Waukesha County, and its governmental body, has long avoided something all but three Wisconsin counties have approved: a sales tax.
But a budget crunch has opened the possibility that the county may step away from its nearly exclusive status in that regard, or else enact other revenue-boosting measures to maintain services that no one wants to lose. That doesn’t mean everyone wants a sales tax, however.
The County Board is expected to begin considering its options as early as late August as part of the annual budget process that includes five-year projections. Since spring, county officials have sought the help of a 35-member task force, consisting of government and organizational officials of different stripes, to help them consider those options.
To be clear, for the moment, the board has not adopted a sales tax. But the future beyond 2025 is another question.
“I think it’ll be sooner rather than later,” Waukesha County Executive Paul Farrow said in a phone interview in mid-August. “I think within the next calendar year, it’s going to have to be decided. Right now, our goal is to work with the county supervisors, inform them about what we’re looking at doing and get their feedback, and then talk to community people to get their feedback.”
Why the county is concerned about budget revenue
Farrow doesn’t hedge when he discusses why the county has taken an interest in a sales tax decades after other counties started collecting such taxes from cash registers. In short, it’s part of a reality that began four years before he became county executive in 2015.
At that time, the Wisconsin State Legislature changed the property tax levy formula limits, eliminating the 2% ceiling that local municipalities could draw from taxpayers in places where new construction couldn’t justify a larger levy increase. Municipalities could no longer raise their levies without new construction.
“Back in 2011, it was kind of the straw that set this all in motion,” Farrow said.
For instance, the county’s property valuation currently stands at about $86 billion. To be able to levy an additional $1 million from property taxpayers, the county would need to add $1 billion in new property value annually. Over the cost of a decade, that revenue reality drove county officials, already conservative, to watch Waukesha County’s budget even more closely as levy hikes were limited to an average of 1.4%, Farrow said.
Then COVID-19 hit. Inflation followed, hitting the county’s coffers, as well. The budget crunch didn’t end with the pandemic.
For the current 2025 budget cycle, Farrow said that for the county to maintain its existing services, it would cost about $6.5 million more than 2024. The tax levy, under the existing formula, would be limited to only a $1.4 million increase. That means a $5 million gap the county has to make up, either through added revenue or extensive cuts.
“We have been doing this, closing gaps, year after year. But $5 million is the biggest we’ve had, and we think inflation is going to continue,” he said.
Waukesha County takes pride in its fiscal conservatism
Farrow laughs at the question as to why the county hasn’t already joined the other 69 Wisconsin counties that have approved a sales tax since state legislation made it possible in the 1990s. (In addition to Waukesha, only Racine and Winnebago counties don’t have sales taxes, and Racine is also reportedly considering one.)
“Traditionally, I think Waukesha County has a phenomenal job (in budgeting),” he said. “When I look back at the last nine budgets that I’ve introduced, we have done a great job of balancing and leveraging every tax dollar that we get, so we haven’t needed the sales tax.”
Recent decisions, like the Waukesha County Sheriff Department’s decision to close the Huber Center prison in favor of electronic monitoring of nonviolent inmates, is one example of a never-ending push to cut county costs, he added.
That conservatism put the county at the bottom of the list on dollars spent per person — about $650 annually, compared to a $1,000 average for all counties, Farrow noted. “That goes to how we do our job, and how we do it so well,” he said.
Task force formed to study options, including sales tax
But Farrow said he and other county officials recognize that the county’s only revenue stream, the property tax levy, “doesn’t cover our cost of operations anymore.” Officials asked aloud if the state might step in to help with additional shared revenue for state-related operations, given that undeniable reality in a conservative county.
The answer the county got from legislative leaders was that Waukesha County might have to rethink its approach. “We were told, ‘you’ve got other revenue options to look at, and you should consider looking at those,’ which was kind of interesting,” Farrow said.
So efforts began to put together “a team” — the 35-member budget task force, a diverse crowd that includes mayors, business association representatives, nonprofit organizations and residents at large — to review all budget data, vet new revenue sources and generally add to county government officials’ knowledge of the options. Including a potential sales tax.
