Milwaukee Adopts ‘Calm Before The Storm’ 2022 Budget

The Milwaukee Common Council adopted the city’s $1.7 billion 2022 budget Friday.

And despite the upheaval caused by the COVID-19 pandemic, the budget holds relatively few substantial changes for the city. The property tax rate will hold nearly steady and there are no fee increases.

Mayor Tom Barrett, in presenting his proposal in September, called the 2022 budget the “calm before the storm.” And the most substantial change the council made to Barrett’s proposal was further preparing for that storm. It allocated an additional $30 million to the city’s pension reserve fund.

The storm, a fiscal crisis triggered by the need to come up with an additional $70 million annually to fully fund the pension system, could result in the layoff of 25% of all city workers if no new revenue source is found.

The council redirected $30 million, using an accounting trick, from the city’s $197.2 million federal American Rescue Plan Act (ARPA) grant to bolster the reserve fund. Coupled with $10 million Barrett had already proposed, the reserve fund will now have $82 million. The amount is enough to completely stave off cuts for one additional year while the revenue-restricted city seeks state support, in the form of a sales tax, to address the fiscal issue.

“I think it was incredibly important to do,” said Common Council President Cavalier Johnson in an interview.

He noted that the reduction and stagnation in state shared revenue, which, after inflation, causes the City of Milwaukee to receive $100 million less annually than it did in 2003, is also creating problems for cities and counties around the state. “These issues aren’t just affecting the big city Milwaukee, and the big county, Milwaukee, they are affecting places that are small too,” said Johnson.

Finance & Personnel Committee Chair Michael Murphy said he hopes the Wisconsin State Legislature sees that the city is being responsible in how it uses the federal funding. A Wisconsin Policy Forum report warned that the city is so aggressively using it to plug budget holes that it could mislead people into thinking there is no crisis.

“If it wasn’t because of the ARPA funding being made available this budget would have been much more difficult,” said Murphy.

The biggest policy change the council added was reallocating an authorized assistant attorney position from the City Attorney Tearman Spencer‘s office to the City Clerk‘s office. The change, a result of the frequent disagreements between the council and Spencer, leaves Spencer with 34 assistant attorneys while giving the council its own in-house attorney.

The amendment, introduced by Alderman Jose G. Perez, was adopted on a 9-4 vote. Council members Ashanti Hamilton, Nikiya Dodd, Chantia Lewis and Russell W. Stamper, II voted against the change. Alderwoman Milele A. Coggs abstained. Ald. Khalif Rainey was excused from the meeting.

Dodd, Spencer’s most vocal council defender, previously said criticism of Spencer is racially motivated. The only council members that voted against the change are Black. Spencer, who defeated a 36-year incumbent in spring 2020, has been subject to a harassment investigation and frequent staff turnover during his tenure. Last week he added the media to the list of reasons his office is facing issues.

The budget includes a 2% raise for general city workers.

The Milwaukee Police Department will hire and train 195 new officers across three recruiting classes as part of the budget, but the department would still shrink through resignations and retirements. The number of sworn officers would drop by approximately 25 to 1,657 by the end of 2022.

The city reduced the sworn strength by 60 and 120 in the past two years while holding the department’s budget steady, largely a result of increased salaries and benefits. But the 2022 budget would see the police budget shrink.

It would drop from $295.3 million to $278.6 million, approximately $10 million of which would be attributed to the new 911 department and $6 million to a cut. No layoffs are included.

The council did alter Barrett’s proposal to use $6.1 million in ARPA funding for the recruits, swapping it for tax levy dollars. But because of ARPA rules and city budget realities, the police department is still ending up with $4.5 million in ARPA funding.

The $30 million pension reserve trick had to be modified with an amendment Friday to not rely solely on replacing Milwaukee Fire Department expenses with ARPA support. Coggs was the lone council member to vote against using ARPA funding to support the police department as part of the reallocation. The structure of the revised amendment, according to budget director Dennis Yaccarino, maintains future flexibility in the city’s use of ARPA funding.

“It’s not something I preferred,” said Johnson. “But for protecting city services it had to be done.”

