Just released: A capital and debt management tale of two governments

The following is an excerpt from the Public Policy Forum's new report on capital and debt management practices at the City of Milwaukee and Milwaukee County.

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"Infrastructure – literally in the case of roads and sewers – underlies the growth and development of cities and regions. And because infrastructure serves generations of citizens, governments generally pay for it through long-term borrowing. Meanwhile, the political process focuses on a much shorter timetable. Elections are about the issues of the day, and candidates rarely focus on long-term issues such as debt and infrastructure.

Even so, Citizens need to be confident that the people they elect to local government office will be good stewards of the public infrastructure – and will ensure the burden of paying for it is dealt with responsibly. In light of the long-term consequences of election outcomes, this paper offers a brief overview of how the city of Milwaukee and Milwaukee County have been managing their capital spending and debt obligations over the past decade.

Overall, the city of Milwaukee and Milwaukee County both comply with state statutes regarding debt levels; both adequately secure high bond ratings. They also both recognize that it is good public policy to take additional measures to control debt levels. The county has an ambitious set of debt management goals, and has also been spurred into tightening them by the fiscal crisis caused in large part by large pension obligations. Nothing as dramatic has happened to city government, but its continuing structural deficit also has necessitated debt management goals. It remains to be seen how well these policies will work in controlling the debt burden in the city and county.

Meanwhile, when it comes to the other side of the debt management coin – capital spending – the city and the county have differed over the past decade. In the case of the city, poor capital financial management has led to a higher debt burden than desired. In the case of the county, the opposite has occurred in a sense: Strict controls on debt have led to a decline in capital spending, suggesting the county has been putting off infrastructure maintenance that will end up burdening taxpayers sometime in the future."

Minnesota in recession, Wisconsin not....yet.

The Packers lost a big game last weekend. While the loss was painful, at least the Pack were in the playoffs and not sitting at home like the 2nd place Minnesota Vikings. I actually felt bad writing that last comment because you hate to kick a state when it's down. I'm referring to the news in which a Minnesota state economist declared his state to be in recession. Ouch.

Needless to say, this declaration was not fully embraced by Minnesota Gov. Tim Pawlenty who described the economist as someone who “tends to err a little bit on the pessimistic side.”

Regardless, the economist cited a significant increase in Minnesota's unemployment rate to 4.9% in December from 4.4% a month earlier and a net loss of 350 jobs over the last 12 months.

If we use the Minnesota example as a benchmark to define "recession," we can see that, for now, Wisconsin seems to have avoided the recession bug. Last week, the Wisconsin Department of Workforce Development reported an unemployment rate of 4.6% which was less than the previous month's 4.8% and less than the current national unemployment rate of 4.8%. In tandem with a lower unemployment, the state benefited from a net addition of 21,700 jobs over the last 12 months.

In short, 2007 was good to Wisconsin. A researcher in this week's Milwaukee Journal Sentinel agrees and states that "overall, Wisconsin is doing better economically than most Midwestern states."

This is not to say that Wisconsin doesn't have it's share of challenges. The article points out that Wisconsin's job mix is still predominantly low-pay (Competitive Wisconsin recently announced plans to address this issue) and that the state should expect job losses in construction and manufacturing due to the housing downturn. Additionally, state tax receipts have slowed and spending cuts may be needed.

How long will labor market data stay positive in Wisconsin? Is it just a matter of time before Wisconsin sinks into recession like our neighbor to the West? We can't be sure of what our future holds but for this very moment let's enjoy our relative economic health and a Packers season to remember.

CEOs for cities

News coverage and commentary on last week's Public Policy Forum Viewpoint Luncheon, "Global wooing," has been abundant. The event featured a lively and candid conversation on Milwaukee's global competitiveness with five prominent area CEOs (from right to left in photo): Rick Armbrust, The Oilgear Co.; Jeff Joerres, Manpower Inc.; Paul Purcell, Robert W. Baird & Co. Inc.; John Shiely, Briggs & Stratton Corp.; and Tim Sullivan, Bucyrus International Inc. On the far left is Chuck Harvey, vice president, diversity and public affairs, Johnson Controls, Inc., who moderated the discussion.

If you missed any of the coverage, here it is:

News
The Business Journal Serving Greater Milwaukee
"Leaders say area still lags in attracting talent"
Milwaukee Journal Sentinel
"Business leaders want to warm city's climate"

Commentary
Steve Jagler, executive editor of Small Business Times
"Our own worst enemy"
John Torinus, chairman of Serigraph Inc.
"Leadership is key element to building business, city"
Patrick McIlheran, Milwaukee Journal Sentinel columnist
"The price of ignoring the price"
Milwaukee Mayor Tom Barrett
"Mayor responds to criticisms from CEOs"
Milwaukee Journal Sentinel
"Editorial: On talk and action"

Letters to the Editor
Jack H. Werner
"Smart business execs don't need pandering"
Richard Armbrust, Jeff Joerres, Paul Purcell, John Shiely, Tim Sullivan
"Commitment to region is solid"

What else is there left to say? Plenty, I'm sure.

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Update: More commentary today, January 18. The conversation continues...

