Waukesha Consultant Suggested Tax Sharing With Milwaukee To Win Water Diversion

Though some suburban officials have said 'over-our dead-bodies,' one prominent consultant paid by the Waukesha Water Utility proposed a while ago that the key to water sales to the suburbs west of the Great Lakes Basin was sharing new property tax revenues with Milwaukee.

The story is reprinted below intact from a guest posting I wrote last year for Bill Christofferson's Xoff Files blog - - in a simpler time when I had no blog of my own.

Insiders familiar with the nuances of the issue will see that things have moved forward a bit since then, but the matter is particularly germane now as Milwaukee officials want New Berlin to consider issues beyond mere payments per gallon for water, should a deal be struck.

It all involves a memo, dated June 10, 2004, "Arguments For and Against the City of Milwaukee Selling Water to the City of New Berlin," found, oddly enough, in the files of the Waukesha Water Utility. As to why, and how it got paid for after the Utility essentially disowned it, read on...

(I will have the original documents converted into an electronic format, and will post them, so bear with me below for such a length posting.)

Citing City of Milwaukee records and analyses, the memo indicated that 42 businesses from Milwaukee had migrated to New Berlin's Industrial Park when it opened, suggesting both that more industrial flight could follow water diversions and sharing tax resources as part of a diversion package could minimize Milwaukee's revenue losses.

"The losses had a negative impact on Milwaukee's industrial assessment and resulting property tax revenues," said the memo. "The sale of water to New Berlin could have a similar negative impact on Milwaukee industry during the decade."

More recently, State Senator Mary Lazich, (R-New Berlin), has called City of Milwaukee officials' suggestions that water be sold in conjunction with a broader social and fiscal agenda "extortion." See her Nov. 1, 2007 blog posting.

The heart of the posting from the Xoff Files is in these few paragraphs, which I will italicize to separate them from the rest of this item.

The consultant referenced was Milwaukee attorney Barbara Boxer, who sent a strategy memo to the Waukesha Water Utility about how sharing property tax revenue with Milwaukee could help seal a diversion deal.

"The sale of water to New Berlin will create competition for industrial development between Milwaukee and New Berlin that may result in a loss of industry and related property tax revenues to Milwaukee" during the current decade, the memo said, citing Milwaukee records.

On the plus side, and again relying on Milwaukee records, the memo said selling water to New Berlin could help stabilize Milwaukee's water rates, provide an essential service to the suburbs, bring Milwaukee needed revenue, foster regional cooperation and establish a wider, cooperative governmental model.

Boxer's conclusion was that the argument for regional cooperation, because it had helped secure an earlier water sale agreement with Milwaukee to supply Lake Michigan water to New Berlin's in-basin territory, "gives considerable insight into strategies that may help advance the proposal for Waukesha."

The memo further suggested "an approach based on a regional tax concept" could help Waukesha "overcome many of the arguments against Milwaukee's sale of water."

And now the full posting:

Wednesday, October 18, 2006:

Hot Potato Found in Waukesha Water Utility Files

Here's the story of one water policy drama that played out behind-the-scenes at the Waukesha Water Utility, where a team of consultants and government officials is working hard to win a diversion of Lake Michigan water:

As the debate over whether Lake Michigan water should be piped to suburbs beyond the Great Lakes basin heated up in 2004, the utility received a memo from a Milwaukee law firm that included a summary of the potential results - - good and bad - - if New Berlin got a Lake Michigan diversion.

The utility's response at the time?

It told the author that the memo's preparation hadn't been authorized or coordinated with the utility's consulting team.

The utility eventually paid the law firm about $4,000 of an initial bill of just over $10,000 and filed the memo away.

Courtesy of the Wisconsin Open Records Statute, read the intriguing history of the unwanted and hitherto undisclosed water memo, including its suggestion that Waukesha woo Milwaukee with an offer of tax sharing, below...

The City of New Berlin wants a diversion of Lake Michigan water to the city's western portion that is outside the Great Lakes basin.

Proposed diversions from The Great Lakes - - the world's largest system of fresh surface water - - are becoming more contentious because some fast-growing Waukesha County suburbs are aggressively pressing for diversion permissions now.

Yet it turns out the case against diversions was included in a legal memorandum that sat unnoticed for two-and-a-half years in the strangest of places - - the files of the Waukesha Water Utility - - which itself wants a diversion of Lake Michigan water about six times larger than New Berlin's, records show.

