Mayor Johnson’s Budget Hikes Fees, Taxes In 2025, Maintains Services

Milwaukee City Hall. Photo by Jeramey Jannene.

The City of Milwaukee enters its second year with its “game-changing” 2% sales tax, as it’s been called. However, some of the same challenges that plagued the city’s finances for the past two decades have returned.

The city must again contend with multi-million dollar budget deficits and service costs growing faster than revenues. A July memo from budget director Nik Kovac indicated the city must work to overcome a structural budget deficit of approximately $87 million.

Drastically changing the 2025 budget process, which formally kicks off Tuesday morning with Mayor Cavalier Johnson‘s budget address, is the end of the pandemic-era American Rescue Plan Act federal grant. Milwaukee received $394.2 million and, since 2021, used two-thirds of the grant to plug budget shortfalls and fund the city’s COVID-19 response.

This is also the second budget where the city must contend with restrictions imposed in Act 12, the state law that authorized the sales tax and an increase in shared revenue. While the city made regular reductions in public safety personnel numbers in prior years to save on ballooning staffing costs, it is now required to increase staffing or face revenue reductions. The mayor’s proposed budget calls for increasing the daily average Milwaukee Fire Department staffing by seven to 206 through the addition of 28 personnel. The proposal also calls for maxing out the capacity of the Milwaukee Police Department academy with three 65-member recruiting classes to maintain the current staff level of 1,645 funded sworn officers, while also providing the department with an additional $10 million to cover growing personnel costs.

On the good news front, sales tax revenues are coming in higher than estimated. Then-Comptroller Aycha Sawa estimated in 2023 that the city would collect $184 million in 2024, but a recent report from her successor and former deputy Bill Christianson indicates the total is likely to be closer to $191 million. The estimate for 2025 is $192.9 million. The sales tax, and a statewide increase in shared revenue, were heavily sought after because it will grow with inflation, unlike many other city revenue sources. Shared revenue, which was stagnant for more than a decade, will grow by $5.5 million in 2025, atop a $21.9 million 2024 increase.

An approximately $10 million cut in prior spending will help close the gap.

Departments were asked in July to produce a budget that indicated what they would do with a 5% cut, as requested by Act 12. “The Mayor looked really closely at a 5% cut,” said the budget director in an interview. But he said the city ultimately pursued a strategy that largely maintained the status quo.

But there are changes planned.

That includes, said Kovac, eliminating dedicated staffing for the Milwaukee Public Library‘s Ready Reference program that allows the public to call or email a librarian for help on virtually any topic. The city would still provide the service by forwarding the requests to whatever librarian is available at the moment.

Johnson is also proposing to save one of the most contentious items from the 2024 budget: Sunday library hours. Kovac said there is no guarantee the offering would survive in 2026, but that the mayor was committed to maintaining the service, which launched in July, for at least one more year. The council added the Sunday hours through the amendment process.

More than half of the budget gap will be eliminated by $44 million in withdrawals from its tax stabilization, public debt amortization and transportation funds. It largely avoided withdrawals in recent years by using federal grant funds, but will now tap the growing balances in the fund. But at the same time, Kovac detailed how the city must also rebuild the transportation fund, primarily funded with parking revenues, after over-relying on it late in Tom Barrett‘s tenure as mayor. The budget document credits innovation director Jim Bohl with overseeing an effort to maximize parking revenue from meters and fines.

The city will increase all of its fees by 2%, with the exception of the sewer and stormwater fees, which will increase by 5% to stabilize an associated maintenance fund. “If you look at it in raw dollars, it’s not a huge amount for each resident,” said Kovac of the fee increases. “But we were able to generate considerable revenue for the whole city.” Unlike the sales tax, which rises with inflation, these fees can only be increased with council approval. And state law prevents the fees from exceeding the cost of providing the service.

The property tax levy, which is effectively capped by state law, would also be increased by 2% to account for new construction and a small, state-allowed inflation increase. The actual impact for a specific property taxpayer would not be known until the assessment process is completed in the spring.

The budget document also notes that the city would boost its borrowing from $96 million in 2024 to $116 million, and likely continue it at that level through 2027. The increase is expected to cover a $40 million public safety radio replacement project, $28 million ERP software system replacement and $17 million cruise ship terminal, as well as provide matching funding to a surge in federal infrastructure funding.

Public safety is likely to remain a hotly-contested topic into 2025. Johnson will maintain a two-pillar focus on prevention and accountability, but recruiting may need to be added. MPD was unable to fill all three of its 65-member recruiting classes in 2024. He will also need to monitor contract negotiations with the Milwaukee Police Association and Milwaukee Professional Firefighters Association. The rank-and-file unions are operating under deals that expired in 2022, and new agreements could impose dramatic salary increases or back pay.

What about pension relief? A key provision of Act 12 was soft closing the city’s pension system and putting new employees in the state system. While there are clear long-term advantages to the switch, in the short term, the city must pay on an accelerated schedule to fully fund its existing system and for new employees in the state system. Kovac said it would be more than a decade until substantial savings are realized.

Urban Milwaukee will have substantially more coverage of the 2025 budget process in the coming month. The council is scheduled to adopt the final budget in early November.