The Business Journal Serving Greater Milwaukee
Editorial: "Listen to leaders' calls"
Steve Jagler, executive editor of Small Business Times
"Standing up against what's wrong in Milwaukee"

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Update: Three op-ed articles in Sunday's Milwaukee Journal Sentinel Crossroads section....

Jeff Browne, "Milwaukee can compete if it's willing to change"
James J. Casey Jr., "Lesson's from the Asian Tiger"
Michael Rosen, "Milwaukee Business Leaders seem to want a return to the 19th century"

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Update: An article and a blog posted today, January 25. And the beat goes on...

The Business Journal Serving Greater Milwaukee, "M7 impact questioned"
Charlie Sykes, "Who's the enemy?"

Profitable "Photo Cop" programs leave some seeing red

Mounted cameras that identify and ticket drivers that run red lights could offer revenue and safety benefits to Wisconsin cities – but legislators should consider the sometimes-negative outcomes that have taken place in other cities before green-lighting such a program.

A bill in the Wisconsin state legislature could open the door to a program some cities have nicknamed “Photo Cop.” If passed, Wisconsin municipalities could join the over-100 other U.S. cities that use cameras mounted on stoplights at key intersections to identify cars running red lights. Presuming that the driver of the car is also the owner, violators would get tickets in the mail. Car owners do not have to pay the ticket if they can prove after the fact that someone else was driving the car. While this system has benefits, other cities like Minneapolis have seen a spiraling series of problems stemming from their “Stop on Red” program.

In Minneapolis, the 12-camera program quickly began bringing in more revenue than initially intended from the $142 tickets. Among the monitored intersections, crashes dropped 16 percent after cameras were installed, versus a five percent drop city-wide.

Embarrassing information came out in the press that 14 Minneapolis police squad cars had been identified as running red lights in non-emergency situations. Some citizens had problems too – one video record shows a blue car running a light near a stopped red car, but the red car’s driver got the ticket in his mailbox and had to institute a lengthy fight to get out of paying it. (Similar tale here.)

Then the ACLU got involved, arguing that the program violates drivers’ constitutional rights and considers them guilty until proven innocent. In the resultant court case, the judge agreed that, while there is always authority to ticket drivers for violations, there was no authority to ticket the car owners, who may or may not have been driving the car at the time of the violation. After eight months of operation, 26,000 tickets, and more than a million dollars in revenue, the Minneapolis Stop on Red program was put on hold until appeals could be decided by a higher court. The cameras were officially shut down in April after a Minnesota Supreme Court ruling.

San Diego’s similar program hit scandal resulting in 150 separate lawsuits when it was alleged that Lockheed, which received a cut of every ticket for administering the cameras, had tinkered with the traffic lights without the city’s knowledge in order to shorten the yellow light time and drive up the number of tickets. A similar 2004 class-action lawsuit in Baltimore also claimed that yellow lights were unusually short at intersections with cameras.

While many cities found accident reductions with the cameras, a number of others found that the cameras sparked a significant increase in accident rates, presumably from drivers that slam on the brakes when they notice the cameras. Washington D.C.’s program generated $32 million in fines over six years from 500,000 tickets. An inquiry found that the rate of accidents at intersections with cameras increased after the camera was installed. The increased accidents were at the same rate or worse than at the 1,520 city intersections with traffic lights but no cameras. Critics claim that, while red light programs are flush with rhetoric about safety, such programs are more concerned with generating revenue.

At this point, no organization has registered to lobby against the bill in Wisconsin, but the Department of Transportation opposes it, predicting it will drive up the agency’s expenses.
Some elements to consider about the bill in the Wisconsin legislature:

• New sources of local government revenue are increasingly needed, especially given the public's anxiety about high property taxes.


• How do we know the program will increase safety? While cameras have reduced accidents in some cities, they appear to have increased accidents in others.


• Will the program be susceptible to lawsuits similar to the ACLU concerns in Minneapolis? How can we shape a program that does not have the same vulnerabilities?


• Will citizens be adequately protected from incorrect accusations? Will the system to dispute tickets be simple and streamlined for the wrongly accused, or overly burdensome? To what extent are drivers “guilty until proven innocent”?

As legislators weigh the potential positives and negatives of red-light camera programs, one hopes that they can see through the dollar signs to create a policy that, if passed, preserves safety and justice while generating revenue.

The other Iowa story

Mike Huckabee and Barack Obama were the big story last week in Iowa.

However, the big story from the last five years in Iowa has been its resilient economy. In fact, no state in the upper Midwest is adding jobs as fast as Iowa. That's right, Iowa. While the Midwest as a whole grew its overall employment 0.2% in the first half of 2007, Iowa's employment grew 1.2%. True, Iowa is no Utah when it comes to job growth but their rate of growth is impressive next to Wisconsin's meager 0.2% advance.

According to a recent Mid-year jobs report released by the Chicago Federal Reserve Bank...

Iowa reported above a 1% growth in total employment partly due to its strong professional and financial industries. For the first half of the year, Iowa also experienced greater than 1% growth in its construction, information, education and health, and leisure and hospitality industries. Similar to Indiana, Iowa recorded a significant increase in construction jobs, even as home building slowed.

