Marketplace Magazine Blog - Idea of the Day

As someone who has advocated that the town and city of Ripon at least sit down to discuss the pros and cons of a merger, this op-ed piece has a timely significance:

The Milwaukee Journal Sentinel looks favorably on a way to promote mergers of cities or villages and surrounding towns, in a discussion about two neighboring municipalities in Waukesha County.

(I point that out because, when you read the editorial, you need to know that the City of Pewaukee and Village of Pewaukee are not the same municipality. The City of Pewaukee is what used to be the Town of Pewaukee, within which historic boundaries can be found the Village of Pewaukee. I’ve done a little creative editing within the brackets to explain how it would apply elsewhere in the state.)

Normally, with a tax rate that is significantly lower, [town] residents could expect to see increases to equalize their tax bills with those of village [or city] residents. But the consultants argue that that by creating a special taxing district for village [or city] residents, such fluctuations could be avoided while achieving lower property taxes for everyone. Village [or city] residents would see their taxes go down, too, because the merged community would need about $2 million a year less to operate, the consultants said.

Noting that state law prohibits having two different tax rates in one municipality for municipal services, the consultants recommend seeking relief from the Legislature, which they call “the best and most straightforward option.” …

A merger of the communities makes sense from financial and municipal services perspectives. Such a merger could well result in savings and more efficient services. We also think it makes sense from a community perspective.

The state Constitution’s “uniformity clause” prohibits different property mil rates within the same community (unless the community is in more than one county). One hurdle to merging cities and their adjacent towns is that town residents usually pay lower property taxes than their city neighbors, and obviously town residents would frown on any merger proposal that would raise their property taxes.

The Pewaukees’ consultants recommend creating a special taxing district to reduce the overall property tax bill of the combined community. According to the Journal Sentinel, using a more generic example, if Town A and City A want to merge, city residents would pay taxes into the fund, which then would be used to reduce property taxes.

City residents would benefit because the merged city and town would operate less expensively than the separate city and town would. Town residents would benefit because the fund would be used to offset higher property taxes. Using the Pewaukee financials, property owners in the former City A would see their municipal mil rate drop from $4.25 per $1,000 assessed valuation to $3.97 per $1,000, while property owners in the former Town A would see their municipal mil rate decrease from $2.60 per $1,000 to $2.39 per $1,000.

As has been argued here before, 3,120 units of government is far too many in Wisconsin. But there is little incentive and much disincentive, including in our statutes, that prevents municipalities, such as cities and the towns that surround them, school districts, or other bodies of government that otherwise would operate more efficiently, from merging government bodies.

Such mergers are in the best interests of municipalities that want to be able to control their own destiny, instead of having their destiny decided for them by population, development or environmental pressures around them. As town chairs can tell you, cities and villages can grow into what now are towns, and the reverse is not the case. That is how state government set up towns in this and virtually every other state. City and village governments have much more authority than town governments; in fact, cities have zoning authority beyond their boundaries, thanks to the state’s extraterritorial zoning law.

Why, you might ask, is this the business of anyone other than a particular municipality mulling over a merger proposal? It is, in fact, the business of all of us taxpayers because Wisconsin is quite skilled at redistributing tax dollars all over the state. (That’s one way that state government is a lot like the federal government; whether that’s good or not is up to the reader to decide.) That shared revenue is one reason why our taxes are out of control, because there is little incentive to not spend money that you didn’t generate. But as long as we have this system, we taxpayers should have more authority on how and where tax dollars are spent. That includes how many units of government we taxpayers get to support.