees should be capped at 3x the median annual income in the city of Milwaukee. This wouldn’t affect any of the regular blue-collar workers, but it would significantly reduce the amount of money owed to high-ranking officials who have stand to earn more money through their pension benefits than any of the regular city workers. If anything, this would reduce the amount of money the city would need to contribute.
Additionally, it might be time to consider installing red light cameras.
I understand the idea behind selling the water system, but they should raise the water rates rather than sell the entire system — they can decrease or hold the rates steady once this deficit passes. There’s really no good options, but the city’s leaders shouldn’t abdicate their responsibility to citizens by passing the heavy lifting off to a private entity.
All meaningful ideas. With a budget gap this big, there is no combination of revenue increases and service cuts that won’t be painful and controversial. I recall seeing that MPD’s overtime went way down since Flynn took over. Eliminating literally all overtime for police and fire would be impossible I think, unless you’re willing to go below minimum staffing when employees call in sick.
Closing non-inner city libraries, red light cameras, and attempting to renegotiate pension details (pension requires 100% funding I believe, which perhaps is overkill; Milwaukee’s pension is doing better than just about any other in the country) are all sound ideas. Milwaukee needs to work with the State and the PSC to get the ability to raise water rates and transfer the profits to the City general revenues in a way that provides the benefit of privatization without actually leasing Water Works (this is not barred by State law, strong negotiation can make this happen).
This budget dilemma really reveals Milwaukee’s complete lack of flexibility and local autonomy when it comes to City revenues. A capped property tax and declining state shared revenues are the majority funding source. When the economy does comes back, Milwaukee will still have considerable budget problems because SSR probably won’t increase much and property values are inelastic. Long-term, placing some City services on a city sales tax (paid in part by nonresidents) that corresponds with a matching decrease in the property tax levy (leaving City residents even overall in terms of tax burden) is the real way to make Milwaukee fiscally healthy. Milwaukee’s lack of revenue diversity and autonomy places our City in a small minority when compared to most large and mid-sized cities. Wisconsin is not doing us any favors at all, and enacting a sales tax would require a change in State law and, therefore, bold leadership and political power. I’m pretty sure and really hope that our elected leaders understand that a sales tax is a potential long-term fix, the sort that Donovan asked for just today. Will any of them call for a sales tax publicly?
In the near term, I hope that citizens get involved and have a robust debate about how the budget should be balanced. The city could put out a budget simulator (http://www.gothamgazette.com/budgetgame/budgetgame.html) to educate us about the challenges and to get a view of citizen preference. It seems that there isn’t a ton of transparency regarding the budget at this point, I hope that changes. Now is the time for the City to use some technological resources to get people involved in the process. Meanwhile, thanks for providing the forum!
The majority of the budget is taken up by public safety. Public safety is treated locally as the troops are treated nationally, and with good reason. No elected official wants to touch that, and none will unless the citizens give their acquiescence. If it truly becomes impossible to balance the budget without touching police and fire, then the people of Milwaukee have to take a hard look at police and fire staffing levels compared to other cities and decide whether it’s possible to make any cuts there without negatively impacting public safety.
Unions and other interest groups have a lot of influence over the elected leadership. The taxpayers need to really step up and make sure they’re heard as well. The city will be making decisions over the next year or two that will have an enormous impact on the long-term outlook of our City, and it’s in everybody’s interest to pay attention and be heard. Thanks again for the forum.
@Nathaniel Holton Thanks for the great well thought out response…. we all need more of that. I did fail to mention that one funding source they will be investigating is just what you suggested regarding the water works. i.e. the Dividend concept. That sounds better than leasing the water works in that the control is retained. thanks again.
Close the East Library? Really? This would be a band-aid type fix for the city’s budget and the East side would be without a library indefinitely. With all of the recent development on North Ave the East Library is poised for a much-needed remodeling. The East Library is one of the busiest libraries in the city, I should know as I used to work there. Advocating the closure and selling of a public library in order for the city to save some money is disgraceful.
