Public Policy Forum
Governor Vetoes Tax Freeze and Fee
Provisions - WRA Seeks Veto Override Votes
by Michael Theo
Governor Jim Doyle has elected to veto two key RealtorŪ-backed
provisions from the state budget. The first, and perhaps the most
significant veto of the entire budget, was Doyle's removal of the
property tax levy freeze. The second key veto was a provision that
would have prevented local governments from charging unreasonable fees
for services. In response, the WRA is asking the legislature to
override these vetoes.
Wisconsin Needs a Property Tax Freeze
The property tax freeze budget provision would have frozen for
three years all county, municipal, vocational school and K-12 school
tax levies at their current levels. If the value of a home increases,
the property tax rate would have to be lowered accordingly so the
homeowner pays the same amount in taxes each year. Communities would
be allowed to apply this frozen tax levy to new construction so local
tax revenues would still increase with new real estate development.
This "growth incentive" was designed to keep real estate markets
strong, promote economic development and generate additional tax
revenues to erase state and local budget deficits and was estimated to
generate an average of 2.6 percent increase in local property tax
revenues each year - which is above the estimated rate of inflation.
Communities were also free to exceed the freeze if voters approved a
referendum to do so.
The WRA was and remains, a strong supporter of the freeze. Without
the freeze, property taxes are estimated to increase over nine percent
annually for the next several years. The majority of this increase
would result from the governor's proposal to move state school aid
from two-thirds to 62 percent of costs. The effect of this change,
which was necessary to balance the state budget, would be a $400
million shift from the state to local property taxes. Without the
freeze, clearly this budget cannot be called a "no tax increase"
budget.
The freeze was also intended to insure that local governments kept
their promise to Governor Doyle that they would not raise property
taxes to make up for loss in state shared revenue and school aids.
Unfortunately, the vehement opposition to the freeze from local
government and school officials is likely signal that they plan on
breaking that promise.
This makes the freeze all the more necessary and thus the WRA will
help direct a statewide effort to encourage the Legislature to
override the governor's veto, calling on legislators from both parties
to restore the freeze.
Regardless of the outcome of that vote, we will call on local
government and school officials across the state to protect Wisconsin
families by resisting property tax increases and demonstrating
spending restraint during these challenging budgetary times. We
believe voters and homeowners will pay close attention to local
budgets and their property taxes, with or without the freeze.
Second Veto Could Increase Locally-charged Fees
The governor's second veto could have a significant impact on
housing affordability and economic development as well. This provision
would have prohibited communities from imposing unreasonable fees on
property owners, developers, and other members of the public for
government services. Without this provision, it will be more difficult
to keep fees for building permits, plat reviews, erosion control and
stormwater management permits, zoning changes, and numerous other
permits, from being used as new revenue sources for local governments
- which is a growing concern in light of cuts in state aid and
stagnant tax revenues.
Legislators shared this concern and addressed it by codifying in
state statutes the current legal standard which requires fees not
exceed the cost of providing the service. The courts have held that if
a fee exceeds the actual cost of providing the service, it is a local
"tax" and must be specifically authorized by the legislature. Although
this is the law, many local communities have continued to ignore it,
thus making the statutory change necessary.
The provision vetoed by the governor would also have codified case
law requiring municipalities to issue written findings demonstrating
how their fees were calculated to demonstrate they are consistent with
the law. Given the fact that one in five locally elected officials are
new each year, the Legislature felt it was important to place these
legal standards in the statutes.
If the governor's veto is allowed to stand, it will be more
difficult to prevent communities form imposing illegal taxes in the
form of unreasonable fees. Because such fees increase housing costs
and hurt economic development efforts, the WRA will encourage the
Legislature to override this unfortunate veto.
It takes two-thirds of both the Senate and Assembly to override a
gubernatorial veto.
For more information, contact Michael
Theo or Tom Larson.
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Honadel Upsets Foeckler in 21st Assembly
District
by Joe Murray
In a special election to fill the vacant state Assembly district in
South Milwaukee and Oak Creek, Republican Mark Honadel defeated
Democrat Al Frockler in a hotly contested race.
Honadel received 6,624 votes (61 percent) to Foeckler's 4,216 votes
(39 percent). Honadel had the support of the Greater Milwaukee
Association of REALTORSŪ and the Wisconsin REALTORSŪ Association.
Making this special election truly special, however, was a set of
circumstances surrounding the state budget and the fight between
Democratic Governor Jim Doyle and Republicans who control both houses
of the Legislature.
Birth of the "Freeze"
When Jim Doyle introduced his "no tax increase" budget in February,
Senate and Assembly Republicans claimed Doyle's budget would mean big
property tax increases because the governor's budget cut school aids
and shared revenues to local governments. Republicans were critical of
Doyle's budget because as a candidate, Doyle promised no new taxes,
including property taxes.
So Republicans unveiled their own plan: the property tax "freeze".
Assembly Speaker John Gard (R-Peshtigo) said the levy freeze would
ensure Doyle would keep his no tax increase promise to voters by
eliminating the potential for big property tax increases in December.
Special Election Called
At the same time the governor and Republican Legislators were
dueling over the property tax freeze, a special election was called in
the 21st Assembly District to elect a successor to Jeff Plale, the
former Democratic state representative who won a special election in
April to fill an open state Senate seat.
And the demographics and voting habits of the South Milwaukee and
Oak Creek district couldn't have set-up a more interesting political
scenario. The 21st district is urban, 50 percent Democrat and 50
percent Republican, with a strong influence from older voters who tend
to vote in disproportionally higher numbers. If the freeze didn't sell
in this district, it might not sell anywhere in Wisconsin.
This offered the perfect opportunity to test the political potency
of the freeze proposal. If the freeze could help deliver a "swing"
seat for Republicans in southern Milwaukee County - a seat last held
by the GOP in 1928 - Republicans would have a valuable and tested
issue for legislative elections in 2004.
Assembly Republicans quickly moved to turn the election into a
referendum on the levy freeze. Mark Honadel supported the freeze, Al
Foeckler opposed it. While other issues were discussed during the
race, the freeze was the focus of the campaign from day one. And it
won big.
Interest Groups Were Interested
In addition to the two candidates, outside special interests were
heavily involved in the 21st district. Business interests and trade
associations, including the REALTORSŪ, lined-up with Republican
Honadel while public employee unions, especially WEAC (the teacher's
union), lined-up with Democrat Foeckler. Voters had a clear choice
between those who supported the freeze and those who opposed it.
Honadel supporters included Wisconsin Manufacturers and Commerce (WMC),
the Wisconsin REALTORSŪ Association and the Greater Milwaukee
Association of REALTORSŪ, the Wisconsin Builders Association, the
Wisconsin Farm Bureau Federation, and the Wisconsin Bankers
Association.
Foeckler boasted support from the American Federation of State,
County and Municipal Employees (AFSME), the Wisconsin State AFL-CIO,
the Wisconsin Education Association Council (WEAC), and the Milwaukee
Deputy Sheriffs Association.
Next Year's Elections
With a huge win in the 21st district for Honadel and the
Republicans, the freeze will surly be a primary issue in next years
elections. The question for political experts is if the freeze will
remain as potent tomorrow as it is today? Assembly Speaker John Gard
and Senate Majority Leader Mary Panzer have promised to schedule a
specific vote to override the governor's veto this year and also pass
another freeze again next year. Their strategy is clear: make the
property tax issue dominant in 2004.
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