Policy watchdog takes on TIF troubles

Published: July 9, 2009
Tags: development, Public Policy Forum, TIF

Sean Ryan
sean.ryan@dailyreporter.com

A Milwaukee policy group is raising the red flag on a state law that lets municipalities abuse tax-incremental financing districts.

“All of the pluses and minuses of using this tool have to be clearly evaluated,” said Rob Henken, president of the Public Policy Forum. “It’s an appropriate time to be taking a step back and looking at this.”

Municipalities can create TIF districts around any property defined as blighted because the land is not meeting its full economic potential. But the definition is so broad that any type of property — from a polluted, vacant industrial site to a prairie — can be considered blighted, said John Kovari, a University of Wisconsin-Milwaukee graduate student who wrote a study on Wisconsin TIF use for the Public Policy Forum.

“It’s really jumped into an economic-development tool,” he said, “rather than a redevelopment tool.”

The TIF districts let municipalities borrow money to promote development in an area through street and utility construction, environmental remediation, or loans or grants to private projects. Communities then have up to 33 years to use new property taxes generated by the projects to pay off the debt.

When Wisconsin wrote its TIF laws in 1975, the districts were intended to help communities build industrial parks on undeveloped land and to redevelop vacant buildings, said Peter Thillman, legislative co-chairman of the Wisconsin Economic Development Association.

The leeway given to municipalities to create districts almost anywhere is not necessarily bad, Kovari said. But it opens the door for communities to overuse TIF districts, he said.

Kovari’s study concluded TIF districts created in suburbs can decrease property values in those suburbs. The districts also can drain property values in the central city, he said.

“The real emphasis of the report is a hope that municipalities will look at TIF in a regional context and also in a way that protects their own economic health,” Kovari said. “Especially in this economy, you don’t want to TIF too much. You don’t want to assume too much risk.”

Thillman, the former economic development director in Green Bay, said it is frustrating when surrounding communities use TIFs to draw projects from the city.

However, he said, TIF creation should be left up to local communities, and those communities do not need more state limits.

“Do I want to punish another community and not allow them to do development?” said Thillman. “I don’t think that’s fair.”

The Public Policy Forum wants state legislators to consider Minnesota’s law, which has a more narrow definition of properties that can be included in a TIF district. According to that state’s law, a property is blighted if more than 70 percent is occupied by buildings or streets and half of the buildings have structural problems.

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