REPORT BRIEF

THE JURY IS OUT

Options for financing a new Milwaukee
County Justice Center

 

 

 

 

Built in 1929, Milwaukee County’s Safety Building originally housed a variety of City of Milwaukee
and Milwaukee County courts and law enforcement functions. The building has been gradually repurposed to serve primarily as office space for County justice system personnel (as well as nine
courtrooms), but it does not adequately meet that need.
The County now hopes to replace the Safety Building with a new 374,000-square-foot justice center
on the same site. Unfortunately, the price tag is prohibitive. With a total estimated project cost
(including temporary transition space) of up to $345 million, the project would exhaust much of the
County’s borrowing capacity for years to come if financed under its regular capital program.
Milwaukee County is not the only financially-challenged county government that has faced the need
for a new courthouse facility. In this report – commissioned by Milwaukee County’s Department of
Administrative Services – we explore how other county governments across the U.S. have financed
new county courthouses, and we seek to apply lessons learned to Milwaukee County’s predicament.
There is little question that Milwaukee County needs to replace its Safety Building and even less
question that to do so it will require consideration of financing approaches that fall outside of its
traditional capital finance model. We hope this analysis will be helpful in providing perspective on
such financing solutions and in launching informed deliberations on the appropriate means of paying
for a new Milwaukee County Justice Center.

National Scan
To initiate our analysis, we conducted a scan of county courthouse or public safety projects
throughout the U.S. with a cost of more than $100 million that have been completed (or are in the
process of being completed) since 2010. Our national scan identified 14 such projects. Notably, we
found there is no “cookie cutter” approach to developing and financing large county courthouse
projects. Indeed, these projects had a diverse array of financing strategies and funding sources and
they employed several distinct types of partnerships.
Table 1 provides an overview of the 14 projects, including information about their size, cost, and
financing. We find a diverse set of financing sources and approaches, though one common
characteristic emerges: most counties are using specialized forms of financing that lie outside of
their regular capital improvements program, and/or are receiving direct help from their state
government or state-authorized special sources of funding. In fact, even for the three counties that
used their own bond financing, two did so in ways that were not typical of their traditional capital
financing approach.
While local governments typically finance major capital projects by issuing debt, increasingly they
also are considering Public Private Partnership (P3) models to finance extremely large projects. In a
P3, a public entity partners with a team of private architectural, development, and management
firms to finance and develop the capital project, and often to maintain the asset after construction.
We found two examples of P3 approaches among the 14 projects (Los Angeles and Howard
counties), and an additional example (Marion County) where local leaders originally pursued a P3 but
ended up with a more traditional approach.

 Table 1: County courthouse projects throughout the United States
State

County

SQ FT

Total Cost

Financing Source

CA

San Diego

704,000

$550,000,000

State-approved court fees pay off state-issued
revenue bonds.

MA

Middlesex

265,000

$200,000,000

State general obligation (G.O.) bonds.

FL

Broward

741000

$262,000,000

OR

Multnomah

444,693

$295,000,000

OR

Clackamas

215,000

$154,000,000

GA

Forsyth

335,000

$100,000,000

FL

Duval

800,000

$350,000,000

OH

Franklin

325,000

$175,000,000

Quarter-cent sales tax initiated in 2013 (ground
broke Nov. 2017).

CA

Madera

115,804

$100,000,000

State-approved court fees.

IN

Marion

665,534

$525,000,000

35-year county-issued lease appropriation bonds
(debt service payments made w/operational
savings).

AZ

Pima

290,000

$143,000,000

Voter-approved county G.O. bonding of $75
million; county general fund reserves.

IL

Will

365,000

$215,000,000

25-year county G.O. bonds; City of Joliet
contributing $50 million over 20 years toward debt
service; new courthouse fee.

MD

Howard

222,000

$105,000,000

County G.O. bonds; P3 hybrid - Design, Build,
Operate.

CA

Los Angeles

531,000

$396,448,640

P3 - DBFOM; private bonds paid off largely
through state-approved court fees over 35 years.

