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THE SURVEY AREA

The 1960 Milwaukee Standard Metropolitan Statistical Area consists of Milwaukee County and Waukesha County with a total population of 1,194,296. Within this SMSA, the Urban Area comprises all 19 municipalities of Milwaukee County and 10 incorporated municipalities in Waukesha and Ozaukee Counties. The difference between the SMSA and the Urban Area consists of 16 townships and 14 villages in Waukesha County which are largely rural; their combined population in 1960 was 79,727.

The problem of disparities between the city and its outskirts is important because municipalities which make up an economically integrated community may join efforts to improve the metropolitan area for their mutual benefit. The amount of the fiscal disparity between them has a decided bearing on the feasibility of intermunicipal cooperation.

It is harder to interest a municipality which is technically in the metropolitan area, but only remotely related economically, in intermunicipal cooperation. Appeals to the municipality on the basis of simple equity fall on deaf ears if a municipality bears little or no economic relation to the main body of the SMSA. Such a municipality may question whether its cooperation would make much of any contribution, either politically or functionally.

Nevertheless, certain aspects distinguish even outlying rural municipalities included in the SMSA from those outside the SMSA. The trend in land value, for instance, may have been different; the rural SMSA has likely experienced a greater increase in land values. In the area of public services there may have been some effect. For education in particular, the outlying SMSA community may spend more per pupil, influenced by the urban standard, than a further outlying rural area.

For other purposes, however, the researcher may do well to concentrate on the urban portion. It represents an area more interrelated economically and otherwise; in every sense it makes up one integral body which if separated could not function. Statistics, for one thing, are more adequate and meaningful for the urban municipalities.

DISPARITIES IN PROPERTY TAX RATES

Overall Rates

The property tax in Wisconsin is for practical purposes the only tax levied by the local government. In 1966, the revenue from this tax represented 99.9 percent of all local tax revenues of the state. Typically the tax rate has been high in most Wisconsin municipalities. The following table shows the general levels of property tax rates and the disparities between the central city and the suburb in the recent past. The suburb here excludes the rural part of the SMSA outside the urban area.

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*The mean of the full value rates for individual municipalities.

Source: City Taxes, Village Taxes (annual), and Town Taxes

(biennial). The 1960 and 1966 full value rates for towns
were computed from County Clerk's Abstract of Assessments
and Taxes.

We observe that the property tax rate in the central city has always exceeded that of the suburb, and that the rate disparity between the two areas has increased considerably over the past ten years. The present rate of 40.7 mills for the central city compares very unfavorably with the suburban average of 28.4 mills.

If we include in the suburb the outlying rural municipalities of the SMSA, the central city-suburb disparity is shown to be greater. The outlying rural communities levy substantially lower taxes (while providing services varying greatly from those in the urban area) and their inclusion necessarily lowers the suburban average.

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The coefficients of variation offered in Table 3 measure the overall variation in tax rates among individual municipalities. Within the urban area, the rate variation remained largely stable, with a slight tendency to rise in the last few years.

TABLE 3.--COEFFICIENT OF VARIATION OF FULL VALUE PROPERTY TAX RATES*
AMONG MUNICIPALITIES OF URBAN AREA AND SMSA

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*Standard deviation as a percentage of the mean.
gives a range within which about two-thirds of observations in a sam-
Standard deviation
ple of normal distribution would deviate from the mean value.
values change; hence, to use standard deviations as comparable mea-
Mean
sures of variability over period they are divided by their respective

means.

Within the greater SMSA area (including rural communities) the trend is toward significantly greater variation during the past decade. SMSA were striving to achieve a higher level of school and nonschool services, with While urban segments of the consequent increases in tax rates, the outlying areas of the SMSA remained largely unaffected.

