Common Council Approves 2% Milwaukee Sales Tax

Milwaukee City Hall. Photo by Jeramey Jannene.

Milwaukee is getting a new 2% sales tax, averting the need to lay off more than 1,000 city employees and slash services.

The Common Council approved the tax, estimated to bring in $193.6 million in 2024, on a 12-3 vote Tuesday morning. Ten votes were required to pass the tax.

The move averts a long-looming, and growing, fiscal crisis, triggered by state-imposed limits of new revenue sources and declining state aid. But even if the city didn’t vote for the state-authorized tax, the Republican-controlled Wisconsin State Legislature had adopted policy provisions that a number of council members think are racist.

“We were presented with a bad deal,” said Alderman Russell W. Stamper, II. He said the deal negotiated by Mayor Cavalier Johnson let Republicans take advantage of the city. “This was already premeditated, they are taking advantage of the money they know we need.”

A city budget office report says that, without the new funding, the city would need to eliminate 700 of the approximately 1,600 police officers, 250 of the approximately 700 firefighters and 400 general city employees. A pandemic-era federal grant has delayed the fiscal cliff for a handful of years, but it will run out next year. Johnson made getting a revenue solution for the city a cornerstone of his campaign for mayor and said he would get a “cot in the Capitol” if necessary.

Act 12, as the new state law is known, sets minimum staffing levels for the city’s public safety departments, removes control from the Fire & Police Commission, bars spending property tax revenue on diversity, equity and inclusion efforts and prohibits extending the streetcar with property tax revenue. It also requires police officers to return to Milwaukee Public Schools (MPS) buildings.

The city could ultimately challenge several of the measures in court, but on Tuesday council members largely deferred discussions of options and focused on the sales tax’s impact and potential massive service cuts.

“I do not want to see us fail, but I don’t want to save the city by sacrificing the citizens,” said Alderwoman Andrea Pratt.

She said the proposal would hit the least fortunate hardest. Referencing her time as a paraprofessional with MPS, she said it would equate to losing half a paycheck every year. “My goal throughout has remained the same, to represent the people and their interests and I intend to stand by that.”

Pratt was joined by Milele A. Coggs and Mark Chambers, Jr. in voting against the proposal. Each said their constituents didn’t support the agreement.

“It’s no secret that my final wish would have been for the people to decide,” Coggs said, noting that her district includes some of the most affluent people in the city and some of the poorest.

Johnson and the other supporters pushed the Legislature to switch a public referendum to a council vote.

Coggs said she wished she had more time and more information, and a “clean bill” that helped the city without the policy provisions. She called provisions of the bill “overreaching, micromanaging and frankly racist.”

“I wish, in an effort to obtain votes, threats and promises weren’t made,” she said of unnamed individuals.

“We all received threats that if we don’t vote for it, someone is going to run against us,” said Chambers after the vote, but he declined to say who they came from.

He said he voted with his constituents, who elected him in a November special election. “I was elected by them, I am going to continue to serve them,” he said. Speaking with a stack of postcards in his hand, Chambers said he received approximately 1,000 responses and 62% were in opposition.

In addition to what his constituents thought, Chambers expressed frustration that the council was “brought in at the last minute… I just think that was a nasty precedent.”

A change to the city’s lobbying process is pending before the Common Council.

Several council members acknowledged the gravity of the vote,

“This is the most important vote of our careers I think,” said Ald. JoCasta Zamarripa.

She was joined in voting in favor of the proposal by Stamper, Jonathan Brostoff, Robert Bauman, Lamont Westmoreland, Khalif Rainey, Larresa Taylor, Michael Murphy, Mark Borkowski, Scott Spiker, Marina Dimitrijevic and Common Council President José G. Pérez.

Stamper said, despite his concerns, he “weighed the options of what could happen” and voted for the proposal. “I made the decision based on what I thought was the best for the city of Milwaukee,” he said in an interview.

Council members found public support from other political leaders yesterday. Independently elected Comptroller Aycha Sawa, the city’s fiscal watchdog, endorsed the tax in a rare press release. Congresswoman Gwen Moore also endorsed the proposal.

Tuesday’s approval and Johnson’s impending signature sets in motion a process that would put the new tax in place on Jan. 1. The bill requires a 120-day lead time before a tax is imposed.

Milwaukee County, as part of Act 12, also faces a decision on whether to enact an additional 0.4% sales tax on its existing 0.5%. The existing rate of 5.5% would grow to 7.9% under Act 12.

The council’s vote comes less than a year before each member, and the mayor, must run for re-election. Some members have served for more than a decade in safe districts while five of the members were elected in special elections in the past year. Pratt won her seat by 17 votes.

Mayor Reacts

Mayor Cavalier Johnson called Tuesday a “very historic day” and said the council’s vote was “important and extraordinary, a vote that I think is probably on par with the vote to adopt the city’s charter in 1846.”

