Wisconsin's Tax Incremental Financing Law (2000)

Wisconsin's Tax Incremental Financing Law
(April 2000)

You've heard about them, you've talked about them with other local officials and you've probably formed an opinion about them. But if you're like 99% of Wisconsin residents, you're probable not sure exactly what Tax Incremental Districts (TIDs) are. This article answers the most basic questions about the Tax Incremental Financing (TIF) law. What it is, how it works and how TIDs are created. It does not, however, address such questions as whether TIFs have been used as the Legislature intended, if they should be continued or if towns should be authorized to create TIDs.

Created in 1975: Wisconsin's TIF law dates back nearly two decades, when the Legislature authorized TIDs as a new way to eliminate blight and rebuild economically depressed areas by promoting industrial development and job creation. TIF authority was extended to cities and villages, but not to towns or counties.

Utilizing Development that Would Not Have Otherwise Occurred: At its most basic level, a TID is intended to allow a city or village to pay for roads and other public improvements by using property taxes that would otherwise go to school, county and other taxing jurisdictions. The rationale for this is that the increased value in the district would not have occurred without the TID and, therefore, a portion of the taxes generated in the TID (i.e., the tax "increment") should be used to pay expenses associated with the economic development.

Standards: To create a TID, the municipality must determine that at least 50% of the area to be included in the proposed district is "blighted" (as defined in s. 66.46), is in need of "rehabilitation or conservation work" (as defined in s. 66.435) or is suitable for industrial development (as defined in s. 66.52). There are limits on the percentage of a municipality's total equalized (full market) value that can be included in TIDs.

How the Law Works: Once a TID has been created, the Department of Revenue (DOR) determines the base value of taxable property (plus some municipally owned property) in the district. Each year thereafter that the TID exists DOR computes any increase in value beyond the base, whether attributable to new construction or to inflation. This incremental value is multiplied by the total tax rate. However, rather than going to these governments, the amounts collected are allocated to a special TIF fund to finance improvements in the TID.

Time Limits: Generally, all TID project costs must be incurred within 7 years after the district is created. The TID terminates when all approved project costs are paid off or within 16 years after final project costs are incurred, whichever occurs first. Thus, a TID can last for up to 23 years.

Not All Improvements Can Be Financed Through TIF: TIF funds can be used to prepare a site for industrial development, to build or expand municipal facilities (such as streets, storm sewers, sanitary sewers and the like) and for associated professional services. However, the cost of constructing or expanding municipal buildings and general government operating expenses unrelated to planning or development of the TID cannot be financed with tax increments.

Creating a TID: The municipality proposing a TID must prepare a plan specifying the boundaries of the district, the property designated as blighted or in need of rehabilitation or conservation work, the public works to be completed, projected costs and other information. The city or village plan commission must hold a public hearing and the municipality must convene a joint review board composed of school, VTAE, county and municipal representatives. A majority of the members can also select public members. This board reviews data supplied by the municipality and can approve or deny the TID based on such criteria as whether the envisioned development is sufficient to pay the costs of the improvements and whether the increased value would occur without the TID.

School Aid Supplement: School districts are generally compensated for reduced school aid payment that would otherwise occur because the incremental value within a TID is included in the tax wealth calculation for the school district's aids, even though the district cannot tax it.

WTA Policy Goals
WTA Position on Annexation
WTA Position on Land Use