@Sarah
What do you cut then? The city is going to be very far in the hole, and needs to be prepared to take serious action. Closing the library for a year or two, and opening it in a mixed-use facility in the neighborhood when things improve financially could help. I would really love to hear your ideas for saving money.
@Sarah Oh yeah closing any library isn’t desirable, but the budget problem appears to be real and very big. It’s not likely that MPD will see real cuts and MFD will only see slight cuts so, where do they go next? Water dividend, ok that’s some. Snow and Ice Fee there’s a little bit. Pay freezes, furloughs, layoffs yup those too… Big tax increases yes. But it’s likely to find $90 million the libraries will be on the list as well.
So as you point out, North Avenue has seen much development, which makes the land, and future tax-base potential of note. So instead of punishing our inner cities (which will probably be first on the chopping block), I think we should get some value beyond just savings..
While I don’t think we should get rid of an east side library, I do think the site needs to be redeveloped and that the library might make a good anchor for any redevelopment that occurs there. With the new hospital near completion, and the new student residence hall getting build within blocks of the site I think the library could be an ideal site for a multiple use development, and that the cost of selling it could provide enough money to build a new one nearby. Libraries are destinations, thus they don’t need to be located on high traffic, high volume streets. Perhaps a new library could be located on Commerce Street near Pick and Save on one of the vacant outlots, or on some other vacant lot on the east side. I am sure that the sale prices for the outlot is a lot lower than the value of the current site so we could probably fund the new library off the proceeds from the current, while getting general funds for the city.
Dave–
I appreciate your efforts to develop a thoughtful blog about City budget challenges. Last year I attended 8 or so Town hall meetings on the Budget, and resident input is always very valuable. I’ll do all that I can to engage the public in discussions about the Budget as we move forward.
Mark Nicolini
Budget & Management Director
Dave, not sure selling the East Side library would even be possible – taken a look at the real estate market lately?
Privatizing the water works is a non-starter, as water is one of the most fundamental human rights and one of the most fundamental reasons for the existence of government. We cannot give up ownership of it. They didn’t put it on hold. They wanted to give that appearance to take the heat off, and succeeded. But if you listen carefully to what was decided at the S&R cmte., all they put on hold was the RFP process for seeking an advisor. The exploration into the possibility of, as Ald. Bohl put it, “leasing and all things in between” is indeed still on the table, and Mr. Morics is still authorized by resolution to look into it – just without the help of a private advisor now.
In my eyes, three things would go a long way toward saving the budget, two of which require help from our state legislators (not good news considering the historically ineffective leadership MKE has had at the state level):
1) Easing the rules regarding the PSC, rates, and use of surplus funds (the water “diviend” option). Private companies are allowed much more leeway in raising rates. If government entities were put on equal footing, then we’d be able to get those proceeds from our well-run and efficient water works into the general fund.
2) A city sales tax. I’m sure it’s a political near-impossibility, but then again that’s what was said about the county sales tax increase. But getting beyond the hyperbolic rhetoric surrounding taxes, I’d point first that 43 of the 67 largest cities in the country (of which we’re a part), have a city sales tax. Second, I’d point to a study done a few years ago out of the LaFollette institute regarding the ramifications of a city sales tax in Milwaukee (warning – goes to a powerpoint file): http://www.lafollette.wisc.edu/publications/workshops/2004-2005/milwaukee.ppt
Just to point out, Mr. Morics is early-on-guestimating that income from a trust created by leasing the water works could bring in $30 million per year (assuming the stock market doesn’t wipe the entire fund out). A city sales tax of 0.5% would be among the lowest of cities that have sales taxes, and could bring in more than $45 million per year (and with much of that burden exported). A 1% sales tax (typical for cities that have them) could bring in $89 million – ironically about the same as the low-end estimate of the budget deficit we’re looking at next year.
