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Milwaukee County approves 0.4% sales tax increase to avert fiscal cliff

Wisconsin Examiner photo by Isiah Holmes.

First published by Wisconsin Examiner.

The Milwaukee County Board of Supervisors approved a 0.4% sales tax increase on Thursday as part of a bipartisan plan to help avoid a looming financial crisis that could have led to drastic cuts in county services. 

Local Milwaukee leaders were given the ability to enact the tax under 2023 Wisconsin Act 12, a law passed by the Republican-led state Legislature and signed by Gov. Tony Evers that increased local government funding across Wisconsin. The Milwaukee city approved an additional 2% sales tax within city boundaries, which was negotiated alongside the county tax, earlier this month. 

“We can either go into financial crisis and deny ourselves local dollars that provide critical services our constituents rely on or we can take advantage of a once in a generation opportunity to invest in our communities,” Chair Marcelia Nicholson said. “Failure is simply not an option.” 

The sales tax was called by County Executive David Crowley the “only solution” to address the county’s looming fiscal cliff, which had been exacerbated by the county’s increasing pension costs and limited ways of raising funds.

The board voted 15-3 with Supvs. Ryan Clancy, Steve Taylor and Sequanna Taylor voting against the resolution. Under the bipartisan state law passed earlier this year, two-thirds of the board — or 12 members — needed to vote in favor to pass the tax.

The decisions by the two local bodies will bring the sales tax rate to 7.9% in the city of Milwaukee and 5.9% in the rest of the county on Jan. 1, 2024. The current sales tax rate throughout the county is 5.5.%, which includes the 5% state sales tax and a 0.5% county sales tax. 

The additional 0.4% tax is projected to generate $82.1 million in annual revenue that will be used to pay for pension and public safety costs. It is estimated that 30% of the revenue will come from people outside the county. 

Without the sales tax, the county was projected to face a $109 million deficit by the year 2028, which could have forced the county to cut services by about 40% and eliminate roughly a quarter of its workforce — about 1,000 positions. Potential cuts would affect the county’s mental health and substance abuse services, housing services, senior services, transit and public parks. 

Alongside the tax increase, supervisors approved language to enroll new hires in the Wisconsin Retirement System (WRS) after December 31, 2024, and close the Employees’ Retirement System of the County of Milwaukee (ERS) to new hires. 

“We are reforming the pension today. That’s what we’re doing and that’s like such a huge part of what people are upset with us about,” Supv. Liz Sumner said. “We are taking steps to make sure we put the county in a place where the pension isn’t going to be a burden on us forever.” 

The sales tax is estimated to result in a net tax levy savings of $44.1 million, money that can then be made available for funding other purposes.

Supv. Ryan Clancy, who also voted against Wisconsin Act 12 in his role as a member of the state Assembly, urged the board to delay voting on the sales tax. He expressed concerns about the tax negatively affecting low-income residents and wanted the board to take more time to come up with a plan for how to spend money that would be freed up.

“What I’m asking for here is to step back to put together an actual plan to save transit, rather than just a vague notion, and to delay this item in front of us for a few months so that we can get there,” Clancy said. 

On Wednesday, Clancy and Supv. Juan Miguel Martinez, proposed delaying the vote on the sales tax and outlined a plan that would have allocated the initial funds generated by the proposed sales tax increase to make bus fares free for the county’s poorest residents. 

Clancy said on Thursday that by “subsidizing transit in a real way for those poorest residents, we can undo the harm of this.” 

Supervisors rejected his motion 17-1. “We cannot afford to wait. We can’t gamble the transit system, health programs, programs for our seniors, parks and housing programs. The stakes are too big to gamble and potentially lose,” Supv. Caroline Gómez-Tom said. 

Miguel Martinez, who had been supportive of Clancy on Wednesday, changed his position Thursday, saying he would be voting for the sales tax and that he would work to make sure the funds go towards helping constituents.

“For me, it is my intention for my constituents to see the positivity of their investments because that’s what it is, it’s an investment for my constituents into their district,” Miguel Martinez said. “I intend to harangue and badger all through the next term, all through whenever I’m serving as a supervisor to make sure that that money is going to go for what we need.” 

County Executive David Crowley, who along with other local leaders lobbied state legislators to let local government raise the sales tax, celebrated the board’s decision Thursday afternoon, saying in a statement that the Board had “shaped the future of Milwaukee County for years to come by avoiding a devastating fiscal cliff that posed to threaten irreparable harm to our community.” 

“After years of advocacy, Milwaukee County finally has the additional revenue needed to avert financial disaster,” Crowley continued. “Milwaukee County is now on a path to preserve critical services, invest in improving quality of life for all county residents, and accomplishing our vision of a healthier, safer Milwaukee County for all.” 

Crowley is expected to sign the sales tax resolution in the coming days.