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Understanding TIF

Understanding TIF. City Council Meeting Lisa A. Kuss City Administrator May 10, 2011. What is Tax Increment Financing?. Wisconsin’s principal economic development financing tool for local governments Program created by legislature in 1975. Current Statistics.

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Understanding TIF

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  1. Understanding TIF City Council MeetingLisa A. Kuss City AdministratorMay 10, 2011

  2. What is Tax Increment Financing? • Wisconsin’s principal economic development financing tool for local governments • Program created by legislature in 1975

  3. Current Statistics • Beginning of 2009, 1,074 active TIDs (includes 2008 submissions) • Equalized Incremental value grew 16% (up 1 ½%)

  4. Eligible Project Costs • Public works & improvements • Financing costs • Real property assembly costs (land write-down) • Professional service costs • Administrative costs • Relocation costs • Organizational costs • Pro-rated costs of utility infrastructure • Cash grants (requires developer agreement) • Environmental remediation

  5. PROPERTY TAXES

  6. PROPERTY TAXES-TID BASE VALUE

  7. TWO PIES-ONE TAX BILL Base $50,000 FROZEN PIE Increment $750,000 NEW PIE BAKING FOR UP TO 26 YEARS

  8. The TIF receives taxes on the increment value at the combined rate of all taxing entities. Property Value All Taxing Jurisdictions continue to receive their share of the tax levy on the base value. Increment Value Base Value Time Tax Increment Financing –How it Works

  9. Clintonville TIF • City of Clintonville • Active TIDs and Year of Creation • TID 3 Industrial Park (1992) • TID 4 Highway 45 Commercial and MultiFamily (1994) • TID 5 Angelus Retirement Community (2002) • TID 6/7 (2003/2005) Seagrave Fire Apparatus • RETIRED TIFs #1, City Hall/Downtown #2 Morning Glory Dr. Cul de Sacs

  10. Created 1992, Max Termination 2018Projected Termination 2016 Expenditure Period Ends 2014 TID 3 Industrial Park Base Value $933,300 Increment Value1992-2009 Added $20,939,100 TOTAL EQUALIZED VALUE $21,872,400 Total Expense $4,964,227

  11. TID 3 Klein Coating Jepson Trucking

  12. TID 3 Specialized Products Specialized Products Addition

  13. TID Values TID 4 Commercial/Multi-Family TID 5 Angelus Retirement • EQUALIZED VALUE Base $253,700Increment $2,254,600Total $2,508,300 TOTAL EXPENDITURES $926,920 Created 1994, Expenses End 2016Max. Termination 2020, Projected Termination2018 • EQUALIZED VALUE Base $0 TAX EXEMPT HOSPITALIncrement $5,584,100Total $5,584,100 TOTAL EXPENDITURES $1,988,799Created 2002Max Term 2028, Projected 2016

  14. TID #5Angelus…Old Hospital Transformed City Investment $1.9 million Tax Value Increase $5.5 million

  15. TID Values TID 6/7 Seagrave Fire Apparatus • EQUALIZED VALUE Base $1,982,700Increment $3,345,200Total $5,327,900 TOTAL EXPENDITURES $1,812,926 Created 2004Max. Term 2030, Projected 2023

  16. The “But For” Test • Key component of the TIF program is referred to as the “but for” test • “But for” the use of TIF, the proposed development would not occur: • as proposed • within the same time frame • with the same level of value

  17. How is a TID Created or Approved?Joint Review Board Reps Entity creating the TID, Includes Reps From • School District • City • County • Technical College • Public Member (appointment must be approved by majority vote of other members)

  18. Final Approval • Final authority to allow creation or amendment of a TID is vested in the JRB • Majority vote • To approve creation or amendment of a TID, JRB must find that the criteria set forth in Wisconsin Statutes 66.1105(4m)(c)1. are met

  19. TID Boundaries • District Boundary Tests • Parcels must be contiguous • Equalized valuation test • the value of any current TID increments plus the base value of the proposed district may not exceed 12% of the total value of the community. SO YOUR COMMUNITY CANNOT ALL BE IN A TIF • Must also meet applicable test for type of District to be created:

  20. Maximum Life • A District may remain open until the earliest of the following occurrences – • The District’s maximum life is reached, which varies by type of District and when it was created (26 years norm) • When total tax increments collected are sufficient to pay all of the District’s project obligations • When the City or Village passes a resolution to close the District (any unreimbursed project costs become a general liability of the municipality)

  21. Eligible Project Costs • As of March 18, 2008, Wis. Act 57 took effect allowing otherwise eligible project costs to be undertaken outside a TID provided: • The project location is within ½ mile of the TID boundary • The project location is within the city or village • The JRB has approved the project

  22. Amendments • Boundary Amendment • Limit of 4 allowed during life of district • May add and/or subtract property • Must be in compliance with 12% test to add territory to a district • Project Plan Amendment • No limit to number allowed (except maximum expenditure period) • Used to amend list of TIF-eligible projects to be undertaken

  23. Questions? Any Questions?

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