Dedicated sales tax revenues received from the
State of Florida to pay debt service on revenue
bonds.
$125 million commitment from State legislature
using bond proceeds; remaining $170 million
through county G.O. bonds and general fund
transfer.
Half to be paid by the State using G.O. bond
proceeds. County will use "internal financing."
Voter-approved Special Purpose Local Option
Sales Tax (SPLOST) program to pay off revenue
bonds and cash finance.
Revenues from Better Jacksonville Plan (1 cent
sales tax) paid debt on revenue bonds. Other
funding included general capital funds and
revenues from traffic fine surcharge.

2

 Traditional Public Financing &
Development Approaches
After conducting our initial scan, we first took a deeper look at five of the projects from our list that
used county-issued debt and a traditional development approach. Then, in a subsequent section, we
examine the two P3 models.
Local governments most commonly borrow money for capital projects by issuing general obligation
(G.O.) bonds. These bonds are backed with the government's general credit and taxing authority.
Another form of local government debt is revenue bonds, which instead are secured with a specific
revenue source. Among the projects cited in our scan, we observe the use of both types of bonds.

Pima County, AZ – Traditional County G.O. Bond Financing
The Pima County Downtown Court Complex is a $143 million 290,000 square-foot facility that
opened in 2015. In 2004, Pima County voters approved $76 million in 30-year G.O. bonds to fund
the complex. Later, the County was forced to come up with an extra $67 million, which it
accommodated through its general revenue streams and reserves.
A major difference between Milwaukee County and Pima County is that Pima’s G.O. bonding must be
voter-approved per state law. Under this approach, the County periodically places proposals before
voters for large debt issuances for projects covering several years. A “secondary property tax” is
implemented to support the debt service on the bonds if the referendum is approved. This tax
essentially constitutes an add-on to the property tax levied by the county for operational purposes.
The Pima County example offers food for thought for Milwaukee County in two ways. First, the use of
30-year G.O. debt allowed Pima County to spread debt service payments over a longer period, thus
reducing annual payment amounts. The downside, however, is that considerably more interest is
paid over the life of the bonds. Milwaukee County currently is limited by the Wisconsin Constitution to
a maximum 20-year term for G.O. debt but that limitation does not apply to revenue bond debt.
Also, use of a special, dedicated property tax for justice center debt service could allow Milwaukee
County to finance the project in a manner that would not reduce the amount of local tax revenue
available for other uses. Per State law, G.O. debt payments are exempted from property tax levy
limits if approved by a three-quarters vote of the County Board. Consequently, County policymakers
would not be precluded by State law from levying a special property tax to pay off justice center debt,
though the already high property tax rates in the county would be a barrier to such action.

Multnomah County, OR – State/County Partnership
Multnomah County’s 444,693 square-foot, $300 million courthouse project is expected to be
finished by 2020. The County was able to take advantage of a state policy that allows for up to a 5050 state-local match for new courthouse projects. In 2013, the Oregon legislature authorized $125
million toward the construction of the Multnomah County courthouse. For the remaining amount,

3

 Multnomah County has provided $80 million from its General Fund and issued $90 million in 30year G.O. bonds. An additional bond sale is anticipated this year or next to pay the remainder.
Multnomah County typically supports its G.O. debt with general revenues, but in this case it also is
using special surcharges to support $25-$30 million of courthouse debt. State law allows the
presiding judge in a judicial district to impose a $5 surcharge for traffic and parking violations if the
county’s commissioners request such a surcharge and if the county is receiving state financial
assistance for a courthouse repair or replacement project.
In both Wisconsin and Oregon, counties are responsible for capital improvements for their
courthouses. Nevertheless, recognizing the overwhelming financial challenge posed by large
courthouse replacement projects for county governments, Oregon’s legislature created a program to
share the cost of such projects. Whether State leaders in Wisconsin would be willing to consider a
similar approach certainly is debatable, particularly in light of the State’s own pressing capital needs
for both transportation infrastructure and buildings.
Multnomah’s use of special surcharges on traffic and parking fines also may be instructive for
Milwaukee County. Again, recognizing the challenge posed by courthouse construction, state
lawmakers in Oregon authorized special user-based fees to help support county-issued courthouse
debt. Similar special surcharges also would require state legislative approval in Wisconsin.