The variation in the tax rates between one community and another was fairly great in 1951, but lessened in the intervening years (Table 3). The rise in public expenditures and tax rates in many developing suburbs is the probable cause--consistent with what Professor Burkhead some years ago referred to as the trend toward greater fiscal uniformity in a metropolitan area.1/ trend might be only transitory, and that what happens after a metropolis (delimited at The present writer argued then that such a a given time) becomes more fully urbanized is uncertain.2/ In the Milwaukee area, equalizing trend in the tax rate observed earlier has largely subsided, and we now witness a relative stability or even a slight increase in the rate variation. the

For subsequent analyses, we shall group our urban area municipalities by function and wealth. The functional classification outside the central city is based on the ratio of business property to total real property within each municipality. Thus, industrial municipalities are those in which total equalized value of business real properties (mercantile, manufacturing, and utility properties) constituted more than 60 percent of total real property in 1966, while balanced municipalities are those in which this ratio was between 40 and 60 percent.

Variation in wealth is greater among residential than among industrial units, and the classification by wealth will be limited to the residential category. dential municipalities are divided between high, medium, and low income residential The resiunits on the basis of 1965 adjusted gross income per return (the AGI for state income purposes).

1/ Jesse Burkhead, "Uniformity in Governmental Expenditures and Resources in a Metropolitan Area Cuyahoga County," National Tax Journal, XIV, No. 4, December 1961, PP. 337-348.

2/ John Riew, "Uniformity in Governmental Expenditures and Resources in a Metropolitan Cuyahoga County," National Tax Journal, XV, No. 2, June 1962, pp. 218-220.

Area

The 29 municipalities are thus divided into the central city, 5 balanced municipalities, 2 industrial municipalities, and 21 residential municipalities, the latter group further divided into 6 high income, 7 medium income, and 8 low income units.

Among the municipalities, the property tax rate of the central city towers over all others. The variation in tax rate increase over the period shows that the spread between the central city and each of the other types of municipalities has increased during the past decade.

TABLE 4.--MEAN FULL VALUE PROPERTY TAX RATES AND THEIR INCREASE
AMONG TYPES OF MUNICIPALITIES, 1957-1966

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*Figures shown are the mean of the percentage increases for individual municipalities in each group.

Source: See Table 1.

The central city, whose property tax rate rose 48% over a ten-year period, has experienced the largest increase. The difference is even greater when the 1960-66 period is taken. The six-year increase of 27.6 percent for the central city is approximately twice the rate of increase for most others. Paces of increase in tax rate among suburban groups of the urban area have, with some exception, been fairly comparable.

Outside the urban area, the incorporated municipalities, mostly small villages scattered around rural townships whose 1960 populations ranged from 276 to 8,880 (with the median of 620), have shown a steady tax rate increase. For them also, as with the urban area suburbs, the rate of increase was considerably greater during the 1957-60 period than during subsequent years. On the other hand, rates for unincorporated towns have advanced more slowly especially during the more recent years.

Tax Rates by Purpose

The general property tax in Wisconsin is a composite of state, county, local, and school levies. The state levy is negligible; the county levy varies by county and

often reflects influences beyond local control. Thus, we shall ignore for the time being both state and county levies and concentrate on local and school levies.

We observe in Table 5 that in the combined local and school levy the central city shows the highest rate of 30.3 mills. This should be compared with other rates ranging from as low as 17.7 mills for industrial units to 22.0 mills for low income residential units--the highest among suburban groups.

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The central city disadvantage largely involves the local rate; its 13.8 mill rate is no match for others which vary over a low range of 1.7 mills (for industrial units) to 4.2 mills (for balanced units). School rates show much less variation; they spread over a relatively narrow range of 15.9 to 19.0 mills. The lesser variation, and the fact that school expenditures dominate the local budget, make the school tax an equalizing element in the overall property tax.

The high income residential and industrial units, as shown later, spend considerably more per capita on most municipal services, but their high per capita valuation and high share of state aid together outweigh the difference in expenditures, thus permitting low local rates.

One observes in Table 5 that the relation of local, school, and combined rates, back in 1957, was largely similar to today's. But the central city-suburb disparity in combined rates has increased substantially. Both in local and school levies, especially in the former, the central city exceeded others in the rate of increase.

Outside the urban area, the incorporated municipalities carried consistently higher rates than did the urban area municipalities. Lacking evidence that they offered higher quality education, the difference may be largely attributable to the fact that they are unable to take advantage of economies of scale inherent in somewhat larger

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