Besides a sales tax, revenue options include an override levy referendum, in which the county could ask voters to allow more taxes to be collected than is otherwise allowed under state limits, and a wheel tax, a fee applied to vehicle owners (but a funding mechanism that must directly relate to transportation costs).
Task force members concur that the county’s traditionally tight budgets are a factor in how they weighed data and discussed options to help the county balance its budgets in the years ahead.
“With a decade plus of levy caps impacting not only the counties, but all local cities and villages, we have come to a crossroads: either cut services such as police, fire and public works along with quality-of-life services like parks or find a new stream of revenue,” Rick Petfalski, Muskego’s mayor and task force member, said in an email interview. “There must be a better way to fund local governments besides the property tax.”
Petfalski praised Farrow and county officials for putting together a task force to address the topic thoroughly and intelligently, all while acknowledging the need to remain fiscally responsible.
“From my viewpoint, almost all took the task seriously, trying to find the best combination of finding efficiencies, service reductions and possible new revenue sources. No one wants to see the tax burden increase for our residents if it can be avoided,” he said.
County sales tax could raise $50 million or more in key ways
One factor that’s not intended to be hidden in the discussion is the extent of new revenue that would likely be raised by a county sales tax, based on current data. In short, it would total $50 million to $60 million, Farrow said.
That figure comes in part from the efforts of Raftelis Financial Consultants, which the county retained to facilitate task force discussions. Raftelis has also helped gather data that will play an important role in county supervisors’ decisions on how the county will proceed, Farrow said. The county will also rely on more precise Wisconsin Department of Revenue numbers before using any projections for budgeting purposes, he added.
Because the projected sales tax revenue could essentially be more than 10 times the 2025 budget deficit, the revenue, strictly speaking, would not be used to merely balance the budget but to provide fiscal relief in other ways to county taxpayers.
“Being the fiscal stewards we were, we would want to ensure … is to reduce our property tax levy with a sales tax,” Farrow said. “So the residents of Waukesha County would see a property tax reduction on their tax bills.”
For Petfalski, a sales tax could reach even further.
“I believe a county sales tax that shares 40% of the revenue with local governments would be a way to provide property tax relief, not only at a county level, but at the local municipal level as well,” he said. “It is an opportunity for us to fund some of our local services with revenue from people living outside of our county, like many of our residents who work and play in Milwaukee, Washington and Jefferson do in those counties.”
Given Waukesha County’s drawing power, including lakes and parks, that means cities would likewise benefit from tourist dollars in a manner that results in tax relief, Petfalski said. Plus, based on data that suggests more than a quarter of the workforce in the county live elsewhere, the nonresident workers themselves who spend money within the county would, in effect, be contributing to tax relief, he added.
Sales tax is not universally favored, especially by businesses
Despite such possibilities and tourism-generated benefits, a county sales tax isn’t a political walk in the park for everyone. Businesses, especially, might throw some shade on the idea.
For one, there’s a flip side to not being among the 69 counties that have a sales tax, said Amanda Payne, president and CEO of the Waukesha County Business Alliance and also one of the 35 task force members.
“Being one of only three remaining counties in the state to not impose a sales tax is an advantage for business attraction and retention,” Payne said in an email interview, acknowledging that she has heard that businesses are paying attention to the discussion.
Payne is glad that the county, for now at least, hasn’t committed to a sales tax and will instead rely on fiscal management as it has in the past for the 2025 budget.
Even Petfalski, a conservative in a lake community where conservatism is prized as an effort to keep property tax dollars manageable, admitted to not being wholly happy with the prospect. “All tax increases concern me,” he said.
County residents at large, who themselves would pay a new tax, won’t automatically cheer a sales tax, he added. “No one wants to see costs increase, there isn’t an endless supply of money, so I know there is a concern with such a proposal,” Petfalski said.
Farrow agreed the lure of county taxes won’t be universal. Asked who might be the most resistant, he said, with a laugh: “Every taxpayer that pays taxes.”
Farrow said a final task force report on revenue and cost reduction options will be presented to the County Board on Aug. 27. Details, or perhaps the full report itself, will likely be posted on the county’s website after that date.
Contact reporter Jim Riccioli at james.riccioli@jrn.com.
