Talks begin on possible $1 billion package for Milwaukee capital projects
1/16/2019

Milwaukee's next big public funding debate is here.

Talks surrounding a possible $1 billion financing package that could go toward a number of Milwaukee area capital projects -- the Milwaukee Public Museum, Mitchell Park Domes, Milwaukee County Safety Building and Milwaukee County Parks -- have begun in earnest.

The funding needed for these large projects, said Theodore Lipscomb, chairman of the Milwaukee County Board, amount to “easily a half billion dollars, maybe a billion when you add it all up.”

Also under consideration as part of a larger deal is funding for the downtown convention center, the Wisconsin Center, which is currently seeking funding to build its long-planned third and final phase. That has an estimated price tag between $240 million and $270 million, said Marty Brooks, president and CEO of the Wisconsin Center District.

While these talks are in the early stages and many options are up for debate, multiple sources have confirmed to WisBusiness.com that a potential deal to fund these large capital projects would likely be generated from revenue from a local sales tax increase that would ultimately require approval through a referendum.

In the state of Wisconsin, local governments are not able to raise their sales taxes without enabling legislation passed at the state level, meaning the state Legislature would have to take action to allow for a local referendum to be held. It is generally assumed that the Republican-controlled Legislature would not directly approve a sales tax increase.

Joel Brennan, new secretary of the Department of Administration under Gov. Tony Evers and former president and CEO of Discovery World, said it would be more likely that this effort would be “part of standalone (legislation)” than be included in the state budget.

Brennan noted that many of these conversations around funding large capital projects in Milwaukee County have been going on for many years, particularly in the Cultural and Capital Needs Task Force first organized by the Metropolitan Milwaukee Association of Commerce in 2013 in the years preceding a deal to fund the construction of a new arena for the Milwaukee Bucks.

“In the early days, those (needs) were tied together,” said Brennan. “Then the arena became a standalone entity. The convention center and other cultural facilities are still priorities in the community. The continuation of that conversation is appropriate and necessary.”

“The current effort is just an extension of that (task force),” said Steve Baas, senior vice president of governmental affairs at MMAC. “Few of these needs have gone away. We have obviously found a way to fund a new arena here in town and that was a priority in terms of keeping us a first-class city in terms of major league sports, but there are other needs that still remain.”

Of these needs, the Milwaukee Public Museum is looking for a new home that could cost more than $100 million, the options to repair or replace the Mitchell Park Domes range from $14 million to $64 million, the backlog at the County Parks was deemed “seemingly insurmountable” by the Wisconsin Policy Forum, the deferred maintenance costs of which Lipscomb said could amount to “a couple hundred million.” Additionally, the cost of replacing the criminal courthouse was estimated between $341 million and $367 million.

In addition to addressing needs for these large capital projects, Milwaukee area leaders are broadly discussing ways to re-examine “how the state funds local government,” said Chris Abele, Milwaukee County executive.

The “Fair Deal for Milwaukee County” workgroup, co-chaired by Lipscomb and Abele -- notably working together despite having a history as political adversaries -- has held several meetings. The group is examining ways to not only pay for these large capital projects but address ongoing problems with funding the county’s operating budget (more than 60 percent of which goes toward state-mandated services) and addressing its structural deficit. Abele also expressed interest in lowering property taxes.

Lipscomb said there are two pieces of the “fair deal,” the first being the large capital projects, the second being the operating budget and structural deficit.

“If you look at the operating budget, we can’t keep up with the cost to continue,” he said. “The inflationary costs of our general operations outpaces our revenue growth each year. That’s the second problem. They’re interrelated, in that the one crowds out the other. And that’s the negative feedback loop we’ve been in for too long.”

Abele echoed much the same sentiment.

“I can’t imagine what’s resulted was anyone's intent at the time, but what’s happened is most local governments around the state have a version of what we have at the county where the amount of money that Milwaukee County sends to the state -- in our case that’s through sales tax, income tax and excise tax -- has increased over the last 10 to 12 years by close to half a billion dollars per year,” he said. “Milwaukee is sending about $500 million more to the state than we were 10 years ago. And what we get back is, broad picture, flat, and, in some cases, even less.”

Abele also noted that the county has made “a quarter of a billion dollars in cumulative cuts” during his eight years as county executive.


"State Sen. Scott Fitzgerald, the senate majority leader and a member of the Wisconsin Center District board, acknowledged some of the needs for these projects, but expressed some skepticism about their path forward.

“The worry I have from my perspective is any time you spread something across a number of different needs like that, it’s always more difficult to get something moving and create momentum because it’s just too abstract,” he said.

On a potential sales tax increase by way of referendum, Fitzgerald said it would be crucial that these efforts have support from both parties.

“We need some kind of truly bipartisan effort to get something like that done,” he said. “And that’s not easy. It’s not easy in this environment, it’s not easy in any political environment to say you need some type of bipartisan effort. It’s still going to come down to the cost and ultimately what’s projected to be the end cost on a project like that."

The funding formula challenge in Milwaukee County is nothing new. The Wisconsin Policy Forum (previously called the Public Policy Forum) has exhaustively identified many of these over the years. Part of what led to the “Fair Deal” workgroup, created by County Board resolution and signed in October 2018 by Abele, was a recognition of this problem reaching a crucial juncture.

“If we’re not already in crisis, we’re clearly headed for crisis,” said Lipscomb. “That’s been the nature of much of our disagreements in recent years. Under the current formulas, it’s essentially been all about cuts. We just can’t continue to cut. That’s where the recognition has come in and why we’re on the same page here, that we’ve got to change the dynamic.”

Abele and Lipscomb each said this issue of a broken funding formula for local government is not limited to Milwaukee County.

“When I talk to other county officials all over the state on the Wisconsin Counties Association board, no matter their size or their budget, they all have these same challenges,” said Lipscomb. “The decimal point might be different, but they all have the same issue of not being able to raise the revenue they need to pay for services their constituents demand. There’s a commonality there. This is not a Milwaukee-only issue.”

“This is not a Republican or Democratic issue,” added Abele. “Everybody in the state has a stake in fixing this. If you look at the charts, you don’t need to be an economist to know this can’t last; it’s not sustainable. Something’s gotta give.”

Abele acknowledges, however, that “fixing the way the state funds local government is probably going to take a little longer.” The short-term issue of potentially raising the sales tax for more specifically defined needs is what is more likely to come first.

So, the next steps of this process are such: Step one: have a local conversation to determine what the priorities are and, as Baas puts it, “reach a community consensus.” The Fair Deal workgroup, which has its final meeting Jan. 17, is a big part of that. Step two would be to ask the state for enabling legislation to allow for a local referendum to be held. That could be months away from taking shape.

Brennan said it will be important for state leaders to be responsive on this matter, as it’s being “articulated from the ground up.”

“What the governor has said he’s going to do is be responsive to 72 counties, be responsive to the various stakeholders who are interested in making the right investments in Wisconsin, and this is coming from the ground up in Milwaukee,” said Brennan. “The Legislature and governor would be reacting to what the local community has come up with. And that’s our job. And there may be discussion about this that might broaden it beyond Milwaukee. There are other parts of the state that would probably want to look at the same issue.”




-- Dan Shafer, for WisBusiness.com




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