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TIF bill targets exemption trend (UPDATE)

By Paul Snyder

State lawmakers, tired of dealing with every tax-incremental financing hiccup from every city, village and town in the state, just want to make it easier to create TIF districts.

“Usually what happens when municipalities run into problems creating a TIF district is they come to the Legislature seeking some kind of exemption,” said Tom McCarthy, spokesman for state Rep. Sondy Pope-Roberts, D-Middleton.

“We’ve seen tons and tons of exemptions for cities over the years, and all these little exemptions have become law.”

Pope-Roberts has co-sponsored a bill by state Sen. Jon Erpenbach, D-Waunakee, that would change state law related to approving new TIF districts.

TIF districts let municipalities borrow money to subsidize developments and pay for utility and street work that serves projects. Communities then use new taxes generated by the projects to pay off the debt.

According to state law, the Wisconsin Department of Revenue cannot approve a TIF district if more than 12 percent of the municipality’s land value is in TIF districts.

But a tax base can change within months, and the state holds a hard line on 12 percent, said Dan Thompson, executive director of the League of Wisconsin Municipalities.

“Sometimes if you’re a nickel over,” he said, “you’re automatically out.”

Erpenbach’s bill would extend the timeline during which a municipality can measure its tax base. Instead of the state law requirement that municipalities submit their TIF applications by Dec. 31 each year, the bill would let the state accept applications for review by Oct. 31 before the official Dec. 31 TIF certification request.

“It allows both the municipalities and DOR a little more wiggle room if things happen to change in a couple months,” McCarthy said.

Quickly changing tax bases have led to several TIF district exemption bills. Earlier this year, Ripon tried to create a TIF district to attract developers for an estimated $30 million hotel and spa.

The city’s tax base changed between the day Ripon filed its TIF application and the day the DOR reviewed the district. Ripon’s tax base calculation came in at about 12.1 percent. Although the city reconfigured the district and came in at less than 12 percent, state Rep. Joan Ballweg, R-Markesan, and state Sen. Luther Olsen, R-Ripon, tried to help by drafting a bill that would have given the city an exemption.

It’s that kind of legislation that causes headaches, Thompson said.

According to the state Legislature’s Web site, lawmakers have introduced 10 bills this session dealing with exemptions or revenue-raising extensions for municipal TIF districts.

It’s the extensions that worry state Rep. Bill Kramer, R-Waukesha. He said even though the bill might solve problems with creating TIF districts, it will not help municipalities raise enough money in taxes to pay off the TIF debt.

“The question is whether we’re looking at this the right way,” Kramer said. “We’ve got TIF districts that are 12 or 13 years old now and are failing, and we’re being asked to extend their lives. Well, who do you hold responsible for that? The current regime or the people responsible for creating it that likely don’t even hold their posts anymore?”

McCarthy said Erpenbach’s bill does not deal with distressed TIFs. It just tries to ease the pain for municipalities and lawmakers.

But covering up the pain is not the same as making it go away, Kramer said.

“You have to remember the TIF law is just a tool,” he said. “Like any tool, it can be used for good or bad, and the danger of having a law that’s got flexibility is you can still run into trouble.”

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