Our Position: Ease limits in Wisconsin’s Tax Incremental Financing Law that hinder the ability of Wisconsin communities to undertake essential economic development.

Background: Twelve Alliance cities that have generated more than $1 billion in new tax base through tax incremental financing (TIF) are unable to undertake more TIF borrowing under current law, state Department of Revenue records show.

TIF financing is the chief tool that cities and villages have to bring businesses to their communities and create new jobs. Between 1976 and 2000, communities across the state created more than 1,000 tax increment districts, or TIDs, to undertake that task, according to the Legislative Fiscal Bureau.

The state's tax incremental financing law includes two caps, and if both are exceeded, a city cannot create any new TIDs. The first cap deals with the total value of increment plus base, which cannot exceed 7% of total value.The second cap deals with just the incremental value of the districts, which cannot exceed 5% of total value.

The effect is to penalize cities that are successful in bringing jobs, economic activity and tax base to their regions: if the value of TIF districts grows faster than the value of the community as a whole — the whole idea behind tax incremental financing — the community is on a collision course with the limits.

Who needs TIF anyway? We do. The benefits of TIF cross political boundaries and benefit an entire region and the entire state.

The Governor’s Task Force on State and Local Government said in January, 2003:

The solution:

• In the short term, if the 5% threshold were raised to 7%, Appleton would immediately be able to undertake riverfront development, and Beloit, Kaukauna, La Crosse, Marinette, Sheboygan and Wausau would be able to finance needed projects to redevelop their communities.
• In the longer term, a TIF law could be devised that does not penalize successful redevelopment and recognizes the regional economies which together constitute Wisconsin’s economy. For example, a test could encompass the entire region, not just the value of a given municipality.

Finally, policy-makers could provide a mechanism that would recognize that TIF does more than create additional property value in a single community, it stimulates income growth and commerce. One of the specific recommendations of the Governor’s Task Force on State and Local Government is on point: