A lobbyist with the Wisconsin Economic Development Association says Evers’ proposed changes to the state’s tax incremental financing law would mark a “huge setback” for economic development.
Michael Welsh is director of legislative affairs and communications for WEDA. He says provisions in the guv’s budget proposal would diminish the value of the TIF program, putting Wisconsin at a competitive disadvantage to other states.
Under Wisconsin’s TIF law, municipalities can rely on future increases in property tax revenue within a designated district, called a tax increment district, to pay for public investments. In theory, those public investments drive increases in property values and related tax revenues. The program aims to boost private development in these districts.
A provision in Evers’ proposal would cap developer grants at 20 percent of the total TIF district project cost. Welsh says there’s currently no cap.
“We’ve had several members say the TIF projects they’ve done would not have been done if this law provision would have been in place,” Welsh said.
Some local municipalities rely on a certain type of TIF financing called “pay-as-you-go,” or developer financing. Welsh explains that under this type of TIF, developers pay the upfront cost for building infrastructure and other project elements. He says the risk falls on the developer to secure financing, as they’re only paid back over time through the tax increment.
Welsh says the provision capping developer grants would largely eliminate this option.
Another provision would require TID project plans to include “sensitivity analyses,” or projections of the district’s finances under less favorable economic conditions. That could include a slower pace of development, or a lower rate of property value growth than expected.
Welsh says these analyses are currently not required by statute. But he says developers in the state “don’t have a lot of heartburn over this,” as they want TIF to be used responsibly.
Still, he says an extra stress test may not be necessary, as the current process for establishing a TID requires multiple steps for review and approval. And he says many communities already hire consultants to examine various economic possibilities.
“We consider it redundant, but we’re not opposed,” Welsh said.
Evers’ proposal would also require municipalities that mistakenly overreport the value increment for their TIDs by at least $50 million to funnel excess tax collections into their general funds.
Evers spokeswoman Melissa Baldauff says this provision is aimed at correcting a specific type of situation where an error is made. She notes that in late 2018, a city assessor for Verona made a mistake that resulted in taxes for homeowners there rising much more than expected.
“There is not currently a mechanism to fix this, which is why the budget included language that would provide a way to correct these types of errors,” Baldauff said.
–By Alex Moe