Additionally, Iowa's high-paying FIRE industry (Finance, Insurance, and Real Estate) comprises 6.7% of total employment as compared to more modest 5.9% slice for the Midwest. In fact, Iowa's "insurance advantage" is attracting investment from Wisconsin's very own CUNA Mutual - CUNA Mutual recently completed a significant corporate merger in Iowa.

In short, not only is Iowa adding jobs, but it's adding the right kind of jobs - the high paying kind.

How did Iowa turn its economic ship around? At the risk of sounding like a broken record here at the Forum, let me suggest to you that it started with a plan. That plan - Iowa 2010, The New Face of Iowa - was released in 2000 and set eight goals to grow Iowa's economy. The goals focused state support on the life sciences, information technology, advanced manufacturing and their emerging insurance cluster - all high-wage and high-tech industries. Each of the eight goals had a list of specific action items, identified leadership roles and measurable indicators to monitor goal progress.

Wisconsin has no such detailed economic development plan (not unlike the vast majority of municipalities and counties in the Badger State). Previous plans from the state, like Grow Wisconsin are really "plans" in name only as they lack a timetable, measurable progress indicators, responsible parties or even a unified budget. Without these critical elements the typical Grow Wisconsin "plan" tends to read more like a political position paper or wish-list than an actual plan. Perhaps Gov. Doyle's upcoming third installment of Grow Wisconsin will be more detailed.

To be sure, governments don't grow economies, businesses do. In Iowa, state government pointed the way with an actionable and accountable 10-year plan and business growth followed. At the start of the new year, this may be as good a model as any to implement in Wisconsin.

Update: Gov. Doyle released a new package of economic development initiatives today.

New year wishes evoke vision for Milwaukee

In the spirit of the new year, OnMilwaukee.com has issued a list of one hundred wishes for a better Milwaukee that succeeds in communicating both a love for and an educated concern for the city. The list strikes a balance between the quirky (number 78: more “pizza by the slice” shops throughout the city), and the serious, with many vital policy issues rising to the top.

Some items speak to what all good citizens desire – good schools, less crime, a local government that is without scandal, and of course, great local sports. Other points take Milwaukee to task on specific gaps, such as needs for Park East development, a tenant for Pabst City, and money for parks.

While the OnMilwaukee.com staff writers are not necessarily a representative group, it is revealing to view Milwaukee through their lens. Their vision for this city is light on the bratwurst of yesteryear and heavy on forward-looking elements such as wishing for city-wide wi-fi , commuter rail, more local female politicians, and multiple environmentally-friendly points including more bike lanes, clean bodies of water, community gardens, and an improved citywide carbon footprint.

While a wish for no tax hikes makes the list at number 19, a savvy commenter points out that many, if not most, of the other wishes would require increased revenue.

The list concludes with wish number 100: “Never again to hear the phrase ‘Milwaukee has an inferiority complex.’” As usual, time will tell whether wishes grow to become resolutions and actions. Though the Public Policy Forum cannot promise to chart the density of local “pizza by the slice” shops in 2008, we are committed to continue addressing regional policy issues to build a better Milwaukee and southeast Wisconsin region.

Water solution in Brown County. Really?

Recently, the Business Journal ran an article highlighting a just-completed 65-mile, $80 million pipeline that delivers fresh Lake Michigan water to the suburbs of Brown County from Manitowoc, WI. In the article, the Business Journal states that "what happened in Brown County could serve as a prototype for southeast Wisconsin," implying that the Milwaukee region could learn something from Brown County in addressing the water demand in its suburban communities.

Based on previous reporting in the Milwaukee Journal Sentinel (JS), this implication is puzzling. The JS article reports that instead of utilizing the existing City of Green Bay pipeline, an entirely separate pipeline had to be constructed because negotiations broke down between the city and its suburbs.

How can the construction of redundant infrastructure - two parallel pipelines stretching from Lake Michigan to Brown County) - be good public policy?

In addition to the apparent fiscal inefficiencies of the Manitowoc/Brown County pipeline, this project may have also cost the Green Bay region a chance at building regional trust, goodwill and cooperation. So state the major players in the pipeline negotiations...

From the suburbs: "Think of the old days, when people fought over water out West. Those days are still here. It just boggles the mind that you can't get people to cooperate on something as basic as water."

From the city: "This was a failure of business, a failure of government, a failure of the media. A failure by everybody. We're taking $20 million to $100 million out of the Brown County economy . . . for no other reason than we can't get along."

From the suburbs: "We all went into this with the idea that we had a regional problem and we were going to come out of this with a regional solution. Unfortunately, it didn't work out that way."

From the city: "It (the pipeline) puts a dollar figure on urban-suburban hate."

These statements from those close to the negotiations question whether this $80 expenditure should be hailed as a prototype for regional cooperation.

It looks as though the Milwaukee Common Council may have been following this debate closely, as they have decided, instead, to negotiate with their thirsty suburban neighbors. Here's hoping these negotiations don't also end up placing a dollar figure on urban-suburban hate. I'll drink to that.