Forsyth County, GA – Dedicated Local Option Sales Tax
Forsyth County’s new $100 million, 335,000 square-foot courthouse facility was completed in 2015.
In 2011, Forsyth County voters approved a 1% Special Purpose Local Option Sales Tax (SPLOST) to
pay for a list of infrastructure projects, including its courthouse complex. The County issued $50
million in revenue bonds in 2012 to help finance the project. Sales tax revenues from the SPLOST
supported the bonds.
In Georgia, the state allows counties and municipalities to enact a 1% SPLOST for the purpose of
financing certain capital outlays. The tax only can be imposed via a referendum. The SPLOST is timelimited (typically five or six years) but can be renewed by voters for new sets of projects.
The SPLOST approach potentially could be attractive for Milwaukee County given that it would
provide a dedicated and robust source of new revenue to support courthouse debt, thus not
detracting from the County’s regular capital program. Requiring that such a special tax be approved
via referendum, that it be time-limited, and that the proceeds be restricted to specifically delineated
capital projects could help temper concerns about permanent higher taxation. Of course, any such
approach would require State authorization. State law allows counties to levy up to a 0.5% local
option sales tax, but that authority already has been used by Milwaukee County.

Broward County, FL – Dedicated Portion of Existing Sales Tax
Broward County opened a new $345.6 million, 674,000 square-foot courthouse in January 2017.
The project was financed with $108 million originally appropriated for a Family Court building and jail
expansion project; and $218 million in proceeds from revenue bonds issued in 2010.
4

 The use of revenue bonds – as opposed to G.O. bonds – was predicated on the County’s decision to
pledge revenues received from a distribution of a state sales tax to support the debt. Under the State
of Florida’s Local Government Half-Cent Sales Tax Program, Broward County receives a formuladriven distribution of a portion of the State’s sales tax collections.
Broward County may hold lessons for Milwaukee County both in its staggering of the maturity of its
debt over a 15- to 30-year period and its dedication of sales tax revenues to cover revenue bond
debt. As noted with regard to Pima County, issuing debt over a longer term can enhance the
affordability of annual debt service payments, though the downside is higher total interest payments.
Dedicating a portion of its existing half-cent sales tax to support debt service payments also may be
an option for Milwaukee County. A clear negative, however, would be the impact on the remainder of
the capital program and the operating budget. Existing sales tax monies already service the County’s
wide range of long-term capital debt, and amounts not needed for that purpose are a key source of
operating budget revenue. Diverting those resources to courthouse debt undoubtedly would create
severe financial pressure in other areas.

Duval County, FL – Mixed Approach
Duval County’s (FL) 800,000 square-foot courthouse facility opened in June 2012 at a cost of $350
million. The courthouse was funded in large part by the Better Jacksonville Plan (BJP), a $2.25 billion
infrastructure package that was placed before voters in 2000. The courthouse was one of several
projects included in the BJP, which was funded in part by a half-cent county sales tax that will expire
no later than 2030. The State of Florida authorizes counties to seek voter approval of sales taxes of
up to 1% for infrastructure spending.
The courthouse project received $211 million as part of the total BJP infrastructure package. Other
primary funding sources included $86.5 million in City of Jacksonville capital funds (appropriated as
part of the city/county government’s regular capital program); and $48.3 million collected from a
$15 traffic fine surcharge. The $211 million from the BJP is paying debt service on 30-year revenue
bonds issued in 2001.
Duval County provides an example of a mixed funding approach that combines the use of local
option sales tax revenue, traffic fine surcharge revenue, and funds from the government’s regular
capital program. For Milwaukee County, an expanded local option sales tax and traffic fine surcharge
would require approval by the Legislature and Governor. Despite that obstacle, a mixed approach
might be seen as a compromise in which the County would need to fit part of the courthouse project
into its regular capital program, but could turn to voters for sales tax approval and Madison for
permission to implement a traffic fine surcharge for the remainder.

5

 Public-Private Partnerships
While a less traditional and less common form of public infrastructure financing, P3s have gained
increased attention from local governments recently in light of their vast infrastructure needs and
limited borrowing capacity.
Customarily, when a government wants to construct a road or a new facility, it engages in a process
known as design-bid-build. Under this approach, government or contracted engineers and architects
design a project, and then construction firms bid for the right to build parts of it. In recent years,
however, a number of state and local governments have departed from standard practice and begun
employing private firms in new ways to develop their infrastructure.
Potential benefits associated with P3s are faster project completion, greater assurance that highquality maintenance will be conducted once the project is completed, and access to private expertise
for technically challenging projects. From a financial perspective, because annual payments to
private entities are budgeted as an operational cost and not as public debt, they do not threaten
bond ratings. Also, P3 contracts typically exceed the payback period for municipal bonds, which can
make the project more affordable.
Potential disadvantages include the higher cost of private capital, the complexity and cost associated
with developing P3 contracts, and potential unforeseen risks, such as the bankruptcy of a private
partner. Also, for Milwaukee County, a disadvantage would be an inability to exempt P3 payments
from State property tax limits, as only G.O. debt payments are exempted under State law.