3) Yes, Dave, I’m gonna do it, and you can’t stop me! 😉 – across the board cuts to staff and services to make up the remaining difference, including non-front line MPD and MFD staff, and across the board pay cuts for all MKE employees making $70,000 or more. And that’s coming from a fiercely pro-union guy. But in this environment, absolutely everybody is going to need to give some if we’re to keep the city from being privatized or going bankrupt and being taken over by a Governor Walker.
@Mark I’m glad you found us, and I always appreciate your explanations and presentations at council meetings.
My fear is that there isn’t an understanding out there just how big a problem the city is facing. I hope more resident will weigh in with creative ideas as to where we can find some savings, because well we need em.
@JCG Of course nothings for sure. But there are mixed use projects going up in the Third Ward (Cocoran Lofts, Jackson Square Apts), and the East Side (UWM dorm, NLE’s project they sold). Add to that this is some prime land so I think it could get sold within a year if an RFP went out soon.
As far as sales tax, I don’t think it’s likely anything like that will be passed quickly… And even the dividend issue is going to take time to work through the legislator as well.
And of course I have every expectation that there will be big layoffs, more furloughs, and salary freezes…
When we start cutting services to only middle class or wealthy areas, we are causing more problems than we are fixing. These areas are where many people of means live as well as where much of our property taxes and votes come from. As soon as we start pruning these things here, they start asking “why do we even need this service at all, it’s not like I have a __________ nearby”. (insert library/park/dpw fixing potholes/etc) Then there’s the issue of what you get for your tax dollar. Why pay more taxes here and then you don’t even get par services? Doing this is like asking anyone who can move, to move.
Obviously there are ways to trim the city budget, but the best way out of this is new sources of revenue.
The city could expend political capital to have the state repeal the law banning red light cameras or to enact another sales tax(on top of the transit/police taxes and maybe parks). However, this will only preserve the status quo in light of new pension liabilities.
Or the city could work to get an exemption from the state law mandating all properties are taxed on value. If Milwaukee could rework how it taxes all residential and apartment property in the city, it could drastically lower the tax rate while bringing in much higher revenues for all units of government. If the taxes that were collected right now were distributed on an equal basis to each residential unit in the city, the property taxes for all units would be ~$2,000 per year. Every single family home or condo worth more than $84,000 would benefit, while providing a huge incentive for new residential development in the city.
Why rearrange the decks chairs on the titanic when you can plug the hole?
@Jesse Well looking at next year’s budget it is more than likely that we will see dramatic cuts, and I see this a possible cut that could have long term benefits. And again a new library could in a new building maybe utilizing a TIF or something down the road.
As far the land value tax idea, I’ve read on that some and my early understanding of it makes me think it is a good idea, but again I don’t think this sweeping change is likely to be passed in the short run.
Unfortunately, the shortfall is fast approaching so we need ideas that can be implemented quickly.
To be fair I wasn’t advocating a LVT but that is another viable alternative. Besides, the same line of reasoning that advocates for closing the East Library, fights against spending money for a new library in a few years. You act as Milwaukee is suffering from a short-term funding problem, but the city has been having trouble long-term. You seem to be advocating short-term solutions the same way that Scott Walker and the County board have been avoiding making any real changes to county government.
@Jesse you can’t rewrite the property tax laws in time for the budget shortfall. It’s just not possible, as it would require local buy-in and state support. Furthermore, I don’t really get how your idea works. Care to explain?
@Jesse Long term ideas are good, (though I don’t understand your original idea), but the key is sweeping changes don’t happen overnight. I don’t believe it is realistic that we could toss out existing tax law or even get a city sales tax in six months, or even a year. We must face reality, next year we will see cuts, furloughs, closings, and so on. As Alderman Murphy said (paraphrase) we can not tax our way out of this one.
Now, the East Side library is just one small idea, but I think the land it sits on demands a long-term benefit in the form of tax-base, economic development, and new residents for Milwaukee. The pension issue is directly connected to the market collapse so it can recover in the future, and then possibly a new facility could be re-opened as part of a mixed-use development, instead of under utilizing the land.
