Report: Wisconsin TIFs create more than $4 in tax base for every $1 spent

A report released Wednesday finds development projects that rely on Wisconsin’s commonly used Tax Increment Financing incentives created more than $4 in tax revenue for every $1 that local governments spend on-average.

The report, from the Wisconsin Realtors Association and Wisconsin’s chapter of NAIOP, the Commercial Real Estate Development Association, heralds the benefits of TIF, which is effectively the only tool that municipalities have to incentivize new development. Consultant Ehlers & Associates used Wisconsin Department of Revenue data to analyze TIF districts in more than 300 communities around Wisconsin.

Local governments typically use TIF districts to provide developers with incentives to build projects or to pay for infrastructure that would facilitate new development. TIF districts direct new revenue from construction into a separate fund, and other taxing entities, such as school districts, do not see additional revenue from new development over the life of the districts, typically between 20 and 27 years.

The TIF report finds that for every $1 local communities invest, TIF districts create $4.66 in new tax base. The report also finds local use of the TIF incentive is 4.9 times larger than the amount the state sets aside for economic development. And between 2009 and 2016, TIF districts on average stayed open for 16.37 years, which is between four and 11 years shorter than the maximum amount allowed by state law.

“TIF is an important tool for economic development throughout Wisconsin,” said Jim Villa, CEO of NAIOP’s Wisconsin chapter. “While some detractors are attempting to limit the benefits that this tool gives our state, the report clearly shows the dramatic economic impact TIF makes in our communities.”

The report comes as a bill that would set new limits on the use of TIF financing is circulating in the Legislature. The measure, authored by a bipartisan group of lawmakers, builds off provisions stripped from Gov. Tony Evers’ budget proposal. Features of the bill would require a stricter analysis of a TIF project’s finances, limit cash grants to developers and give other taxing entities more power in the TIF approval process.

Critics of the state’s TIF policy are concerned at how common the tool has become, and argue the use of the incentive shifts the burden of new development to property taxpayers. According to the bill’s co-sponsorship memo, some 22.5% of the 1,310 active TIF districts in the state are not self-sustaining, meaning they receive donations from more successful districts, have a negative increment, or have been declared distressed.

The proposal was authored by a bipartisan coalition of lawmakers that include Sen. Duey Stroebel, R-Cedarburg, and Sen. Jon Erpenbach, D-West Point. Groups backing the bill include the Wisconsin Counties Association, Wisconsin Association of School Boards. The conservative group Americans for Prosperity are also in support of the bill.

The Wisconsin Realtors Association, along with the Wisconsin League of Municipalities and the Wisconsin Economic Development Association, are opposing the bill, arguing it would curtail economic growth. Follow @natebeck9