Case Study #1 – Long Beach (Los Angeles County) Courthouse
Los Angeles County’s 545,000 square-foot courthouse in Long Beach opened in 2013. This project
is the first P3 courthouse built in the U.S. under a performance-based infrastructure (PBI) approach.
It relied upon private firms for all phases of infrastructure procurement: design, construction,
finance, operations and maintenance.
The main public partner is the Judicial Council of California, which is the policymaking body of the
California courts. Long Beach Judicial Partners is the private partner. This is a company established
specifically for the courthouse project that includes private equity, design/construction, architecture,
and real estate firms.
The project was financed through a $518.5 million, 34-year bond issued by the private partner.
Under terms of the agreement, the Judicial Council provides $53 million annually in availability
payments over 35 years. The payment is not considered debt, but instead is treated as
compensation for performance-based facility services, such as operations and maintenance, which
constitute 40% of the payment value.
Several financial, engineering, and architectural journals and professional associations have lauded
the Long Beach project. Conversely, the Alliance of California Judges, a 500-member group of
California judges formed in 2009, has criticized the expense of the project and questioned whether it
required P3 financing.

6

 Case Study #2 – Howard County (MD) Courthouse
Howard County, a suburb located between Baltimore and DC, is in the midst of a process that will
select a private partner for the building and operation of a new county courthouse. The facility will
occupy 227,000 square feet at an estimated construction cost of $138.7 million.
Howard County characterizes its new project as a “hybrid P3,” meaning that private firms take on all
procurement responsibilities from design through maintenance but the County provides most of the
financing through G.O. bonds. An advantage is that these municipal bonds have a lower interest rate
than private capital.
The County will issue about $90 million in G.O. bonds, which will fund partial construction,
procurement, and preparatory costs. Private capital will finance the remaining construction costs as
a means of ensuring that the private participants have “something at stake” in the long-term success
of the project. After occupancy, Howard County will make estimated annual availability payments of
$14.4 to $17 million under a 30-year contract.

Possible Financing Strategies
for Milwaukee County
Milwaukee County has never had to finance a $300 million facility. Not only is this a daunting price
tag, but it also must be considered in the context of the County’s other financial difficulties, which
include a mounting backlog of unfunded capital projects and a longstanding structural deficit. Below,
we discuss four potential strategies to finance a new justice center in Milwaukee County that
emanate from our earlier analysis of recent courthouse projects from across the country.
Strategy #1: Issue General Obligation Bonds Per Current Practice
Bonding for the full cost of a large facility, such as a courthouse, is a fiscal reach for most
governments. Indeed, one concern about full bond financing by Milwaukee County would be the
potential impact that a large increase in debt might have on the County’s bond rating and, as a
result, on future borrowing costs.
In addition, borrowing for the full amount of the justice center project clearly would have negative
implications for the County’s capital program. Total G.O. debt would rise by about 50% (assuming
$300 million in new debt) and would reach an unprecedented level. If the County adhered to its
current practice of issuing 15-year G.O. debt, then its annual debt service would be about $25.6
million per year (assuming an interest rate of 3.25% and level debt service payments). Such an
increase would have a detrimental impact on County operations and sharply constrain its ability to
issue other debt for mounting capital needs.
Given the difficulties the County has encountered each year in bridging its structural deficit and the
expectation that budget balancing strategies will grow even more difficult in the future, it is doubtful
that issuing 15-year G.O. bonds for the full cost of this project and paying the associated debt service
payments would be a viable option to pursue. Other funding strategies, however, could reduce the
amount of needed G.O. borrowing and/or the level of debt service payments, as discussed below.

