State Should Encourage Local Consolidation

In Waukesha County, two communities named Pewaukee have been talking about merging for years. The City of Pewaukee and Village of Pewaukee are, as you expect, right next to each other. The city actually surrounds the village, and the village acts as a downtown for the area. The communities also share a lake that coincidentally is also called Pewaukee.

With all of that in common, it’s hard to imagine why the two Pewaukee communities haven’t merged yet. The one thing that keeps the two communities apart more than anything else is the different tax rates. The tax rate for the village of Pewaukee in 2009 was $4.36 per $1,000 of equalized property value and the tax rate in the city was $2.47.

Clearly, if the two Pewaukee communities were to merge there would be a greater efficiency in services. A proposed merged budget for 2010 showed the two communities could save $331,000 per year in operating expenses and $8.3 million in capital costs over the next fifteen years. But it’s understandable why some in the city of Pewaukee might be a bit apprehensive about watching their taxes go up so they can merge with villagers carrying pitchforks, torches, and higher taxes.

Merging the two communities does have some support. In November residents of the city of Pewaukee voted in an advisory referendum in support of the proposed merger, 64% to 36%. In February 2010, the Pewaukee Chamber of Commerce released the results of a survey showing the vast majority of its members were in support of a merger, too.

One proposal that has been languishing in the legislature is an amendment to the state constitution that would allow two merging communities to have separate tax rates for a period of twelve years. Instead of one community experiencing an immediate increase in taxes in a cooperative merger, this exception to the uniformity clause would allow for the two tax rates to gradually even out.

The proposed amendment passed the state assembly when that body was under Republican control, but Wisconsin Democratic legislators showed little interest in the amendment when they were in control of both chambers in the last legislative session. Now that Republicans are in charge, Pewaukee area state legislators State Senator Rich Zipperer and State Representative Paul Farrow are optimistic that the proposed constitutional amendment could pass.

Farrow said it was, “a worthwhile amendment to consider” while Zipperer said he couldn’t understand why the Democrats did not show an interest when they were in the majority.

Depending on how the proposed state amendment is written, the change in state law could have implications far beyond Pewaukee. The amendment could make it easier for school district mergers and municipal mergers involving towns. The gradual changing of the tax rates could even help merging communities avoid costly lawsuits.

As more communities are learning, consolidating services can be an effective way of lowering the overall cost of government. The city of Pewaukee recently learned this when they successfully eliminated their police department, opting instead to contract with the Waukesha County Sheriff’s department for police protection.

“More and more communities will realize that they need to consolidate,”Farrow said, especially if shared revenue is cut to local municipalities.

“This will be a starting point for that transition,”he said.

As for the city and Village of Pewaukee, the two communities are exploring ways to get around the state’s uniformity clause to make the merger more palatable to residents, including a proposed special street utility district. Some residents are concerned that the street utility district will not go away after the merger. If the proposed constitutional amendment were to go through, the two communities would have more of an incentive to work out a long-range plan for equal tax rates with a constitutionally required deadline.

Wisconsin has a well-deserved reputation for having too many units of government. These many layers of government only increase the inefficiencies. During the time of Governor Tommy Thompson, The Kettl Commission advised the state should be more generous with aid to those communities that collaborate regionally. It was a recognition that too many government units were duplicating services, raising costs on everyone.

The proposed constitutional amendment helps merging communities to deal with the difficulties of merging without causing an instant sticker shock to one of the communities. Instead of winners and losers in a community merger, everyone could win in the long term. Instead of angry villagers wielding torches and pitchforks, community mergers could produce even closer neighbors.

By James Wigderson
Special Guest Perspective for the MacIver Institute