The Wisconsin Alliance of Cities greatly appreciates the opportunity to respond to the draft recommendations of individual members of the task force, distilled from the August meeting of the task force. Please keep in mind that the following are the reactions of Alliance staff, not the board of directors or the organization’s members, though the following comments are based to a great extent on previously adopted Alliance positions and discussions with members.

1. Guiding principles:

• Increase, simplify and focus economic development tools for metropolitan and rural regional economies;
• Foster multi-jurisdictional cooperation in service delivery to achieve efficiency and quality service;
• Use state funding to achieve state goals;
• Inventory government properties;
• Increase the number of civic-minded entrepreneurs drawn to local government services.

Comment: Economic development, planning, governmental service delivery and taxation on a regional level can help remedy the growing poverty, declining tax base, inefficient growth and racial and social segregation that social scientists have uncovered in metropolitan areas of Wisconsin, urban advocates from the Alliance and elsewhere have concluded.¹

State funding must achieve the very important statewide goal, identified in later task force recommendations, of equalizing the tax burden among communities that have ample tax base and those that have meager tax base. It is the fundamental principle of equalization that is crucial to realizing a host of other statewide goals: economic development, fighting poverty, fostering wise land use, preserving farmland, controlling suburban sprawl. Regional funding or service delivery can’t do the job alone.²

Comment: The headline is at least half right: benchmarking is complex. The question is whether it is worth the substantial cost.

Devising a cost-effective, fair system that compares local governments across a broad spectrum of services is a task fraught with peril. The exercise may not produce any usable information. For example, benchmarking snow-removal practices, and comparing Madison and Ashland, could result in Madison looking much more efficient because it receives a fraction of the snow that Ashland receives in a typical winter. It could make Ashland look more efficient because Madison has to haul more snow than Ashland. It could make the village of Shorewood look inefficient because the village removes snow from sidewalks. Each community’s snow-removal service defies fair comparison with any other community’s services — but it is the level of snow-plowing that the citizens of each community desire.

Regional differences as to cost of living, the age of the infrastructure, density, concentrations of poverty and wealth, all influence the cost of government. Existing comparisons among local government all fail to adjust for those variables.

None of us are apples. We’re all different.

On the other hand, when benchmarking is planned effectively, when it focuses on the right targets, and when its recommendations are implemented and monitored correctly, the results are significant and sustainable.

If benchmarking occurs, efforts should be funded by the state from new revenue, not carved out of existing shared revenues, and should be undertaken in one or two narrowly defined functional areas at a time. Benchmarking should be done with a microscope, not Super Doppler radar.

Comment: In the Alliance of Cities, shared revenue is seen as an asset to invest in quality services. Without shared revenue, Ashland could not operate its police department, its fire department, its ambulance service, its parks department and its public library.³ Elimination of shared revenue would mean elimination of all those departments, not just one or two. Shared revenue pays 51% of Ashland’s operating budget. Without shared revenue, Ashland’s property tax rate would increase by 13.8 mills.⁴ Racine’s would increase by 11.4 mills.⁵ Beloit’s would increase by 16.3 mills.⁶

Characterizing shared revenues as an entitlement to spend ignores its very real role as life support equipment — life support equipment without which some of our communities, large and small, could not survive. "Eliminating ($17 million annually in) state aid would force the dissolution of the City of Beloit," city officials said last January.

Specific Comments. On the general objectives:

Shared revenue should live up to its original intent: to share income taxes with local governments (from which) the taxes were collected in the first place. This sharing should not be a sum certain but a percentage of the total income tax collections.

Comment: In 1911, the dynamics of citizen interaction with state and local government were much simpler than they are today. As Appleton Mayor Tim Hanna, a task force member, points out, citizens today frequently work in one community, live in another and shop in a third. With which should revenue be shared? In the 21st century, return-to-source revenue sharing works better on a regional basis.

The Alliance of Cities has formally supported making shared revenues a percentage of state tax collections rather than a set (and from 1995 to 2001) frozen amount.

Shared revenue should enable poorer communities to provide services without having to place an unbearable tax burden on local property taxpayers.

