Milwaukee Common Council approves additional 2% sales tax, avoiding financial crisis

The Milwaukee Common Council voted 12-3 on Tuesday to approve an additional 2% sales tax that will help the city avoid a financial crisis but that also came attached to several provisions that will limit local control. 

The revenue from the sales tax, which will go into effect on January 1, 2024, can be used to pay for the city’s unfunded pension obligations and public safety costs. The tax is projected to generate an initial annual revenue of $193 million and will bring relief to the city that has been approaching a fiscal cliff for many years.

The council, through a vote by a two-thirds majority, was given the authority to approve the sales tax under Act 12, a bipartisan state law signed last month. The Milwaukee sales tax and how it would be approved was one of the major subjects of bargaining in a deal negotiated between Gov. Tony Evers, Republican lawmakers and local leaders on local government funding and education funding.

Milwaukee faced challenges due to several factors including the increasing cost of the city’s pension system, a diminished capacity to sustain core services and an unhealthy mix of revenue, according to a Wisconsin Policy Forum report. State lawmakers approved raising the city’s sales tax rate, which falls below the rate for most large metropolitan cities in the U.S., as a mechanism for allowing the city to address the issues.

The sales tax rate in Milwaukee currently sits at 5.5%, which includes a 5% state and a 0.5% county sales tax.

Without the sales tax increase, state lawmakers and city officials estimated that the city would have been forced to make massive cuts to city services, including the loss of about $25 million in funding for its public library system and hundreds of police and fire positions, to offset the pension costs. 

Ald. Marina Dimitrijevic said residents’ concern about city services is the major reason why she voted to approve the tax. 

“There’s people behind those services,” Dimitrijevic said. “For every phone call to the fire department, every child that picks up a book in a library, those are lives that were touched in a certain way.” 

Beyond sustaining current services, Dimitrijevic said she hopes to work to explore what expanding city services would look like, whether that’s by extending library hours or responding to phone calls faster. 

Alds. Milele Coggs, Mark Chambers and Andrea Pratt voted against the sales tax, saying that the tax could negatively affect low-income residents and small businesses, that the tax should have been approved through referendum and that the provisions attached to the sales tax impede on the city’s authority.

“I wish the state was more fair with us. I wish the city negotiated a better deal. I wish information was accurately, entirely shared with council members and the public all along. I wish we had more time. I wish departments answered questions factually without efforts at persuasion,” Coggs said. “I wish we had a clean bill that financially helped this city without overreaching, micromanaging and being racist.”

Coggs added that the city should “stop accepting peanuts from the state.” 

Conditions attached to the state shared revenue law that permitted the council to raise the sales tax include a prohibition on using money from levying taxes to develop, operate or maintain its streetcar, a ban on using tax revenue on diversity, equity and inclusion positions, a requirement that the city maintain the level of law enforcement and fire department staffing at least at the current level and that Milwaukee Public Schools reinstate school resource officers.

Common Council President José G. Pérez announced the day that Gov. Tony Evers signed the shared revenue bill into law that the city would begin efforts to combat those provisions. The actions include taking up legislation separate from the sales tax that would double funding for the city’s Office of Equity and Inclusion and Office of African American Affairs, directing local agencies to apply for a federal grant to extend the streetcar and setting aside money for litigation to fight provisions that “overstep our home rule.”

Ald. Robert Bauman said that the steps the city will take to combat the local control provisions and prospects for future change in state government helped him decide to vote in favor of the tax. 

“We’re going to instruct our lobbyists to work very diligently to reverse these measures to the greatest extent possible,” Bauman said. “Hopefully when there’s a new map drawn for the legislative districts of Wisconsin, we might get a more favorable Legislature that will recognize the true worth and value that the city of Milwaukee represents for the state.”

Milwaukee Mayor Cavalier Johnson, who was integral in negotiating the deal with the state Legislature, celebrated the approval on Tuesday, saying that he would sign the legislation in coming days. 

“In taking this action, the Council has protected Milwaukee and its residents from unimaginable cuts to library and public safety services,” Johnson said in a statement. “We have reached a turning point in the history of Milwaukee’s municipal finances. This is certainly the most significant change in how city services are funded in more than a century.” 

The Milwaukee County Board is in the process of considering an additional 0.4% sales tax, negotiated at the same time as the Milwaukee sales tax, that is meant to help with its pension and public safety costs.