County Officials Review Revenue Options

Milwaukee County’s Fair Deal Work Group, a committee tasked with addressing the county’s revenue crisis, met Thursday to further assess the county’s financial picture and new revenue options that could include a sales tax.

The group was created in the fall of 2018 and is co-chaired by County Executive Chris Abele and Board Chairman Theodore Lipscomb, Sr. to work through the financial challenges before the county — the largest of them being the state’s shared revenue formula which short changes counties like Milwaukee. During the last decade, Milwaukee County has seen its revenue (from sales and income taxes paid by county residents) sent away to the state government increase, while the funds sent back to the county have stayed the same or decreased. And all the while, costs continue to rise.

Estimates of the structural deficit facing Milwaukee County project that by 2023 the county will have a gap between its expenditures and its revenue of nearly $80 million. And since 2011, according to Abele, the county has made roughly a quarter billion in cuts to services that have translated to a reduction in hundreds of staff and one million square feet of office space. As Lipscomb pointed out at the group’s first meeting, from 2019 and moving forward, the capital project backlog and deferred maintenance will reach figures of around half a billion dollars.

These figures impact the county’s ability to adequately provide services, whether it is scrambling to find funding for bus lines, or looking for funds to fix crumbling park infrastructure. But behind the scenes some of Milwaukee’s most vulnerable feel the impact. As Abele often points out when discussing the county’s finances, the average caseload for social workers in Child Support Services is about 900 cases per worker.

The group wants the state government to apportion more fairly the revenue the county sends away every year. Their case is quite simple: if the county sends more money away each year, it should get more back each year.

As county lobbyist Matt McGovern told the group during their first meeting in December, “If you’re going to do something big enough to solve this problem, you’re going to have to work with the legislature.”

Changing the formula will require cooperation with the legislature, which means extensive lobbying in the capitol. And if a change comes, it would likely be in a biennial budget because of its impact on the state’s revenues and expenditures. And a change in local taxes, whether that be sales or property, would likely require a referendum. There is some support for this, as Governor-Elect Tony Evers has made statements showing he is aware of the problem the revenue formula poses to local governments.

At their meeting Thursday, the work group looked at potential revenue sources for the county’s ongoing capital needs. Of the six options, a sales tax seems most useful for the county’s needs and also most palatable politically. Milwaukee County already has higher property taxes than adjacent counties and, as Abele said, “When people complain about taxes here they’re not complaining about the sales taxes, they’re complaining about the property tax.” And it wouldn’t be possible to raise enough revenue through a Hotel, Food and Beverage Tax without increasing the rate to a point where it would be both politically and competitively unviable for Milwaukee County, said Jeremy Lucas, with the office of Performance, Strategy and Budget.

The other four options for new revenue were some variation of a sales tax. One of them, a premier resort area tax, would apply to specific goods related to tourism. This tax is allowed under state law for tourist destinations and must be used on infrastructure. Milwaukee does not currently qualify as a tourist destination, but there have been legislative exemptions for a few localities in the past.

Another possibility is a sales tax increment district. This option works like a Tax Incremental District for real estate, except in this case, state sales tax revenue in a specified area is frozen for a specific amount of time and any funds from economic growth are diverted for other use. This option, as Lucas pointed out, is less stable than others as it is heavily reliant on consistent economic growth.

The other two sales tax options would prove most lucrative for the county, as they would generate the most revenue: a general sales tax increase or a new sales tax being called the Pittsburgh Model.

Under the Pittsburgh Model a countywide sales tax of .5 to 2 percent would be divided between a newly created Regional Asset District, the county and the local municipalities, with the asset district getting 50 percent, the county getting 25 percent and the municipalities splitting up the other 25 percent. There would likely be a formula designated how the funds could be spent, with specific percentages being designation for things like parks or transit. And the county couldn’t levy new taxes, only redistribute from the sales tax revenue where needed.

Then there’s the general sales tax increase, which would require state legislative change. A one percent increase in the general sales tax would generate more than half a billion in revenue over the next four years if put in place.

Working with the legislature will prove difficult as its Republican majority has been blatantly opposed to all things Milwaukee. Assembly Speaker Robin Vos even chided Evers for some of his appointments specifically because they’re from Milwaukee. As a politically liberal bastion, Republicans around the state have a tactical interest in hamstringing Milwaukee’s local economy and government.

But Milwaukee County isn’t the only county facing these issues; the state method of funding local government has squeezed counties and municipalities around the state. Abele and Lipscomb have both stressed the need to communicate that the issue is not just about Milwaukee and is actually a bipartisan one affecting other counties in the state.

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