For local governments to stop clashing, they need to share taxes
By Marc Eisen
Feb. 28, 2003 issue
Dane County shouldn't be viewed as a crazy quilt of 62 governmental bodies with Madison stitched in the middle, proponents say, but as a single community with an interwoven economy, housing market, retail network, transportation system, cultural and education opportunities, and, of course, a shared love of the Farmers' Market and UW football at Camp Randall Stadium.
Liberals like regionalism because it acknowledges the primacy of the core city -- Madison, in Dane County’s case -- and seemingly links the fate of older and poorer neighborhoods to the newer and richer suburbs.
"There is growing recognition that the problems of segregated metropolitan areas -- declining neighborhoods, congested highways, degradation of valuable natural resources and wasteful intraregional competition -- cannot be addressed through the actions of individual local governments working alone," writes urban researcher and Minnesota lawmaker Myron Orfield, who issued a report last year on Wisconsin’s metropolitan areas for the Wisconsin Alliance of Cities.
Conservatives and business interests like regionalism because they think it holds the promise of leaner government (through consolidation of services) and reduced rivalry among neighboring communities.
"Our regional approach to issues is rooted in our deep-seated belief that the economy of the future is a regional one," writes US Bank president Londa Dewey, who chairs the Greater Madison Chamber of Commerce. "There is no advantage to playing Madison against Verona or Middleton against Madison to lure a business such as Epic Systems. Using tax credits to attract one company to one community versus another is counterproductive and costly to taxpayers at a time when budgets are tighter than ever."
Both Madison mayoral candidates, Paul Soglin and Dave Cieslewicz, have well-thought-out positions on regionalism. But underlying the discussion is a big-picture problem: Can regionalism work in the context of a governmental system firmly entrenched in the 19th century -- those 62 governmental units with their own taxing and jurisdictional powers.
Don't bet on it.
A good case can be made that regionalism won't really make sense until there’s also a regional approach to financing local government -- something called tax-base sharing.
Reality is that Dane County communities are still scrapping among themselves -- and outbidding one another -- to capture new development. Verona edged out Madison and Fitchburg for Epic Systems' new campus. Middleton outbid Madison and Verona for Electronic Theater Controls. DeForest has apparently stolen Badgerland Meat and Provision from Madison. (Voter alert: Both Cieslewicz and Soglin oppose Madison entering bidding wars to capture new development.)
Our cover story this week details how some of Verona's community leaders are convinced that putting big-box retailers in a nearby cornfield will generate a surplus of property taxes for the fast-growing community.
Not everyone believes this. Critics of a big-box proposal in Sun Prairie see it generating only a token surplus. Don Kettl, a UW-Madison political scientist, says he's "very leery" of assertions that big boxes spin off a lot of tax revenue. But closer to the ground, many suburban officials see it differently.
Retail stores, offices and light industrial development don't demand as many services as residential construction, they say. New homes mean more kids, which mean more schools, which mean more taxes. Failed school referendums are a suburban rite.
"Our focus in the last five or six years has been on nonresidential economic development," says Verona's city administrator, Larry Saeger. "Our understanding is that unless houses are of a certain value -- I'm not sure what it is, but it's high -- the school district actually loses money through the state aid formula."
You can imagine, then, how unwelcome multifamily housing -- with its low- and moderate-income families and their gaggle of kids -- is to suburban cities and villages. That's probably a big reason why 59% of the apartment units constructed in Dane County between 1998 and 2002 were in Madison, while 63% of the single-family homes were built outside of Madison.
This troubling split in housing is seldom mentioned in the debate over inclusionary zoning in Dane County. (Inclusionary zoning is the idea that new, large housing developments should have a certain number of affordable units.) Advocates want to make it mandatory in Madison, but have inexplicably failed to press the same goal for the county, even though outlying communities are doing far less than Madison to accommodate families with modest incomes.
There’s a hard question here: How do you make inclusionary zoning a countywide concern when the county’s 19 villages and eight cities are relatively autonomous and innately suspicious of affordable apartments?
Tax-base sharing won’t solve that conundrum, but it would vastly strengthen economic ties within the county. The Twin Cities region is held up as the model to emulate. Forty percent of commercial and industrial growth in a seven-county area is allocated to a common pool, then reallocated according to need.
"Tax-base-poor communities get back more than they paid in to the pool," writes Orfield, "while tax-base-rich communities get back less. Because all communities keep 60% of the growth, the program allows municipalities to cover the costs of development, but because they lose 40%, the program reduces the incentives for...competition for tax base."
Tax-base sharing thus levels the field between rich and poor communities in a region.
Not surprisingly, Kettl, the UW’s leading light on governmental reorganization, thinks tax-base sharing could be a key element in restructuring the state’s faltering shared-revenue program, which is how Wisconsin now attempts to shore up poorer communities.
Similarly, Gov. Scott McCallum’s Task Force on State and Local Government made tax-base sharing its number-one priority. Authorizing it in Wisconsin "will invite communities to talk about ‘what is good for us rather than me,’" the task force argued in its report.
Verona’s Saeger makes the same point. His city offers incentives to Epic Systems and Continental Properties, he says, because that’s how the game is played when communities compete for development. But he remains uneasy about how this forces his small city "to shoulder all that risk," even if the payoff is that it gets to "capture all of that reward."
Saeger would prefer a countywide system that not only shares new tax base but shares development costs for relocating an Epic: "That’s risk and reward sharing." Meantime, he says, Verona will continue to look out for its own best interests.
In Dane County and elsewhere, high-minded calls for a regional approach will sound hollow as long as government and its financing remain anchored in the 19th century.
©2003,
Isthmus Publishing Co.
reprinted with permission