Comment: Right on! See the effects of shared revenue on the tax rates of Alliance members cited above. The effects are even more dramatic in smaller communities:

On specific recommendations:

2.8 Determine what local governments are spending their shared revenue on. If shared revenue is going to be a goal-driven, incentive payment, it should be known which functions were previously funded and thus will be cut or switched to other funding sources.

Comment: Shared revenue is not earmarked by the state or by local governments. It is spent on everything that property tax dollars are spent on. It is impossible — and meaningless — to separate the two. As the saying goes, it’s all taxpayers’ money.

2.9. Revise current shared revenue formulas to better equalize the fiscal capacity of Wisconsin municipalities. (DePere consensus)

Comment: The fiscal capacity of a municipality can be expressed in terms of equalized property value per capita. Fiscal capacity determines what tax rate is required to provide a given level of services.⁸ Ruekert & Mielke Inc. found that in eastern Racine County an additional $3.5 million in shared revenues would be required for total equalization of tax capacity.⁹

Orfield and Luce found that state aid equalizes fiscal capacity in each of the seven metropolitan areas they studied, more so than Minnesota style tax-base sharing could accomplish, except in the Superior area. They compared the ratio of the richest (95th percentile) communities’ tax capacity to the poorest (5th percentile) and this is what they found:¹⁰

"These Wisconsin disparities are all relatively low by national standards," Orfield and Luce wrote. "For instance, in 1999 Milwaukee had the smallest ratio of the 25 largest metropolitan areas, 3.3 — just edging out Portland and Minneapolis-St. Paul, and way ahead of Chicago, St. Louis and Cincinnati, which had ratios from 11.9 to 31.6."¹¹

Wisconsin’s shared revenue system is a resource to build upon, not tear down. This recommendation would build upon a resource that already is a model for the rest of the country.

2.10 Revenue sharing should have two levels: a. Level one is state to local. The formula should measure fiscal capacity of municipalities, expressed in dollars of equalized value per capita, which is the measure of a community’s ability to afford municipal services. b. Level two is voluntary and local to local or applied regionally, such as within SMSAs or regional growth areas. The two formulas should be easy to adopt and encourage multi-jurisdictional agreements for growth sharing, boundary adjusting and service sharing.

Comment: At this point, constitutionally, revenue sharing may have to be voluntary. But a long-term strategy should recognize the right of citizens to organize on a regional basis to undertake the functions of government. 

2.11 Provide state grants, including shared revenue, as incentives for resolving boundary disputes.

Comment: We oppose attempts by state government to micromanage local government, through shared revenue or by other mechanisms. Shared revenue should not be a carrot, and withholding of shared revenue should not be a stick. Shared revenue should be the keystone of the state-local partnership, a partnership of equals. Regional mechanisms could eliminate many of the reasons that boundary disputes arise.

2.14 By local decision, communities should share the cost of museums, zoos, etc. which are presently paid for by central cities but enjoyed by areawide citizens.

Comment: In Portland, Ore., Portland Metro oversees operation of regional parks, the Oregon Convention Center, the Portland Center for the Performing Arts, the Oregon Zoo and the Expo Center.

Ruekert & Mielke Inc. found that the city of Racine provides 74% of the local revenue that goes toward operating the Racine Public Library, and all of the capital costs associated with library infrastructure. But residents of nearby communities — towns and villages that don’t have their own libraries — borrow 39% to 42% of the library materials. In fact, neighboring communities’ residents borrow more from the Racine Public Library, on a per-capita basis, than city residents. Ruekert-Mielke calculated Racine’s subsidy to nearby communities as $1.15 million in 1998 for library use alone.¹²

Should libraries be financed regionally as part of intergovernmental agreements of the kind Ruekert & Mielke Inc. proposed for eastern Racine County, or should they simply be funded regionally by the entire metropolitan area through some sort of equalizing taxation, removing the bean counters from the equation?

The Racine Zoological Gardens and the Racine Area Transit System, similarly, are regional resources, Ruekert & Mielke found.