7

 Strategy #2: Reduce Financing Costs and Debt Through New Sources of Capital
We present here two strategies involving outside financing that would reduce or eliminate the
County’s need to issue G.O. bonds to finance a new justice center.
Strategy #2A—State G.O. Bonds
One way to reduce the amount of County debt needed for the justice center would be to draw on
state G.O. bonds for at least partial assistance. In Wisconsin, the State and counties share in
financing county circuit court operations, but counties have had full responsibility for capital funding.
While the State (to our knowledge) has not issued bonds in whole or part for county courthouse and
justice facilities, there appears to be no hard and fast agreement on this practice.
State bonding assistance could have a meaningful impact on the Milwaukee County project. If the
Oregon model of equal capital financing were followed, Milwaukee County’s total G.O. debt would
increase $150 million (to about $760 million) and debt service payments by about $12.8 million
annually. Of course, even with the State paying for half of the cost, Milwaukee County might find it
difficult to fund its share. From the State’s perspective, there would be concern that borrowing for
county justice facilities might establish a costly precedent and add to its total G.O. debt.
Strategy #2B—Private Capital
The County also could pursue a P3 to finance a new justice center. One advantage is that financing
would be “off the books” and private borrowing costs would not be counted as debt nor availability
payments as debt service. Nevertheless, Milwaukee County would need to find the resources in its
operating budget to make room for the substantial annual payments required for a P3 contract. Also,
because P3 payments would count against the property tax levy limits on the County’s operating
budget, using increased property taxes to find such room largely would be precluded.
P3s work best for complex construction projects where the expertise and skill of private partners can
reduce risk and lower life-cycle expenditures despite higher financing costs. Milwaukee County
facilities officials and engineers would need to determine whether that potential advantage would
offset the added costs of private financing. An approach modeled after Howard County’s P3 hybrid,
financed in large part with public G.O. bonds, would eliminate much of that added cost, but the
hybrid’s draw on G.O. bonding would take away one of the advantages of a P3.
Strategy #3: Create New Revenue Sources for Annual Debt Service Payments
We explore three potential new revenue sources for offsetting the debt costs of the proposed justice
center. Each of the three involves local revenues that would require State authorization.
Strategy #3A—Sales Tax
There are two ways to use the sales tax for capital funding. First, sale tax revenues receipts can be
directly applied toward construction costs. Conversely, sales tax receipts can be applied toward
annual debt service payments. Milwaukee County would require State authorization to implement
either approach.
Currently, Milwaukee County raises about $75 million a year through its 0.5% sales tax. This tax rate
would need to double for at least four years to fund the entire cost of the proposed justice center.
Conversely, an increase in the sales tax of .17% for a period of 15 years would fund required debt
8

 service payments using our previous assumptions (i.e. $300 million in 15-year G.O. debt at an
interest rate of 3.25%). Extending the life of the bonds for a longer period of time (such as 20 or 30
years, as discussed below) would lower these sales tax requirements.
There are a variety of arguments that can be made for and against choosing the sales tax to finance
capital projects. On the positive side, the amount of tax assessed on most sales transactions would
be small and the administrative framework for tax collection already is in place. On the negative side,
budgeting a given amount of sales tax for a specific purpose can be tricky since incoming revenues
can fall during an economic downturn.
Strategy #3B—Miller Park Sales Tax
This option is a variation of the one presented above. Rather than increase Milwaukee County’s
current 0.5% sales tax, it would apply the 0.1% Miller Park sales tax in Milwaukee County to debt
service on a new justice center after the ballpark’s bonds are retired in late 2019 or early 2020.
In 1995, the Wisconsin Legislature created a special district to help finance Miller Park. Most funds
for construction came from the issuance of revenue bonds. Annual debt service costs on the bonds
are paid by a 0.1% sales tax on residents living in the five-county Milwaukee metro area.
Retention of this tax only in Milwaukee County to pay justice center debt would require legislative
authorization. This approach would raise about $15 million per year, or more than half of estimated
debt service costs associated with a 15-year, $300 million G.O. bond issue. The sales tax proceeds
could be combined with other funding sources to fully pay for annual debt service (e.g. court fees or
general County revenues). Alternatively, the length of the bonds could be extended to 30 or 35 years,
in which case the 0.1% sales tax may be sufficient to fully cover annual debt service payments.
Strategy #3C—Court Fees or Surcharges
In Wisconsin, the State and counties share in funding circuit court operations. The State assumes
the salaries and fringe benefits of circuit court judges, court reporters, and other specified costs,
which are funded mainly by an annual lump-sum appropriation. Counties pay for court clerks,
courtroom security, clerical staff, law libraries, juries, and other costs. In the 2015-16 fiscal year,
State-funded circuit court expenditures totaled $108.8 million, while county-funded circuit court
expenditures were estimated at $207.2 million.
The circuit courts assess fees, fines and forfeitures, and surcharges. This revenue helps offset
general court costs while also funding specific law enforcement and justice programs. State statutes
set each specific charge and specify the portion of revenues allocated to the State and/or county.
The revenue generated by Milwaukee County circuit court operations in 2015-16 totaled $15.6
million. Of that amount, the County retained $3.2 million and remitted $12.4 million to the State.
An increase in county circuit court revenues would require State authorization. Additional funding
could be obtained either by raising the dollar value of specific charges or by increasing the counties’
share of the pot. A basic argument for drawing upon court fees to fund courthouse capital projects is
that the users of court services would bear greater responsibility than the general citizenry for paying
for those projects. On the other hand, a substantial increase in individual court fees would be
required to generate enough money to support debt service payments, and some of those paying the
increased amount likely would be economically disadvantaged.