I feel woefully ill-equipped to engage substantively in this debate. That’s tough to admit, but I am grateful to Urban Milwaukee for creating a forum for me to see ideas and research further. I am particularly inspired to see a post from Marc Nicolini. This is the type of engagement with citizens that is necessary for these tough problems. I wish more public servants and politicians could embrace more transparent, intelligent dialogue using social media tools that are actually how we know communicate and engage. The model of public hearings – usually during daytime hours – while serving some purpose, is limited and restrictive in its value any more. And politics as usual is clearly not working.
To the subject at hand, as a person who regularly uses the North Avenue library, and my two year old is a huge fan, I have to say that I recoiled initially at the closure suggestion. After reviewing all the comments, I have to say I would be willing to see it close as part of a package of tough choices. We also frequent the Central Library and that would be our alternative. I still don’t really know if these are good or bad ideas and whether a million of these things would add up to meaningful change, its more a comment about the process. By rationally reviewing many comments, I came to a broader perspective and was able to be persuaded. That seems to me to be good for a democratic process and for tackling tough choices.
@Juli Of course it is a terribly sad thing to suggest closing a library, though my guess is next year they will be talking about closing or drastically closing a bunch of them. So I felt this one at least offers redevelopment i.e. long term positives.
That said the real point is to think about and come up with a variety of ideas to plug the budget hole, as I expect next year we will (I believe) see dramatic across the board cuts, and big tax/fee increases.
And yes it was great for Marc to visit UrbanMilwaukee and I hope he and others continue to do so.
A few random things:
-I’m not terribly concerned about water privatization right now. It would require a referendum, which would be a bloody affair, and I doubt that any elected official is willing to step into that minefield. My understanding was that Morics was going to study the non-privatization options for water revenue. Hopefully we’ll never get to the privatization debate, it’s hard to think that the city striving to be the freshwater capital would sell off its access to freshwater.
-A flat fee property tax, which is what I understood one of the above ideas to be, would violate the tax uniformity clause of Wisconsin’s constitution. Treating similarly situated taxpayers similarly is kind of a major tenet of American government. We can be open to any constitutional idea, that one is not possible. I also think that would cause revenues to decline substantially if I understand the idea right.
-I agree that the sales tax option would require a lengthy process, not to mention political courage that might not exist right now. It’s hard to see that happening in the next two years, it would probably take at least that long from the time that a prominent leader called for it. It’s the long-term solution, and it would be a good idea to get started on it now. Meanwhile, the budget focus should be on not crippling our city’s long-term future. Can the potential harmful effects of a cut be reversed or adequately addressed in the future? Short-term pain is unavoidable, long-term pain is not necessarily.
-Cutting the salaries of high-wage employees is an option, but those employees would fight that tooth and nail. They could argue that they are the bedrock of the city, not only as employees who keep the city functioning, but also as residents whose presence improves the community. I’m not privy to what, if any, contractual restrictions that might be involved either. Assuming cuts are possible, taxpayer input for this option would have to be considerable I would think. There’s also the threat of mass retirements, which would help the budget but could really mess up service delivery and institutional knowledge.
-I completely agree with Juli, Milwaukee needs to use social media and the internet to create a meaningful two-way conversation about the budget issue. Public hearings are limited in value, and it seems that they tend to bring out one-issue taxpayers who will fight against a specific cut without considering the rest of the budget whatsoever. The budget hole is too big for that sort of ad hoc special interest-driven process, which could lead to suboptimal fiscal choices. Now is the time for Milwaukee to stand up and handle the budget in a transparent and rational way. Every dollar or second spent on pushing this two-way conversation would pay for itself by enlightening the discussion and increasing openness to hard but ultimately optimal choices.