In metropolitan Milwaukee, many once-local functions are performed by Milwaukee County, but they are resources of a multi-county region. Resisting the temptation of joking about the resource the Milwaukee Brewers provide, Miller Park is unique in being funded on a multi-county regional basis. Yet it is not the only multi-county resource in southeastern Wisconsin.

In Racine, the city had something that surrounding communities very much wanted — the ability to expand capacity of the wastewater treatment plant to accommodate growth. For decades, that growth has largely occurred outside its borders, but the city could do little to benefit from it. Business leaders became aware that the city’s fiscal plight hindered growth regionally. The city withheld approval of the sewer plant expansion until it won approval of an intergovernmental revenue sharing agreement.

Other cities around Wisconsin provide the same subsidies to residents of neighboring communities as Racine, but do not have the leverage to win a revenue sharing agreement.

By whose local decision should revenue sharing be undertaken to reduce or erase these subsidies? By the cities? By the surrounding towns? Or should it be a regional decision?

2.15-2.17 Use the $45 million incentive grant program to achieve focused goals. (DePere consensus) ... Give credit to cooperating communities for past cooperation. Make the effective date for the incentive grant program the date the governor signed the budget repair bill.

Comment: The incentive grant program erodes equalization. It bases grants on estimates rather than real numbers. It penalizes communities that for geographic reasons have little opportunity for consolidation. It gives no credit for past consolidation. It fails to recognize what the private sector has long recognized: that efficiencies take time to be realized. A new manufacturing process, like a consolidation, may increase costs in the short term but save significant sums in the long term.

The consolidation incentive grant program should be delayed and integrated into a comprehensive regional strategy.

2.18 Align shared revenue policy with regional growth strategy, growth sharing and TIF creation.

Comment: We need to separate TIF policy and shared revenue, not integrate them.

ISSUE #4. A systems approach: Hard lines on paper and elsewhere cost everyone.

4.12 Municipalities should be allowed to opt out of paying taxes to counties for services not provided to the municipality. (i.e. pay once for service)

Comment: Urban residents should pay for urban services and rural residents should pay for rural services.

ISSUE #5. Barriers to efficient, quality service: Target and eliminate

5.12 Eliminate state review of boundary agreements, DOA and circuit court review. A two-thirds vote of all members of each board and ratification of the proposed consolidation in a referendum held in each municipality is sufficient.

Comment: There needs to be someone to referee incorporations and boundary changes in order to make sure growth is accomplished in harmony with statewide land-use goals. Without such a referee, rural towns and suburbs can hem in cities, as occurred in Milwaukee in the 1950s and 1960s. Regional review is a potential alternative to state review. The law should provide for extensive planning and public review before large-scale annexations are undertaken. A referendum is not sufficient to ensure that decisions are made in the public interest.

5.17 Make it easier for urban towns to incorporate and use incentives programs for growth that are provided by the state.

Comment: Locking ourselves into a 19th century governmental structure and system of delivering services isn’t something the task force should recommend. As of January 1, 2000, there were 3,017 local units of government in Wisconsin, nearly 42% of which were towns. Of the 20 states that have towns, only six have more towns than Wisconsin's 1,265.

ISSUE #6. Economic growth: Create policies to support it locally and regionally

 6.11 Allow towns to use TIFs for economic priorities that are important to them, such as the dairy, forest products and hospitality industries.

Comment: Tax Incremental Financing was created in Wisconsin in 1975 as an urban development and redevelopment program. Cheap land and TIF are mutually exclusive, or should be.

ISSUE #8. Local revenue sources: Provide options

8.1-8.4 Define services, separating property related from non-property related, expand fees, reduce property tax exemptions, etc.

Comment: We challenge the myth that there is such an animal as a property-related service. Even garbage pickup is a public-health related service.

8.5 Maintain current shared revenue program to local tax options. Independent taxing authorities (tech schools, sewer districts, convention centers, stadium authorities, etc.) should be elected officials.

Comment: Regional Planning Commissions should be included on that list. Boundaries of different regional entities should be coterminous.