“For the past several decades, and it’s been decades, the City of Milwaukee has been in a position where we’ve had a financial crunch, where we did not get the amount of shared revenue back as has been necessary, where we did not have additional funding sources such as a city sales tax that virtually every major other city in the United States has and is able to use as a tool for diversification of revenue,” said Johnson.

Johnson, who once represented Chambers district, said he understood the concerns about a new tax, but those in the most impoverished neighborhoods “depend on our city services the most.”

“In those districts and those neighborhoods that’s where the most calls for police service come from,” said Johnson. “In those districts and those neighborhoods that’s where that’s the most fire service and emergency medical service come from. In those districts, that’s where it’s the most important to have library services that are available to our young learners and it’s places for people that don’t have air conditioning to get a reprieve from the heat on warm summer days like we have now.”

He said the new tax would capture revenue from those coming to the city and the money would go to support those that live in it.

Is It Enough Money?

The city faces a $183 million structural deficit in 2024, driven by rising pension costs, a state prohibition on enacting new revenue sources or increasing property tax revenue and long-flat shared revenue payments, estimated to cost $155 million annually when inflation is considered.

The deficit will grow by an estimated $50 million because of actuarial assumptions included in the agreement’s soft closure of the city’s pension system. New employees will be added to the state’s pension system, which uses a 6.8% investment return, versus the city’s 7.5%.

The sales tax is expected to generate $193.6 million in 2024 and the city is to receive an additional $21.75 million annually in shared revenue. Both amounts would grow as sales tax collections increase.

“The math doesn’t add up,” said Chambers. “We are still going to have a shortage.”

The mayor, during his remarks, declined to say if he thought cuts would still be necessary. “We will be working with our budget director to get everything figured out considering this new tax source,” said Johnson.

The city has faced a situation where it has increased police funding, but needed to eliminate officer positions because of rising per officer costs through a state-protected collective bargaining process. In addition, it now faces complicated hiring and spending targets as a result of Act 12 and if it fails to meet them it could face a shared revenue penalty larger than the increase it receives.

During a June briefing, budget director Nik Kovac said that despite the cost increases the two revenue sources, coupled with $80 million in pension reserve funding and $93 million remaining from the city’s American Rescue Plan Act grant, would allow the city to pursue cost-to-continue budgets through 2027 without any major cuts.

Bauman and others said the financial aspects might not be perfect, but gave the city a chance.

“I think we did a very good job giving the challenges we faced,” said Bauman of the past 20 years of declining state support. “We always muddle through.” But he said “the wolf is at the door” and the council must now take the solution offered.

Johnson said he needed to be a “political realist” when dealing with the state. “They were not going to open the door to legalized marijuana and then use [the revenue] to support the City of Milwaukee… the only door that we had to go through was this.”

An Open Meetings Law Violation?

Much of the council’s debate on the proposal appeared to take place outside of the public eye, and possibly in violation of the state’s Open Meetings Law.

Stamper called for a recess after the item was first called and at least six council members ultimately spent more than a half hour out in the council offices, out of view.

Stamper, Coggs, Taylor, Rainey, Pratt and Chambers were in the private office area for the entire duration of the recess, with Pérez and Dimitrijevic briefly entering the area, connected to the council chambers by a private staircase. The public was unable to see if they were discussing the proposal as a group, which would have been a violation, or each in their private offices.

The Common Council President said he didn’t think they had violated the law in the few minutes he went to the area. “I didn’t witness any of that. I didn’t see a group together or anything of that nature,” said Pérez in an interview.

Two other individuals that walked through the office pool at different times described situations where the members were interacting with one another or congregating.

There is one individual who voted without ever stepping foot in City Hall Tuesday. Murphy was traveling with his family and several others on a previously scheduled trip. He participated in the meeting via a cell phone.

DEI Efforts Evolving

There was one piece of the city’s Act 12 actions was held: new funding for the Office of African American Affairs and Office of Equity and Inclusion.

Pérez said a legal opinion said the existing funds could be used through the end of the year despite the new prohibition on spending tax revenue on many diversity, equity and inclusion (DEI) efforts.

The council was going to allocate $781,000 from its American Rescue Plan Act (ARPA) to the two offices, but Pérez said the council learned the money wasn’t needed immediately and that the existing funding wasn’t likely to be exhausted by the end of the year.

“We wanted to use the ARPA money to make a very strong commitment,” said the council president. “We want to use our time and plan accordingly for next year’s budget.” The proposal was referred back to the Steering and Rules Committee.

With a unanimous vote, the council directed the administration to pursue options to repeal policy provisions of Act 12.

On a 13-2 vote, with Spiker and Borkowski in opposition, the council authorized the Department of Public Works to pursue federal funding for four streetcar extensions.

“The work begins,” said Pérez of Tuesday’s votes.

For additional information on the tax and the city’s fiscal crisis, see our coverage of a five-hour hearing in late June or our compilation of all of our articles going back to 2017 on the issue.

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Related Legislation: File 230357