Understanding TIFCity Council Meeting

Lisa A. Kuss City Administrator

May 10, 2011

What is Tax Increment Financing? Wisconsin’s principal economic development

financing tool for local governments

Program created by legislature in 1975

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Current Statistics§ Beginning of 2009, 1,074 active TIDs

(includes 2008 submissions)§ Equalized Incremental value grew 16% (up 1

½%)

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Eligible Project Costs§ Public works &

improvements§ Financing costs§ Real property

assembly costs (land write-down)

§ Professional service costs

§ Administrative costs

§ Relocation costs§ Organizational costs§ Pro-rated costs of

utility infrastructure§ Cash grants (requires

developer agreement)§ Environmental

remediation

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PROPERTY TAXES

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PROPERTY TAXES-TID BASE VALUE

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TWO PIES-ONE TAX BILL

Total Tax Value $800,000 Value, $28 Mill Rate Total Tax Bill $22,400…..Pie One $1,400…Pie Two $21,000

City Spent Money to Build Road, Install Utilities, Development Incentive Payment

Funds are Divided When Taxes Are Paid

Base $50,000 FROZEN PIE

Increment $750,000 NEW PIE BAKING FOR UP TO 26 YEARS

Tax Increment Financing –How it Works

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Pro

pert

y V

alue

Time

Base Value

Increment Value

All Taxing Jurisdictions continue to receive their share of the tax levy on the base value.

Mil RateLocal 5.00County 3.50School 9.50VTAE 2.00Total 20.00

Mil RateTIF 20.00Total 20.00

The TIF receives taxes on the increment value at the combined rate of all taxing entities.

Clintonville TIFCity of ClintonvilleActive TIDs and Year of Creation

TID 3 Industrial Park (1992)TID 4 Highway 45 Commercial and

MultiFamily (1994)TID 5 Angelus Retirement Community (2002)TID 6/7 (2003/2005) Seagrave Fire Apparatus

RETIRED TIFs #1, City Hall/Downtown #2 Morning Glory Dr. Cul de Sacs

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TID 3 Industrial ParkBase Value $933,300

Increment Value1992-2009 Added $20,939,100

TOTAL EQUALIZED VALUE

$21,872,400

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Total Expense $4,964,227

Created 1992, Max Termination 2018Projected Termination 2016Expenditure Period Ends 2014

TID 3Klein Coating Jepson Trucking

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TID 3Specialized Products

Specialized Products Addition

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TID ValuesTID 4 Commercial/Multi-Family

TID 5 Angelus Retirement

EQUALIZED VALUE Base $253,700

Increment $2,254,600Total $2,508,300

TOTAL EXPENDITURES $926,920

Created 1994, Expenses End 2016Max. Termination 2020, Projected Termination2018

EQUALIZED VALUE Base $0 TAX EXEMPT

HOSPITALIncrement $5,584,100Total $5,584,100

TOTAL EXPENDITURES $1,988,799

Created 2002Max Term 2028, Projected 2016

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TID #5Angelus…Old Hospital Transformed

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City Investment $1.9 million Tax Value Increase $5.5 million

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TID ValuesTID 6/7 Seagrave Fire ApparatusEQUALIZED VALUE Base $1,982,700

Increment $3,345,200Total $5,327,900

TOTAL EXPENDITURES $1,812,926

Created 2004Max. Term 2030, Projected 2023

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The “But For” Test§ Key component of the TIF program is

referred to as the “but for” test“But for” the use of TIF, the proposed

development would not occur: as proposed within the same time frame with the same level of value

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How is a TID Created or Approved?Joint Review Board Reps

Entity creating the TID, Includes Reps From School DistrictCity CountyTechnical CollegePublic Member (appointment must be

approved by majority vote of other members)

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Final Approval§ Final authority to allow creation or

amendment of a TID is vested in the JRBMajority voteTo approve creation or amendment of a TID,

JRB must find that the criteria set forth in Wisconsin Statutes 66.1105(4m)(c)1. are met

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TID Boundaries§ District Boundary Tests

Parcels must be contiguousEqualized valuation test

the value of any current TID increments plus the base value of the proposed district may not exceed 12% of the total value of the community. SO YOUR COMMUNITY CANNOT ALL BE IN A TIF

Must also meet applicable test for type of District to be created:

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Maximum Life§ A District may remain open until the

earliest of the following occurrences –The District’s maximum life is reached, which

varies by type of District and when it was created (26 years norm)

When total tax increments collected are sufficient to pay all of the District’s project obligations

When the City or Village passes a resolution to close the District (any unreimbursed project costs become a general liability of the municipality) 24

Eligible Project Costs§ As of March 18, 2008, Wis. Act 57 took effect

allowing otherwise eligible project costs to be undertaken outside a TID provided:The project location is within ½ mile of the TID

boundaryThe project location is within the city or villageThe JRB has approved the project

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Amendments§ Boundary Amendment

Limit of 4 allowed during life of districtMay add and/or subtract propertyMust be in compliance with 12% test to add

territory to a district§ Project Plan Amendment

No limit to number allowed (except maximum expenditure period)

Used to amend list of TIF-eligible projects to be undertaken

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Any Questions?

Questions?