Under a 2020 budget proposal from Mayor Satya Rhodes-Conway, Madison drivers could be paying a $40 registration fee for each vehicle they own.
Here’s what to know about the fee, when it might take effect and how the revenue would be used.
What is a vehicle registration fee?
A local motor vehicle registration fee, sometimes called a wheel tax, is an annual charge applied to cars and some trucks. The fees are collected by the Wisconsin Department of Transportation at the time of vehicle registration or when a vehicle’s license is renewed and returned to the municipality as an additional source of revenue.
Local vehicle registration fees are collected in addition to the state’s $85 fee.
The state requires all revenue generated from the fee to be used for transportation-related purposes. Municipalities receive the revenue within 30 days after the end of the month in which the fee is collected.
The fee applies to cars and motor trucks that weigh less than 8,000 pounds gross weight and are customarily kept in the municipality or county that enacted the tax. Vehicles such as buses, motorcycles, mopeds, motor homes and low-speed vehicles and trailers are exempt from a municipal vehicle registration fee.
What is the mayor’s proposal?
Rhodes-Conway’s budget proposal calls for a $40 per vehicle fee and anticipates $7.9 million in revenue. The mayor said in her budget announcement that the fee is the only option that will help the city “achieve a modern transit infrastructure.”
“There are very, very few ways that cities can raise revenue in the state of Wisconsin,” Rhodes-Conway said in the Oct. 1 budget announcement. “The other options that we considered were looking at other places we could cut, and many of the cuts we didn’t take would have much more drastic impacts on our community.”
Rhodes-Conway said she determined the fee amount in consultation with city staff, taking into consideration the needs of the budget and an attempt to plan farther out in the operating budget.
The City Council could propose to amend the ordinance and fee to an amount other than $40, but it would require other changes to the mayor’s proposed budget.
“If you were to come to an amount lower than $40, you would have to significantly amend the operating budget,” Rhodes-Conway said at a Finance Committee meeting Oct. 7.
How would Madison’s vehicle registration fee compare to other local governments?
If adopted, Madison’s $40 vehicle registration fee would be the highest in the state. Madison residents would pay a total of $153 in vehicle registration fees — $40 from the city, a $28 tax that Dane County adopted in 2018 and a state fee of $85, which the state raised by $10 over the summer.
Across the state, 12 counties and 24 cities, towns and villages have implemented vehicle registration fees, according to the city attorney’s office. Eau Claire County, Milwaukee County and the city of Milton collect the highest fee on the list at $30. Many of the municipalities collect $20.
Over the past several years, more municipalities have been turning to vehicle registration fees as a revenue source. Until 2011, only four communities enacted the tax, according to the Wisconsin Policy Forum. That list grew to 27 by the end of 2017, with tax revenues nearly tripling from $7.1 million to $20.7 million.
Local governments rely on property taxes, which have been restricted since 2011, as a revenue source.
“If we didn’t do the vehicle registration fee, then there would need to be substantial reductions in services,” Transportation Director Tom Lynch said.
Alternatives to enacting a vehicle registration fee, according to the Finance Department, include:
- Cutting all departments by 2.5%, which would mean closing a fire station, eliminating 18 police officers and the Crossing Guard program. This would save $6.5 million.
- Eliminating a 3.25% pay increase for city employees to save $2 million
- Cutting newly created positions, such as an early childhood mental health specialist, to save $3.8 million
- Laying off 12 positions to save $1 million
- Cutting funding for community service contracts by 10% to save $1 million
How and when would the proposed fee take effect?
In order to take effect, the Madison City Council would need to adopt an ordinance enacting a vehicle registration fee. The state requires the city to provide notice of the fee three months prior to when it would be enacted.
“The sooner we adopt the ordinance at council, the sooner that clock starts ticking and the sooner revenue comes in,” Rhodes-Conway said at the Oct. 7 meeting.
The proposed ordinance sets a March 1, 2020, effective date. For this to happen, the City Council would need to vote on the ordinance no later than Nov. 19. If the council adopts the ordinance at its Oct. 15 meeting, the fee could be effective Feb. 1, 2020.
Madison would lose $550,000 of the $7.9 million in revenue from the tax project in the mayor’s budget because the city would not be able to collect the tax in January, according to Finance Director Dave Schmiedicke.
Madison’s Finance Committee voted Monday to refer a decision on the ordinance to its Thursday meeting.
Ald. Mike Verveer, District 4, said during the Finance Committee’s discussion that he was uncomfortable voting on the ordinance before hearing Metro Transit’s budget presentation, which is set for Thursday, He would prefer waiting to vote on the vehicle registration fee until Oct. 21 when the Finance Committee votes on operating budget amendments.
“This obviously is a huge decision for all of us,” Verveer said.
If the Council does not vote until its Nov. 5 meeting, the fee would not be implemented until March 1. This would result in a loss of an additional $550,000.
The mayor’s proposed 2020 operating budget assumes revenue from the vehicle registration fee starting in January. Schmiedicke said the city would be able to “manage a month or two” by scaling back new elements and delaying funding for studies.
“Each delay of this month is reducing the revenue that would be available,” Schmiedicke said.
What would the revenue generated in the city of Madison be used for?
Under the mayor’s proposal, the revenue would be used to create five new positions for the implementation of bus rapid transit and will fund three studies for route analysis, mobile ticketing and organizational structure.
Bus rapid transit — a system that aims to deliver fast and efficient bus service — is a major priority for Rhodes-Conway and her administration. BRT is estimated to require about $120 million to $130 million for initial capital costs.
“We will need a revenue source. This registration fee won’t pay for all of the operating costs,” Transportation Director Tom Lynch said. “This gives us a start, but it’s also one of the last tools remaining to help preserve city services.”
The additional revenue stream also frees up approximately $3.6 million collected from property taxes that the city allocates to Metro Transit.
Revenue generated from the fee would also be used to expand weekend bus route service to the south side and provide free Metro Transit ride passes to students qualifying for free and reduced lunch in addition and offer bus passes at an employment center.
“This actually is targeting an investment to address transportation needs in our underserved communities,” Lynch said.
Has a vehicle registration fee been floated in Madison before?
Yes. In June 2018, former mayor Paul Soglin proposed a $17 vehicle registration fee as a way to close budget shortfalls.
The City Council did not approve Soglin’s proposal after it was largely rejected by committees. Alders who did not support the ordinance expressed concern that the tax is regressive and would replace other funds rather than use the revenue for expanding Madison’s transportation services.
Bus rapid transit — a system that aims to deliver fast and efficient bus service —is a major priority for Rhodes-Conway and her administration. BRT is estimated to require about $120 million to $130 million for initial capital costs.