Proposals to divert Great Lakes water are splitting the region along urban/suburban lines.

Citing radium contamination and potential water supply issues linked to the over-pumping of deep wells, some suburban and allied Waukesha County business interests argue that Waukesha communities are entitled to Lake Michigan water - - even if their communities lie outside the boundaries of the Great Lakes basin.

Meanwhile, many environmentalists fear that a New Berlin diversion could cause precedent-setting water losses to an already fragile and indispensable fresh water ecosystem.

And some Milwaukee activists and officials worry that selling water to the fast-growing suburbs would contribute to the very suburban sprawl that is draining value from the state's largest city.

The issue is front-and-center because all eight Great Lakes states are reviewing rule changes to a Compact their Governors signed with two Canadian Great Lakes provincial premiers in 1985.

The changes lay out potentially higher legal barriers that could slow or block the diversion of Lake Michigan water to Waukesha, western New Berlin and other municipalities outside the Great Lakes basin.

An open records request to Waukesha's Water Utility this summer unearthed numerous documents about water policy planning in Waukesha and some other Waukesha County communities.

Among the more documents were Waukesha's confidential - - and unsuccessful - - behind-the-scenes proposals in March and May that sought Gov. Jim Doyle's permission to divert water relatively quickly from Lake Michigan without applying to the other Great Lakes states for approval.

(http://wisopinion.com/index.iml?mdl=article.mdl&article=5113).

The open records request also produced the June 10, 2004 legal memorandum - - "Arguments For and Against the City of Milwaukee Selling Water to the City of New Berlin."

The memo was prepared by Attorney Barbara Boxer at the Milwaukee firm of Reinhart Boerner Van Buren, S.C., and relied heavily on City of Milwaukee records to support the pro-and-con arguments that the memo summarized.

On the negative side of the diversion argument, according to the memo: encouragement of urban sprawl, possible job losses, potentially-insufficient payments to Milwaukee, possible harm to the Great Lakes basin, and New Berlin's non-compliance with a Milwaukee requirement that municipalities seeking its water have a comprehensive housing strategy - - an omission the memo said New Berlin had subsequently addressed.

On the relationship of diverted water to the issue of job losses, the memo cited the earlier relocation of 42 Milwaukee firms to New Berlin's Industrial Park that had occurred in the 1970's.

"The sale of water to New Berlin will create competition for industrial development between Milwaukee and New Berlin that may result in a loss of industry and related property tax revenues to Milwaukee" during the current decade, the memo said, citing Milwaukee records.

On the plus side, and again relying on Milwaukee records, the memo said selling water to New Berlin could help stabilize Milwaukee's water rates, provide an essential service to the suburbs, bring Milwaukee needed revenue, foster regional cooperation and establish a wider, cooperative governmental model.

Boxer's conclusion was that the argument for regional cooperation,because it had helped secure an earlier water sale agreement with Milwaukee to supply Lake Michigan water to New Berlin's in-basin territory "gives considerable insight into strategies that may help advance the proposal for Waukesha.

"The memo further suggested "an approach based on a regional tax concept" could help Waukesha "overcome many of the arguments against Milwaukee's sale of water."

Boxer suggested she provide the utility with additional research into regional tax plans elsewhere.

Efforts to reach Boxer and the law firm for comment since September 24, 2006 have not produced a reply.

Dan Duchniak, the Waukesha utility's General Manager, distanced the utility from the memo.

Duchniak told Boxer by letter on August 30, 2004 that the memo had not been authorized contractually and had not been coordinated with his team of consultants.

"Without this effort and coordination, our position for a successful application to the Great Lakes Governors could be compromised," Duchniak wrote.

Records show that the Rinehard firm had a $60,000 contract with the Waukesha Water Utility in 2003 for work on drinking water quality and compliance issues, but not on the subjects outlined in the memo, Duchniak said.

Duchniak said his objections to the memo were entirely procedural and were unrelated to the memo's substance.
He said initially rejected a bill for the memo's preparation for $10,107.90, and later agreed to pay $3,945.

Duchniak's letter to Boxer included an offer to review a proposal from Boxer's firm for additional work, including lobbying, but a request to the utility for all contracts related to Waukesha's diversion planning shows no contracts with the firm.

The utility has retained Godfrey & Kahn, S.C., to work on some diversion legal planning, Martin Schreiber & Associates for public relations and lobbying, and GeoSyntec Consultants, Chicago, Illinois, for engineering advice.