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What happens when the value of a TIF district changes?

David Rasmussen | with 0 Comments

What happens when the value of a TIF district changes?

Even the best laid plans can change over time.  When communities create or amend a Tax Incremental Financing (TIF) District, they do so with the intention that new development will occur and provide sufficient tax increment to pay off the communities’ investment in the TIF District. 

What happens when
- values in a District decline due to recession?
- there are changes in the way the Department of Revenue (DoR) calculates equalized value?
- there are shifts in the way vocational colleges are funded?

All of these scenarios have occurred recently, with the latter occurring last year.  Wisconsin Act 145 shifted a portion of the vocational colleges funding from the local tax levy to state aid.  This shift in funding reduced the amount of tax increment that is generated in a community.
Realizing that these situations are beyond the control of the community, the Study Committee on the Review of TIF developed a couple of recommendations to offset the impacts of declining value and funding shifts. 
One of the Committee’s recommendations is to allow communities to amend the TIF District’s Project Plan to request an additional five-year extension to the TIF District if during the life of the District the tax increments generated were adversely impacted by one or more of the following:
  • Changes to the TIF law; 
  • Changes made by the DoR in their method of calculating equalized values;
  • Impacts of Wisconsin Act 145.
In situations where the property value of a District does not rise as planned and actually falls, current law allows for a community to request the DoR to re-determine the base value.  Wisconsin Act 183 allows communities to request a base value redetermination if a “decrement” situation occurs.  A “decrement” situation is defined as a decline in current value of at least 10% of the base value for two consecutive years.  With joint review board (JRB), a community can request the DoR to re-determine the base value. 
The Committee offered an alternative method to redetermining the base value.  The Committee’s recommendation allows communities to request a redetermination of the base value from the DoR if values drop more than 10% in any single year, and the community has the redetermination or multiple redeterminations in their project plan.  Because the project plan is approved by the JRB during the creation and/or amendment of the TIF District; no further action is required by the JRB.  This change recommendation should hopefully streamline the process for redeterminations.
The Wisconsin Joint Legislative Study Committee appointed David Rasmussen, MSA senior planner, Rice Lake, to the Study Committee on the Review of Tax Incremental Financing (TIF).  The committee submitted their recommendations in November 2014. Check out David’s series of blog posts on TIF changes. Or, contact David for more information on these proposed changes and questions you have on TIF.

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