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Madison’s proposed $40 wheel tax would be highest in state, but may be ‘only way’ to balance budget
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Madison’s proposed $40 wheel tax would be highest in state, but may be ‘only way’ to balance budget

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Mayor Satya Rhodes-Conway has proposed a $40 wheel tax that would impact all Madison residents with a car starting next year.

A $40 vehicle registration fee on Madison drivers proposed in the mayor’s 2020 operating budget would be the most expensive in the state of Wisconsin, but it might be the only way to balance the budget, some City Council members say.

If approved by the City Council, the vehicle registration fee, also known as a wheel tax, would be implemented in February or March. It would be in addition to Dane County’s wheel tax of $28, adopted in 2018, and a state wheel tax that was hiked up by $10 this year to $85, bringing the total annual vehicle registration cost for city residents to $153.

Projected to bring in $7.9 million in revenue in 2020, the tax is a key part of Mayor Satya Rhodes-Conway’s proposed $340.4 million operating budget. She wants to see the timeline for approving the fee accelerated so that the city could begin collecting it in February.

“If you were to come to an amount that was lower than $40, you would have to significantly amend the operating budget,” Rhodes-Conway told members of the Finance Committee at a Monday meeting.

The Finance Committee could have approved the tax Monday, but voted to delay action until at least Thursday over concerns about rushing into a tax that many council members consider regressive. In September 2018, the City Council rejected a $17 wheel tax proposed by former Mayor Paul Soglin.

“I think we all agree that it is a very regressive tax — not in any way based on your ability to pay,” said Ald. Mike Verveer, 4th District. “A junker of a car pays the same $40 as a brand new BMW.”

In Wisconsin, 12 counties and 24 cities, towns and villages have wheel taxes, according to a memo from the Madison city attorney’s office. The highest currently is $30, which is collected by two counties and one city. Most of the other cities collect $20.

In the mayor’s budget, revenue from the tax would be used to bolster operations of the city’s bus service, Metro Transit, and prepare for Bus Rapid Transit, a high-frequency, high-capacity, limited-stop service that Rhodes-Conway hopes to have in place by 2024 to reduce vehicle traffic in the city.

Under state law, revenue from the vehicle registration fee has to go toward transportation, but the tax would also help free up about $3.6 million from property taxes to maintain police, fire, library and other basic city services.

Options limited

Ald. Tag Evers, 13th District, said a handful of his constituents have reached out to him as firmly against a wheel tax, but it “may be the only way left” to meet the obligations the city has to various departments and staff.

Verveer said it would be difficult for the City Council to balance the budget without some sort of wheel tax “because the mayor has built her budget around” the fee. But he said he hopes the council can find a way to get the wheel tax closer to the $30 mark, so it won’t be the highest in the state.

“If we removed the wheel tax completely from the budget there would be a huge gaping hole in the budget that would be very painful to close,” Verveer said.

If the City Council wants to avoid a wheel tax, other places it could cut costs to make up the $7.9 million the tax would raise, according to a presentation Monday by city staff, include:

  • Cut all city departments by 2.5%, which would result in closing a fire station and eliminating 18 police officers and the crossing guard program. This would save $6.5 million.
  • Eliminate a 3.25% pay increase for city employees at a savings of $2 million.
  • Cut new initiatives included in the mayor’s budget, including Bus Rapid Transit programming, mental health programs for police and the creation of several new positions, including additional clerk’s office staffing for the 2020 elections for $3.8 million in savings.
  • Lay off 12 positions, likely in Public Works and administrative staff, to save $1 million.
  • Cut funds given to nonprofits that provide community services to the city by 10% for a savings of $1 million.

Rhodes-Conway has acknowledged the wheel tax is regressive but said it would be offset by more bus passes being available for low-income residents and increased bus service on the South Side.

Evers said the wheel tax could also have the positive effect of having fewer cars on the road.

“If paying more causes us to keep and drive fewer cars, that is not a bad thing on a number of levels,” Evers said.

Timeline problems

If the wheel tax isn’t approved by the City Council on Tuesday, the city could lose out on a month of revenue from the fee.

Madison has to notify the Wisconsin Department of Transportation at least 90 days before the month that the wheel tax would take effect. If the council approves the $40 fee Tuesday, the earliest the tax could be implemented is Feb. 1.

Because the city wouldn’t be able to collect revenue from the tax in January, it would lose $550,000 of the $7.9 million projected in the mayor’s budget, city Finance Director David Schmiedicke said.

Verveer said he is not sure if he or council members will be comfortable approving the wheel tax next week because Finance Committee members won’t be done going through the rest of the budget.

Committee members have until Oct. 16 to turn in amendments to the operating budget, and the Finance Committee will vote on the amendments and budget Oct. 21.

The council’s next meeting is Nov. 5, which would push the start date of a wheel tax to March 1, losing an additional $550,000 in revenue from February.

In that scenario, Schmiedicke said some proposed new public transit spending would be deferred until 2021.

Verveer said another option would be to hold a special meeting of the City Council at the end of October, which the mayor would have to call.

The Finance Committee could again delay a vote on the wheel tax Thursday.

“I cannot say I am comfortable voting on a wheel tax as early as Thursday night,” said Verveer, a member of the Finance Committee. “I honestly don’t know what I will do until the moment comes.”

[Editor's note: This story has been updated to more clearly describe what would have to be cut to obtain $3.8 million in budget savings.]

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