Policy Forum: Transportation aid formula favors small towns, high-growth cities

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Wisconsin’s primary means of helping cities and towns pay for road work tends to deliver the most support to places with high property values and new development at the expense of local governments that may have greater needs, according to a report released Wednesday.

The nonpartisan Wisconsin Policy Forum, along with the University of Wisconsin-Milwaukee’s Institute for Physical Infrastructure and Transportation, examined the state’s General Transportation Aids program, the primary method of distributing road money to local governments.

The report found Wisconsin’s road-aid system tends to favor local governments with more development and high property values over their low-growth counterparts. Over time, the money has also shifted to small towns, which receive the same aid payments no matter how much they spend on roads, a system that provides little to no incentive to invest in infrastructure.

“In short, Wisconsin’s aid system rewards communities with high property values and new development for spending money on roads or even related services such as police – whether or not the spending is needed – while providing no incentive to very small communities to repair and rebuild roads,” according to the report. “The result is a system that is likely less efficient and effective in promoting a safe, high-quality road network.”

With $508.2 million in 2021 alone, Wisconsin’s road-aid program has the second largest amount of money set aside for it in the Wisconsin Department of Transportation’s budget. It’s also the second largest category of state aid for local municipalities, and one of the largest aid categories for Wisconsin counties.

Wisconsin’s spending on roads is the sixth-highest nationally — a sum that’s consistent with how much other cold-weather states with a large rural population spend on transportation. The state spent $952 per capita on state and local highways in its 2017 fiscal year. As part of that, Wisconsin sent $119 per capita in highway aid to all local governments in 2017.

But the allocations have not been even. Small local governments in particular have captured a large share of the aid. Small towns are paid through a formula that reimburses them based on the number of road miles that are within their jurisdictions. Larger municipalities meanwhile receive payments in proportion to their various road-related costs, including their need to provide police protection and undertake construction and maintenance projects.

Since 1990, state lawmakers have increased the rate used to allocate money to small municipalities for their total road miles at a faster pace than the total funding for road aids. That means road aid has risen faster for small towns and villages than for cities and counties.

The Policy Forum finds Wisconsin’s neighboring states — Minnesota, Iowa, Michigan and Illinois — take into account a greater variety of factors when deciding how to allocate road aid to local governments. They, for instance, might consider population, vehicle registrations or fees, and local needs.

Using a system looking at road spending and local road needs in 111 Wisconsin municipalities, the Policy Forum found payments were highest for small towns and for the city of Milwaukee because of its high police costs. But the report found actual spending on roads may fall short of likely needs.

The report suggests state officials take a number of steps to more fairly distribute road aid. They, for one, could set up a council of local leaders to deal with transportation-aid policy.

The report also recommends various tweaks to the road-aid formula. Lawmakers, for instance, could reduce the formula’s emphasis on police costs to allow more weight to be given to needed road maintenance and construction. It could also take into account road and pavement types, population and vehicle-registration figures.

The Policy Forum cautions that change won’t come easily. Reforming the current system would “inevitably” give rise to winners and losers.

“Still, there are also drawbacks to appropriating ever larger amounts of tax dollars for the current program without considering whether those funds are achieving the state’s transportation goals,” according to the report. Follow @natebeck9