Great commentary, NH. Dave, I’m still not convinced that the library could even be sold, but that being said you’ve still offered one of the more realistic short term possibilities (more realistic than mine, I’ll admit!). However, the paradox is that a $90-$130 million deficit simply can’t be solved with piecemeal solutions. It’s going to require BIG solutions, and the paradox is that big solutions take big time. Which is why, of course, eyes should be kept on the lookout for officials jumping off the top of city hall!
PS – Jesse: “The city could expend political capital…”
This is Milwaukee. We have negative political capital, especially at the state level!
Lol, great comment about the political capital. The only way the state does anything is if we make it seem like they’re screwing us over (“stick it to Milwaukee”) or if the entire state’s future rests on something here(Marquette interchange).
I agree with post 11. by JCG.
If a corporation comes in and pays the city $30mil/year for a lease, how much do they plan to profit? The Water Works is too lucrative and profitable. Don’t give that away, work on amending the law to be able to send that profit into the general fund! The city is facing huge debts and future costs in pensions and health care. I’d be interested in what the city’s situation would look like if the proposed government-run health insurance somehow passes. But in the meantime, the prudent thing would be to raise rates on water and initiate a temporary sales tax increase. Sell it on limiting cuts to essential services and things like road repairs. Cut down the debt. How else do you reduce that much debt?
For the long-term, they need to re-renegotiate contracts, isn’t cost of labor a huge part of why the deficit exists? The City could try to negotiate with the unions a lower cap on high salaries and possibly eliminate further redundant positions by attrition. The core city employees make reasonable real world wages, $45-$60k/year is a healthy salary. But when “managers” in departments (especially MPD, MFD) are earning $90,000-120,000/year. A drop in that salary would mean the hiring of a new front line employee, could the union go against that? It’s better than job cuts and it might help cut overtime. They could try to negotiate a different pay for sky high positions, so that when the current job holder retires, the replacement would get a “Reasonable” pay. There are many city employees that wait for promotions, it’s not as a lower pay would mean you lose a good candidate. Qualified workers are too vested in the pension plan to turn down a job because it pays $75,000 instead of $90,000. What greener pasture are they going to find at that point in their career?
Taxpayers need to wake up about those handling Milwaukee’s book and who need to be run out of town.
Where did the money go? How about capital improvements (sewers, water, street lights, curb, gutter,all tax dollars) going to accomodate construction of condominium, which Fannie May has just put the clamps on mortgage fianancing unless they are 70% occupied.
Even CDBG funds, supposedly to help the low and moderate income, are tampered with to supplant
normal city services….of course not without exacerbating Inner City crime by not putting those funds where they belong.
TIF (Tax Increment Financing) programs, if done correctly, would offset the upcoming deficit, however those programs were used to buttress the rip-offs by folks like Andy Grunau, Barry Mandel and Boris Gokhman, who had the nerve a couple of weeks ago to almost demand that the city help him finance a multi-story high rise on Kilbourne Ave.
One alderman has already been almost indicted, so he’s not running. Figuring what caused the proposed $100 million deficit is not rocket science. Unscrupulous investors, condo builders, blind oversight by the mayor, and too many alderman (Blacks and whites) see the taxpayers as a “Money Tree.”
The threats to lay off city workers, furloughs and cuting services have been conceived in idiocy. The Black community has been changed into a Colony, for the inhabitants are nowhere to be seen on jobs that could generate millions of dollars in taxes. Sensible people need to ask why.
The irresponsible acts by some elected officials have turned Milwaukee into a greedy, composite of tastless, unsophisticated young people, grubby dinner goers who think jeans and T-shirts are formal wear.
This place used to have a bit of class.