9

 Strategy #4: Reconfigure Bond Repayment to Reduce Annual Debt Service Costs
We present two strategies to reduce the amount of annual Milwaukee County revenue needed for a
justice center bond issue, neither of which would require new revenues.
Strategy #4a—Extend Repayment from 15 to 20 years or More
The Wisconsin statutes and the Wisconsin Constitution limit the aggregate value of a local
government’s total debt to less than 5% of the value of its taxable property; and the repayment
period of G.O. bonds to 20 years from date of issue. Milwaukee County fits comfortably within these
standards; its debt is at 20% of the debt ceiling and County policy restricts the life of its G.O. bonds
to 15 years.
Table 2 shows the impact on annual debt service of extending the repayment period for justice
center bonds from 15 to 20 years. For illustrative purposes, we also include a column showing a 30year G.O. bond repayment, though that would require a Constitutional change. Two scenarios are
presented, one for a $300 million G.O. bond issue and the second for a $150 million issue. The
smaller amount could be accommodated if, for example, the State agreed to finance half the cost; or
if it authorized Milwaukee County to use new taxes or fees to directly finance half the cost.
Table 2: Estimated annual debt service and total debt service cost for G.O. bond financing scenarios
$150 million G.O. Bond
Annual Debt Service
$150 million G.O. Bond
Total Debt Service
$300 million G.O. Bond
Annual Debt Service
$300 million G.O. Bond
Total Debt Service

15 years (3.25%)

20 years (3.5%)

30 years (4.0%)

$12,793,287

$10,554,162

$8,674,515

$191,899,305

$211,083,240

$260,235,450

$25,586,574

$21,108,323

$17,349,030

$383,798,610

$422,166,460

$520,470,900

This approach would produce a modest drop in annual debt service cost if the bonds were issued
over a 20-year period, as opposed to the County’s current policy of 15 years. A weakness is that it
would produce substantially higher total debt service payments over the life of the bonds. Also, even
if the debt service payments were stretched out over 30 years, the annual cost under either the
$150 million or $300 million scenarios still could produce unacceptable impacts on County
operations and/or cause other capital needs to be deferred.
It also may be possible for the County to issue revenue bonds to finance a new justice center, in
which case the life of the bonds could be stretched to 30-35 years without a legal change. Under
such a scenario, the County hypothetically could pledge a portion of its existing sales tax revenues as
the revenue source for the bonds, similar to Broward County. While an advantage would be lower
annual debt service payments, disadvantages would include the need to pay a higher interest rate
and establish a reserve fund because of the increased investor risk associated with revenue bonds.

