Milwaukee could again face a budget gap in 2025. One solution? Merging city, county services

 

MILWAUKEE (CBS 58) -- Despite implementing a new sales tax next year, both an outside report and the city's own budget office project Milwaukee could once again find itself needing to fill a budget gap by 2025.

The new municipal sales tax, which became possible this spring via a new state law, is projected to bring Milwaukee about $180 million next year. That, along with about a $22 million boost in state shared revenue, which had remained flat for about 20 years, will keep the city from facing cuts or fee increases next year.

However, a report from the nonpartisan Wisconsin Policy Forum finds Milwaukee could need to make up $35-45 million in 2025. The gap is largely caused by the end of federal pandemic aid.

"It does appear that the very, very positive impacts of the [shared revenue] legislation are more short-lived than we had originally anticipated," Wisconsin Policy Forum President Rob Henken said.

In addition to losing funding from the American Rescue Plan Act (ARPA), the shared revenue law also forces Milwaukee to eventually close down its pension system and fold city workers into the state retirement system, which is much better funded.

Along the way, though, the city is also required to lower its estimated earnings assumption for the retirement fund.

"As a result of doing that, believe it or not, that adds about $40 million of taxpayer obligation," Henken said. "In terms of the annual contribution."

Milwaukee Budget Director Nik Kovac acknowledged Wednesday at City Hall there'd likely be a budget gap to close in 2025. However, Kovac said he was optimistic that deficit would be more manageable than the approximately $40 million forum projection, let alone the $180 million gap the city was facing without having its own sales tax.

Kovac's reason for relative optimism was much of the city's ARPA spending next year will be on one-time uses, so those expenditures won't be part of the 2025 budget.

Both Kovac and Henken said finding efficiencies would be the preferred way of balancing the 2025 budget. The alternatives would be increasing fees or cutting services.

Merging city, county services

Henken said the policy forum was in the midst of conducting a study on parts of Milwaukee and Milwaukee County government that could potentially be merged. He said both the city and county commissioned the study.

The focus of the eventual report will be 'back office' functions that could be merged with little risk of public outcry. 

"These are services like human resources, and information technology," Henken said. "Fleet maintenance and facilities maintenance."

The catch with such mergers is they also don't save a ton of money. Henken said the bigger savings are in public safety, whether its police, fire or emergency dispatch. However, that would require suburban governments partnering with Milwaukee, and historically, there hasn't been any appetite for that.

"It's important to understand it takes two to tango when it comes to consolidating government services," he said.

So, the focus is on city-county mergers. Kovac said he was most optimistic combining public works duties could yield significant savings without affecting quality of service.

"I do think on the fleet side there's real promise, especially when you look at snowplowing," Kovac said. "There's so many county parks, county roads, city streets that intersect."

Another benefit of city-county consolidation is it could lead to the governments selling property they no longer need. One prime example is the city's central repair garage, which sits along W. Canal St. between Potawatomi Casino and American Family Field.

The city also operates a mixed recycling facility in the Menomonee Valley that also serves most of Waukesha County. That facility is currently down for repairs after a fire in May.

"The value of that land in the Menomonee Valley certainly should fetch a pretty good asking price if the city can figure out a way to move those operations," Henken said.

Kovac said the city was exploring the idea of moving some of its facilities out of the Menomonee Valley, but added there'd need to be additional studies.

"You've gotta look at who's coming from where, total roundtrips, gas on all the vehicles, efficiency," he said. "All of that will get factored in, so it's not something we're gonna do overnight or in a week or two."

A suburban blueprint?

Perhaps the most successful merger in the metro Milwaukee area was the creation of the North Shore Fire Department, combining seven suburban departments. A 2015 study found that, adjusted for inflation, the merger was saving the communities more than $1 million per year. 

Glendale Mayor Bryan Kennedy said Wednesday he was still hoping to pursue a similar merger of the communities' police departments. Glendale even commissioned a study on the idea in 2021. However, the other North Shore communities have given the idea the cold shoulder, demonstrating the delicate nature of consolidating services.