@George I had to respond to you because well so much of what you said is incorrect. First, Alderman D’Amato has been cleared of any wrong doing, and it was a pretty baseless case (hell a judge tossed it out once). Your discussion about TIF is so far of the mark, for example you say Boris Gohkman has used TIF for “rip-offs,” except for one thing he has never utilized a TIF! Is he looking for one now, yes but he has never in the past. The $100 million deficit had little to do with “condo builders,” well except for one thing. The top 10 condo developments (recent construction) in Alderman Bauman’s district pay more in taxes than 2 other Aldermanic districts. Yup 10 condo projects pay more than entire neighborhoods … I’d say those condo’s help the budget. Finally, the $100 million deficit has everything to do with the national economic collapse.
Reid, my fellow…
You need to go back to school….ahhhh, I may not be 100% correct, yet I know the city government is
half-ass corrupt, and that the idiot D’Amato, with no “education” in education now runs a Seed program, and tried to ram this down Black people’s throat not long ago. Now you tell me why he did not run again as
alderman, and I see signs in his neighborhood that he should be indicted.
Now he’s Barrett’s extra stooge in grappling with the school issue.
I know how Monroe Swan, a former state senator, and a few developers put TIF into being a few years back, me bucko. And, generally, it was to be an economic tool to assist in also generating development AND jobs. Now, you tell ME, why there is a scarcity of Black people working in all these construction jobs?? Training, huh? We have been training since Black people built the Whitehouse!
And also why white construction companies and workers are coming into town to work in Black neighborhoods, AND buying little dinky houses so they can say they are residents?
Then tell everybody why Fannie Mae has put mortgage financing on hold for condos that do not have adequate occupancy. Plus, where did all the CDBG funds go? The city-wide dispersment is a sham
and target areas go down, and the stats on Black male joblessness go ballistic..
Next thing you will say is that Barrett and his dimwits ought to take over MPS to get at their $1.1 billion bucks, followed, again, by a dizzy declaration that Ald. Hines’ piece in 2008, about the city going broke related to the upcoming economic collapse, rather than Milwaukee city government cooking the books,
and keeps clean types like Grunau, Mandel, with ongoing projects that rip off the taxpayers.
Gohkman simply wants his share, and the dummy indicated that at his last meeting with the city and that is to get what those other two have received from DCD. Please,
You obviously know little, and care less about the Black community’s demise to the point of being a Colony; and will blame Blacks for it. However, get real, and think! Could not city government have something to do with it?
I cannot point to all the right pegs to go in the correct holes, but I know enough, and have had the experience, to separate good government from the incompetents that are screwing taxpayers, whites and Blacks, in Milwaukee.
I do not plan to have an ongoing debate with you. Useless. I got your point. Maybe yYou got mine.
Straight ahead,
George F. Sanders
George, your posts have been really poignant and I’m glad I read them. I had some trouble following some of your stream of conscious points, but I’m sympathetic to the general idea that the city government does not do Milwaukee’s black community very many favors. Why do you think this is? What are the biggest problems? Who in city government is responsible for this, both in perpetuating it and preventing its occurrence? What could be done to improve the situation? I want to hear more of what you think.
@George I might respond to more of your comments later, but you claimed in your first comment that Boris had in the past received a TIF, this is not true (example of not understanding the topic). Further, you claimed that somehow Milwaukee’s TIF use had hurt our city, which from what I have seen clearly is not true. TIF is about redevelopment, and has been used fairly effectively in Milwaukee, though we could possibly do more (if anything the city using TIF very carefully)… Further, TIF is very rarely if ever used to fill a project gap for condos, it has been used for streets, brownfield cleanup, riverwalks, and infrastructure related to some projects, but I think it correct to say never for a straight up project gap. Anyhow my point of view is to grow Milwaukee, and to somehow blame the folks who have brought new residents customers, tax payers, and jobs creators to our city doesn’t add up to me.
I welcome your comments, though I’d hope discussion can occur and not name calling, and would offer to grab a beer one night to talk about it, and hear your point of view.
I’d add many communities are facing shortfalls, smaller for sure, but shortfalls as well. http://www.jsonline.com/news/waukesha/50588487.html Part of next year’s budget issue will be a drop in shared revenues like these other communities.