Report: Milwaukee County Transit System could face $26 million deficit by 2025

A combination of declining ridership, loss of federal pandemic aid and other fiscal restraints has led to a dire situation for Milwaukee County Transit Services, according to Wisconsin Policy Forum’s latest report.

The report, commissioned by the Milwaukee County Department of Transportation, explains MCTS’s $160.4 million operating budget is funded by four main revenue sources: federal aids, state operating assistance, revenue from riders and county revenue (a property tax levy and vehicle registration fee revenues).

The system is facing looming fiscal challenges, mainly because it will lose the portion of funding it gets from federal pandemic relief aid beginning in 2025. This will lead to a “sizable operating budget gap,” according to the report. A model for 2025 predicts a $25.7 million deficit, which grows to $40.5 million by 2028.

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“Milwaukee County’s other fierce financial challenges likely preclude a sizable increase in its levy allocation to transit, and the societal factors that already are depressing transit ridership could make fare increases counterproductive,” reads the report.

It predicts the transit funding gap would likely need to be filled by increasing vehicle registration fee revenues, reducing services, or a combination of both.

“In order to be a world-class community that recruits top-tier talent and businesses, we need a world-class transit system,” said Denise Wandke, MCTS president and managing director in a press release. “Allowing MCTS to wither away due to a structural gap would be nearsighted mistake with cascading, cross-sectoral ramifications for all of us—setting back the regional economy, exacerbating labor shortages, and worsening education and health outcomes.”

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The report does point to a possible state-enabled solution: a 1% countywide sales tax increase. The approximately $190 million in annual revenues the increase would bring in would be divided equally between the county and the city. This sales tax increase is currently being considered as part of state budget deliberations.

Under a hypothetical scenario in which county leaders allocated 10% of their share of the new tax ($9.5 million initially) annually to MCTS, and combined that move with successive $10 increases in the VRF in 2025, 2026, and 2027 and modest increases in MCTS’s property tax levy allocation, MCTS’s fiscal challenges could be largely addressed without severe service reductions.

“We project that MCTS would face a relatively manageable $5 million deficit in 2025, and the deficit would be erased by 2027 when the final $10 fee increase takes effect,” according to the report.

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County Executive David Crowley used the report to express the importance of his efforts with the Move Forward MKE coalition, a group that supports giving Milwaukee County the authority to implement a local sales tax option.

“Today’s report, coupled with the recent five-year fiscal forecast released by the Comptroller’s office earlier this month, makes it clear that Milwaukee County’s push for additional revenue tools is not a luxury desire, but an absolute necessity for the residents who call our region home,” said Crowley.

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