Report: Milwaukee only city of its size limited to property taxes as sole local tax

The City of Milwaukee is more unique than we knew.

It is the only city its size limited to using property taxes as the sole form of local taxation, a new report has found. The report also suggests the current revenue structure Milwaukee is required to operate under is ineffective and outdated.

"Milwaukee is in this unique situation because the handcuffs are so tight," Mayor Tom Barrett said in an interview with the Milwaukee Journal Sentinel.

The report — "On The Money?" — will be released Sunday by the nonprofit Public Policy Forum.

Following an analysis of 39 similar-size cities, the forum found Wisconsin is the only state in the Midwest that limits municipalities to the property tax as the sole form of local taxation. And it's the only state whose largest city has the same tax structure as all other municipalities. 

"We certainly had a strong sense that Milwaukee was somewhat unique in terms of its substantial reliance on the property tax and on state aids," said Rob Henken, the forum's president. "But even we were not aware until we dove into every single city with a population between 300,000 and a million that we were the only one whose sole major source of local taxation is the property tax."

The analysis also found that each of the cities studied in the report except Milwaukee has multiple taxes, and most have general or selective sales taxes, such as taxes on entertainment or food and liquor. Other findings include that state aid is typically a minor source of revenue for most of those cities, and cities with larger populations tend to draw more heavily on the sales tax and less on the property tax. 

"We are not unique in terms of state government wanting to place significant restrictions on the ability of local governments to use various revenue tools," Henken said. "But what stood out is the extent to which we are different in terms of not allowing flexibility to our state's largest city."

He added that larger cities like Milwaukee tend to have a much broader base of individuals using city services, including commuters and visitors who use city infrastructure and services every day.

"Is it now time to look at giving greater flexibility to municipal governments — and in particular to specifically the City of Milwaukee — which is by far the most dependent on state aid," Henken said.

The report was commissioned by the Greater Milwaukee Committee as part of its MKE United effort.

Julia Taylor, president of the Greater Milwaukee Committee, said what "the report really brought out for us was the lack of tools that the city has in its tool kit to be able to spur neighborhood development and invest in the neighborhoods in the way that other communities can."

She said this latest Public Policy Forum report, combined with its September 2016 "Making Ends Meet" analysis, showed that "the city has actually managed its finances fairly well given the constraints that it has."

"Other cities are able to basically benefit from their own growth patterns through different types of local usage taxes and lower property taxes," Taylor said.

She added that she hopes the report will bring change for Wisconsin's largest city.

"I think long term certainly we hope that it will spur a policy change," Taylor said. "I think for the short term that it will spur some ongoing discussion with different representatives from the business community, the state, the city and the county, in terms of what would a fair revenue structure look like that would work for all the parties involved."

Barrett said the report is especially timely because the state budget is not yet complete.

"We have been talking to the state about, 'Look, if you're not going to increase our shared revenue, we have this problem going forward that this current revenue menu is not sustainable,' " Barrett said. "We've been making that case, and I frankly feel that this is strong outside validation that we're correct in what we're saying."

The mayor said city officials have been having conversations with state lawmakers about the need for more revenue, specifically focused on meeting the city's public safety needs.

"This may be exactly what we need to get them to take a look at this," Barrett said of the report. "I think Milwaukee has a compelling case as to why we need to have a change in our relationship with the state government, and I think that this is an opportunity for us to act on it in a positive way where everybody benefits."