The success of Clintonville’s Tax Increment Financing (TIF) Districts has served as a model for other communities in Waupaca County.
City Administrator Lisa Kuss explained this process to new council members and others in attendance at the City Council meeting on Tuesday, May 10.
TIF is Wisconsin’s principal economic development financing tool for local governments. The TIF program was created by legislature in 1975. Clintonville created its first Tax Increment District (TID) in the late 1970s for the City Hall area.
Beginning in 2009, Wisconsin had 1,074 active TIDs (including 2008 submissions). The equalized incremental value grew 16 percent (up 1.5 percent from the previous year).
Eligible project costs include public works and 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), and environmental remediation.
Kuss explained that two “pies” are created when a TID is created, but there is one tax bill. The base assessed value of a particular property, for example, may be listed at $50,000. The mill rate for this property might be $28 per $1,000 valuation. This pie is pre-TID taxes that are paid to the city, county, school, FVTC, Lake District, and the state.
After the TID is created and improvements are made, the increased value or the increment/growth in assessed value of the property could be an additional $750,000. The total tax value of the property is now $800,000, with a $28 mill rate. The total tax bill is $22,400; of that amount, $1,400 comes from the first pie ($50,000), while $21,000 comes from the second pie ($750,000). The city spends money to build roads, install utilities, and make a development incentive payment. TID funds are divided into these two areas-pre-TID and post-TID, when taxes are paid.
The TID receives taxes on the increment value at the combined rate of all taxing entities. This means that properties in a TID pay the same amount per thousand as all tax payers in the community. All taxing jurisdictions continue to receive their share of the tax levy on the base value. The increment value and property value increase over time.
The City of Clintonville has the following active TIDs (year created is in parentheses):
• TID 3 – Industrial Park (1992)
• TID 4 – Highway 45 Commercial and Multi-Family (1994)
• TID 5 – Angelus Retirement Community (2002)
• TID 6/7 – Seagrave Fire Apparatus (2003/2005)
Retired TIDs include:
• TID 1 – City Hall/Downtown
• TID 2 – Morning Glory Cul de Sacs
TID 3, which is home to businesses such as Klein Coatings and Jepson Trucking, has a base value of $933,300 and an increment value added from 1992-2009 of $20,939,100. The total equalized value is $21,872,400; the total expense for this TID was $4,964,227.
TID 4 has a base value of $253,700 and an increment value added of $2,254,600 for a total equalized value of $2,508,300. Total expenditures for this TID are listed at $926,920.
TID 5 has a base value of $0, since it is a tax-exempt hospital property. The increment value added is listed at $5,584,100, which is the total equalized value. Total expenditures for this TID are listed at $1,988,799.
TID 6/7 has a base value of $1,982,700 with an increment value added of $3,345,200 for a total equalized value of $5,327,900. Total expenditures in this TID are listed at $1,812,926.
Kuss explained that the key component of the TIF program is referred to as the “but for” test. “But for” the use of TID, the proposed development would not occur as proposed, within the same time frame, and with the same level of value.
Kuss explained that TIDs are created and approved by joint review board representatives. The entity creating the TID includes representatives from the school district, city, county, technical college, and a public member, whose appointment must be approved by majority vote of other members.
Final authority to allow creation or amendment of a TID is vested in the joint review board. A majority vote is required to approve a creation or amendment, and any creation or amendment must meet the criteria set forth in Wisconsin State Statutes 66.1105(4m)(c)1.
TID boundary requirements state that all parcels must be contiguous. Also, the value of any current TID increments plus the base value of the proposed district must not exceed 12 percent of the total value to the community; so, an entire community can not all be in a TID.
A TID 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. Usually a district has a 26-year life;
• When total tax increments collected are sufficient to pay all of the district’s projected obligations;
• When the city passes a resolution to close the district (any unreimbursed project costs become a general liability of the municipality).
As of March 18, 2008, Wisconsin Act 57 took effect, allowing otherwise eligible project costs to be undertaken outside a TID provided:
• The project location is within 1/2 mile of the TID boundary;
• The project location is within the city;
• The joint review board has approved the project.
A limit of four boundary amendments are allowed during the life of the district, and property can be added or subtracted, provided that the boundaries are in compliance with the 12 percent test to add territory to a district. Project plan amendments can be made without limit (except during the maximum expenditure period), and these amendments can be used to amend a list of TIF-eligible projects to be undertaken.
“My goal for the Council Meeting was to provide information to our elected officials, staff, media and the public on the tremendous asset we have in Wisconsin in TIF,” said Kuss. “It is a way for us to provide infrastructure and financial assistance to expanding businesses in Clintonville. It is not something that is widely understood in Clintonville or Wisconsin and I hope that this presentation can help our community see what a valuable tool it is to facilitate growth in Clintonville.
“We have made many positive improvements to our business and industrial tax base because of TIF,” continued Kuss. “The greatest part is that these improvements do not come at the expense of any other taxpayers. If there are others who would like to learn more about TIF, please contact me at City Hall by calling 715-823-7600.”