10

 Strategy #4B—Structure G.O. Debt Service to Avoid Spike in County Payments
The County also could seek to structure justice center G.O. bonds in a way that would time the
initiation of principal payments to coincide with the retirement of its pension obligation bond (POB)
debt in 2031. Doing so would allow the County to maintain relatively level debt service payments
throughout the term of the bond issue, thus potentially allowing it to avoid an unaffordable spike in
debt service payments that would cause severe disruption in other parts of the budget.
The Milwaukee County Comptroller prepared estimates showing such a structure for $299 million in
20-year G.O. bonds. In Chart 1, we show the County’s current projected annual debt service
payments for the next 25 years without the justice center project (the blue line), and compare those
to projections that incorporate justice center debt per the hypothetical debt structure. While the
orange line shows that the County’s annual debt service payments would increase by $35.8 million
(40%) over the period, the annual increase would be relatively steady at $1.1 million to $2 million
per year because of the “backloaded” structuring of principal payments for justice center debt.

Millions

Chart 1: Potential County debt service with and without new justice center
$140

$126.1
$111.4

$120
$100 $90.3

$101.3

$80
$72.6

$60
$40
$20
$0

2018

2020

2022

2024

2026

Projected Debt Service

2028

2030

2032

2034

2036

2038

2040

2042

2044

Debt Service including new justice center

Source: Milwaukee County Comptroller’s office

The clear benefit of this approach is that it would allow the County to absorb justice center debt
without having to accommodate a sharp increase in debt service over a short period of years, and
without needing to seek a change in State law. Indeed, at first glance, the annual increases of $1.1
million to $2 million would not appear to be an exceedingly daunting obstacle.
However, while this approach certainly would appear to be more affordable and realistic for
Milwaukee County than any of the G.O. bonding approaches discussed above, it still would pose
considerable challenges. The foremost is that for years, the County has been able to achieve only
limited annual revenue growth, and any growth it does achieve is required for basic operational
needs (e.g. fringe benefit and salary increases). Thus, absorbing $1.1 to $2 million in annual debt
service increases over a prolonged period would constitute a substantial challenge for the County.
11

 Conclusion
This report has explored a number of different financing, funding, and technical strategies that would
help Milwaukee County pay for a new justice center. Our analysis yields the following conclusions:
•

The traditional approach of issuing 15-year G.O. bonds will not work given the costs of the
proposed building and the impact that paying for it would have on the County’s capital and
operating budgets. This approach would constrain the County’s ability to finance other needed
capital projects and exacerbate the current infrastructure backlog. It also would worsen the
County’s structural deficit and intensify the County’s fierce operating budget challenges.

•

Most other large counties that recently have built new courthouses received state assistance.
This has come either in the form of direct state financing or state legislation that empowered
local governments to raise local funds for capital projects, often via referendum.

•

Many counties have drawn on multiple sources of funds to finance their project or pay debt
service costs, and many have used lengthy debt repayment schedules of 30 years or more. If the
State of Wisconsin is unwilling to share in the construction cost of a new justice center, then a
strategy that combines new funding sources with a non-traditional debt financing approach
would appear to be most viable in Milwaukee County, as well.

While we do not advocate a specific solution, it is illustrative to consider how two potential combined
approaches might work:
1) Under a scenario in which the State did accept a shared responsibility for justice center
construction and bonded for $150 million of the construction cost itself, the County could
consider a backloaded debt financing approach for the remaining $150 million. That would
ostensibly allow it to absorb interest costs within its regular capital program between 2020 and
2031 without experiencing a spike in debt service. After that time, when the POB debt is retired,
the need to pay off $150 million of principal (as opposed to $300 million) still would leave
several million dollars of POB debt savings to apply to other needs.
2) If the State instead was willing to authorize new sources of Milwaukee County revenue (or
authorize a referendum on the matter), then a 0.1% sales tax combined with a traffic fine
surcharge and other increased court fees could be sufficient to meet the annual debt service
cost of a 20-year, $300 million G.O. bond issue, which we estimate to be about $21.1 million
annually. A positive element of this approach is that it would allow the County to service its
justice center debt without impacting its other budgetary needs.
A negative element of both approaches would be higher total interest payments from the lengthier
bond structures, which would increase the project’s overall cost to taxpayers. Also, even an approach
in which the State is willing to pay half the cost may not be affordable for the County without new
sources of revenue given its other financial challenges and needs.
The overriding conclusion is that Milwaukee County does not have the financial wherewithal under
current conditions to finance a new $300 million justice center, which is a conclusion reached by
most other large county governments as they have pursued similar facilities. Creative options for
financing and funding such a facility do exist, but implementing them is likely to require some form of
assistance from State government.
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