PUBLIC POLICY FORUM
While citizens have varying views and expectations regarding the role and responsibilities of local governments, most would agree that providing, maintaining, and updating public infrastructure is a fundamental governmental responsibility. On the local level, that responsibility extends from streets and buses, to sewer and water systems, to fire and police equipment, to parks and cultural facilities, to public buildings that citizens use to access government services.
Unfortunately, budgetary pressures and expanding needs have called into question the ability of many local governments to appropriately fulfill this critical part of their mission. In a May 2016 report, the National League of Cities asserted that “declining funding, increasing mandates, and misaligned priorities at the federal and state levels have placed responsibility squarely on local governments to maintain roads, upgrade water and wastewater systems, and accommodate growing transit ridership.”1 Yet, according to the report, the ability of many local governments to meet their growing infrastructure obligations is restricted by statutory limitations on the amounts of local tax revenues they can raise.
To what extent have local governments in Greater Milwaukee effectively addressed their infrastructure needs and challenges? The answer to that question likely will differ among individual governments and among different types of infrastructure.
In Pulling Back the Curtain, a December 2013 report on the condition of Milwaukee County’s cultural and recreational facilities, the Public Policy Forum examined one small subset of local government capital assets in our region. We identified a daunting set of infrastructure needs, as well as a potential funding “gap” of more than $140 million over a five-year period to address those needs.
We are now expanding our research to assess infrastructure challenges for the full range of capital assets owned by the three largest local governments in Milwaukee County. We plan a series of reports that will detail the condition and needs of major capital assets owned not only by Milwaukee County government, but also by the City of Milwaukee (including the Milwaukee Water Works) and the Milwaukee Metropolitan Sewerage District. In our final report, we will provide policy options and recommendations to address perceived challenges.
In this, the first in our report series, we focus on transportation infrastructure owned by the County and City. In examining city streets and bridges, county trunk highways and bridges, and Milwaukee County-owned buses, we focus on the following research questions:
- How do the two governments identify and assess their transportation infrastructure needs, and what is the general condition of that infrastructure?
- How are transportation capital projects financed and what are the funding trends over the past several years?
- How much would it cost to fully fund identified repairs and improvements over the next several years, and what is the capacity of each government to cover future costs while complying with capital budgeting and debt management pressures and policies?
The overall intent of this report – and our full series – is to catalogue and describe the infrastructure challenges of the major local governments in our region and to assess the resulting financial implications. We hope this research will be used as a tool for policymakers and civic leaders as they consider local government spending priorities and the larger revenue structure that is used to support local governments in Wisconsin.
Financial Capacity to Address Transportation Infrastructure Needs
In this section, we analyze how the City of Milwaukee and Milwaukee County have been financing capital repairs and improvements to their transportation infrastructure and what that tells us about their ability to address their future needs. First, we provide context by briefly considering the specific fiscal environment for each government in terms of current debt loads and competing capital needs. Then, we review capital spending over the past several years and multi-year capital plans. The box below summarizes our findings.
Capital Finance Environment
As noted earlier in this report, the City of Milwaukee’s ability to finance its transportation infrastructure needs is impacted by a debt service limit prescribed by State law and by a need to control the amount of property tax levy that is dedicated annually to debt service payments. The debt service limit does not pose a significant obstacle to future borrowing for transportation needs given that the City’s current outstanding debt has reached only about 50% of the limit. The need to control levy-supported debt to preserve sufficient tax levy resources for City operations poses a much bigger problem, however.
Per its 2016 budget, the City will use $61.2 million (24%) of its $256.7 million property tax levy for debt service payments. To prevent debt service from eating up an even bigger share of the overall levy, the City has established a goal of limiting the issuance of new levy-supported debt in a given year to the amount of levy-supported debt retired in that year.
Chart 10 shows how the City has fared in meeting that goal in recent years – and how it is expected to fare through 2020 – per the debt report referenced earlier that was issued by the City Comptroller in August 2016. It is important to note that this chart includes debt issued for TIDs, which contributed substantially to the sharp increase in debt issued in 2015 and 2016, but which is not reflected in the City’s policy goal. Still, the 2018-2020 figures, while only estimates, indicate that the City likely would need to reduce projected tax-levy supported borrowing for its overall capital program in those years in order to meet its policy goal. Also, it should be noted that the City’s ability to meet its goal in 2011-12 likely was attributed to the receipt of federal stimulus funds.
The need to limit levy-supported debt heightens the competition that transportation infrastructure needs will face from other areas of City government. That competition includes the need for major repairs to the foundation of City Hall, which is estimated to require $42 million of locally-generated capital funds from 2017-2020 per the City’s multi-year capital plan; remodeling of the Police Administration building, which is estimated to require $20 million; and new Fire Department equipment, which is estimated to require $10 million.
Overall, the multi-year plan indicates relatively flat local funding for capital projects over the 2017- 2020 timeframe. It is possible that scenario would allow transportation infrastructure projects to command the levels of G.O. bonding to which DPW has become accustomed in previous years. However, whether that will be enough to meet the high level of need of streets and bridges is questionable and will be discussed in the pages that follow.
About the Public Policy Forum
The Milwaukee-based Public Policy Forum, established in 1913 as a local government watchdog, is a nonpartisan, nonprofit organization dedicated to enhancing the effectiveness of government and the development of Southeastern Wisconsin through objective research of regional public policy issues.