CHAPTER XI.

MUNICIPAL TAXATION.

FINANCE AND ACCOUNTS.

The government of cities is of profound interest to the people who live in them and the gravity of the questions connected with municipal charters and the administration of finances under such charters are keenly appreciated. Apprehension and anxiety over future conditions are felt by all intelligent and patriotic citizens who have carefully observed and studied the problems of their own city governments in the light of past experience.

Improvement in the present mode of taxation will depend in a large degree upon the character of the administration of municipal finance and full knowledge of the precise conditions of the finances in every city. Reform in the principles and methods of the general property tax must be accomplished through intelligent effort in cities to secure uniform and just taxation and in the wiser use of the power of expenditure and a careful exercise of the power to issue bonds.

The tax upon real and personal property is now almost entirely a tax for local purposes and with a slight increase in corporate taxation would become wholly so. The ordinary expenses of the state government are not defrayed from the taxation of general property except to a very limited extent as hereinafter stated, but almost exclusively from the taxation of corporations. The state treasury received the sum of $2,059,138.74 from license fees from railroads, insurance companies and other corporations in 1901, and $2,200,674.19 from the same source in 1902,1 which is nearly sufficient to meet the expenses of the state government including all of its various institutions.

1 Vide, p. 262.

The wants of the cities are multiplying rapidly. To secure the revenue to satisfy those wants resort must be had to higher taxation or increase of bonded indebtedness to meet the requirement for new improvements. The assessment of property more nearly at the cash value in compliance with law within the last two years has increased the aggregate of taxable property to an extent that in many cities will furnish an opportunity for largely increased indebtedness. The constitutional debt limit of five per cent. of the assessed value of taxable property no longer stands as a safeguard against extravagant or unnecessary indebtedness.

It does not seem practicable to fix a tax rate or a lower debt limit which can be applied uniformly to all cities without seriously crippling some of them and possibly prevent necessary improvements for several years. Under the former practice of valuing property for taxation the need of revenue became so urgent in a few cities that the only method of securing the requisite funds was to increase the assessed valuation of property. The result has been that the assessment in several cities for a number of years has been raised to nearly the true value of all taxable property within the municipalities. To reduce the debt limit from five per cent to two and one-half or three per cent might be desirable for some cities while as to those last referred to it would produce serious hardship and stop all progress in the development of such cities. The conditions in the various cities of the state are such that a fixed uniform limitation upon municipal indebtedness at less than five per cent does not appear practicable at the present time. A further investigation and study of this problem may furnish a guide for the establishment of a limitation on the rate of taxation and debt limit which will be safe, just and reasonable for all cities.

The present outlook for good, sound municipal financiering is not as encouraging as could be wished and the situation is viewed with considerable alarm by many residents of the cities. While a uniform debt limit is hardly feasible at the present time some steps toward a better system of municipal finance and accounting seem highly desirable and would operate as a salutary check on excessive taxation.

It is scarcely within the province of the commission to recommend a system of municipal government, or to discuss particular features such as the choice and power of mayors, composition of city councils, nominations or the relation of political parties to city government. Dissatisfaction with existing conditions has led in other states to much hasty and ill-considered legislation to remedy the evils complained of and there seems to be necessity for careful study of existing charter laws to determine what changes are required to secure better and more scientific municipal government. The expenditure of public funds is so intimately related to and connected with the important questions of taxation that we feel impelled to call attention to the defective methods of accounting which appear to prevail in many of the cities of the state, and to the necessity for a system of uniform accounting of receipts and disbursements.

Financial Statements of Cities.

The commission addressed a circular letter early in 1902 to the city clerks of thirty-three cities of the state, having a population of five thousand and over, asking for a detailed statement of the receipts and disbursements for the last fiscal year. The annual reports of the treasurers were also requested and were generally furnished. The circular letter calling for a statement of municipal finances contained a few simple questions which could easily be answered if a proper system of accounting was in force. From some cities with a fairly satisfactory system of accounting, the statements returned were quite accurate and intelligible, but by reason of special charter provisions and from other causes the statements of financial affairs for all the cities could not be reduced to a definite or uniform basis for comparison between the cities.

From such statements it appears that nine cities have only one fund in which is entered the receipts from all sources and from which all expenses were paid. Twelve cities report from three to eleven different funds; five from eleven to twenty funds; four from twenty-one to thirty funds; one city has thirty-seven funds and one city fifty-three different funds. In

stances are also found which in addition to numerous city funds, two different funds for each ward appear in the report of the clerks and treasurers.

The systems of accounting are so radically different that when the statements were examined for tabulation no logical classification was possible. An attempt was made to compile the statistics as embraced in the statements, but the result proved that no definite conclusions can be reached upon the most important branches of municipal administration under the methods of accounting now in use. The receipts from the general property tax were not in all cases separated from other receipts. The total state, county and local taxes are occasionally reported as municipal taxes. The receipts from loans and the transfers and re-transfers of funds from one account to another were so intermingled with other items in the statement that classification was unsafe. Ward funds were in some cases not separable from the general fund.

The expenditures for poor relief, police, justice, fire department, lighting, sewerage disposal, streets and bridges, schools, libraries, public buildings, permanent improvements, and special assessments, could not be compiled to make intelligent comparison between cities under similar conditions and with like population.

The principal source of income for municipalities is from the general property tax, which according to the statistics, varies in the different cities from 35 to 92 per cent of the total income. In seven cities it ranges from 50 to 60 per cent; in six, between 60 and 70 per cent; in five, from 70 to 80 per cent; in five, between 80 and 90 per cent; and in one above 90 per cent of the total income. The liquor licenses vary from less than one per cent to twenty per cent of the total income. Until a more uniform system of accounting is prescribed for cities, statistics of receipts and expenditures to exhibit the cost of service in the several branches of city government will not be obtainable.

Statistics of Municipal Taxation.

The best information that can be offered in the present condition of affairs is to give the aggregate taxes levied on all the

general property for local purposes for a series of years to show the general trend of taxation in the cities.

From the reports of the secretary of state is compiled the following table of taxes for the period of eleven years from 1891 to 1901 inclusive, except for the years 1892 and 1894 fór which no data can be obtained as to local taxes.

State, County and Local Taxes, and Special Charges, Levied in State of Wisconsin for years 1891 to 1901, both inclusive.

1 Transferred from general fund in lieu of taxes, levy of 1894, $732,570.

2 One mill tax increased $806, 284 on account of valuation of property in state by state board of assessment, at $1,436, 284,000.

From the foregoing table it will be noticed that there has been a gradual increase in local taxation during the period for which the statistics are given. Towns and villages being included in the total, the increase in city taxation cannot be determined with accuracy, but as the expenses of towns and