Led by Ald. Nik Kovac, the council unanimously adopted a change that will enhance the civilianization of certain MPD functions. The amendment reassigned $400,000 within the department to hire 10 police service investigators to work vehicle theft cases. Currently police officers take reports and investigate the thefts, “which probably isn’t the best use of a badge and a gun,” said the alderman when the finance committee considered the amendment last week. The non-sworn officers, often retired officers, will serve as a less costly method to address the surge in vehicle thefts. MPD will absorb the cost by adjusting personnel costs throughout the year.

Kovac praised newly-confirmed chief Jeffrey Norman for working to use non-sworn personnel where possible, a proposal that past chiefs have fought.

The budget includes a $4 million withdrawal from the city’s tax stabilization fund.

Amendments from Coggs to pay for healing spaces on vacant lots and from Ald. Scott Spiker to pay for a wildflower planting pilot on a state highway within city limits were adopted without impacting the levy.

Of the 15 amendments the council adopted, the majority are policy footnotes that will be need to ratified by further council action and departmental cooperation. The City Attorney’s office change will also require a charter amendment from the council.

The ARPA spending plan, adopted Oct. 21, includes funding for housing, lead abatement, combatting reckless driving, childcare providers, addressing the pandemic, backstopping lost revenue as a result of the pandemic and a handful of other programs. The council will receive its second and final tranche of the $394.2 million award next year.

“I think what we did this year, that I was happy to lead on, lays a good foundation for what we might be able to follow next year,” said Johnson. A contingent of council members that didn’t vote for Johnson as council president in 2020, led by former president Hamilton, was critical of the ARPA process and said their voices were not heard.

The final budget was adopted on a 12-1 vote, with Ald. Mark Borkowski in objection. Rainey missed the entire meeting for a family obligation and Lewis had to leave early to attend a funeral.

“This has been a challenging time because we more or less dealt with two budgets at the same time,” said Murphy in his remarks to the council after the budget was adopted. The finance committee sat through dozens of hours of meetings in the past month. “Putting together a budget is not easy.”

Murphy and Johnson both said they believe the budget reflects the city’s fiscal realities and the pandemic-induced pain felt by residents.

Barrett could still veto the council’s budget amendments, but only one amendment (moving an attorney to the Common Council) was passed by a margin insufficient to override a veto. He has until the close of business on Nov. 16 to issue vetoes. Johnson said he didn’t think there was anything that stood out as veto worthy.

Property Owner Impacts

The property tax levy would grow by 2%, with the average residential property owner (a $127,900 assessment) expected to see the city share of their tax bill rise by $30.87. The adopted budget includes no fee increases.

The property tax rate will be $10.20 per $1,000 of assessed value, up from $10.09. The rate is the second lowest the city has levied in 10 years, but the average assessed value has grown in that period. After adjusting for inflation, the $305.2 million levy is up only $8.5 million since 2013.

The council reduced the rate from Barrett’s proposal by $0.02 ($81,522) as a result of a technical amendment relating to the library’s budget. It did not add any new tax levy spending.

The city cannot raise its property tax levy outside of the value of new construction or a small inflationary increase. It also cannot institute new taxes to increase revenue that are not first state authorized.

A home assessed for $100,000 would pay a city property tax bill of $1,020 in 2022. When including the other property taxing entities (MPS, MMSD, MATC and Milwaukee County), a homeowner would ultimately see a bill that is approximately triple the city amount.

Street Lighting Fee

The lack of any fee increases didn’t prevent some members from voting against the city’s newest fee: the street lighting fee that costs the average property owner $40 per year. Created as part of the prior year’s budget process, the city found out in a nearly embarrassing fashion earlier this year that it cannot use ARPA funds to cover the fee’s expected revenue.

Dodd, Coggs, Hamilton, Borkowski and Stamper voted against levying the fee without any mention of what the city would do to come up with the approximately $10 million it generates. The fee covers labor costs related to maintaining the aging street lighting system, but not capital costs.

But the council’s previously approved ARPA plan and the Department of Public Works’ capital plan do allocate nearly $13 million to replacing the worst-performing circuits in the system. According to City Engineer Jerrel Kruschke, the replaced circuits would eliminate approximately 500 of the 3,000 calls the city received last year for street lighting issues. Using electricians paid for by the street lighting fee, the city is also upgrading to LED lights which are anticipated to generate hundreds of thousands of dollars in energy savings annually.

The city has increasingly turned to fees to pay for services as they can be applied to all properties, including tax-exempt properties, and it is one of the few revenue sources the city has some flexibility on.