The cost of TIF
It’s not listed on property tax bills, but city and village Tax Incremental Finance projects cost taxpayers, including town residents
Town of Marathon resident Kathy Anderson is no stranger to Tax Incremental Finance (TIF). She served as a City of Wausau alderperson from 1998 to 2004 and, during her career in city government, she got to vote both “yes” and “no” on various TIF development projects.
In casting votes on TIF projects, Anderson knew taxes from people outside of Wausau were being used to help finance the city projects, but, like a lot of things that involve TIF, only vaguely. Thus Anderson, now a township resident, was surprised to learn that she indirectly paid $477 or eight percent of her property tax bill this past year to finance TIF projects all across northcentral Wisconsin.
“I wouldn’t have guessed it was that much,” she said.
The sum is a Record-Review calculation. To get to this bottom line, we figured Anderson’s 2020 taxes if all of the property in Tax Incremental Districts in our area were taxed just like other property. We compared that sum with her 2020 bill. The difference, $477, is her contribution to TIF.
Here’s how it works. In a TIF district, taxes generated by a new industrial, commercial or residential development are diverted by city and village governments to pay for needed improvements, such as streets, sewers and sidewalks, for as long as 27 years (or even longer, if the districts are “distressed.”) This leaves the county, technical college and K-12 school not getting those taxes. They respond by increasing the tax burden on everybody else by the amount they don’t get.
These higher levies are not a direct property tax listed on anybody’s annual bill. Instead, it is indirect taxation.
The Record-Review has calculated these TIF taxes for residents of our four local school districts in the 2020 tax year on an average-priced home ($158,756):
_ Athens School District, $127.34.
_ Edgar School District, $112.72.
_ Marathon School District, $188.92.
_ Stratford School District, $155.58.
Anderson doesn’t begrudge paying her property taxes, including the portion that indirectly finances TIF.
She is irked, however, that her indirect payment of TIF taxes isn’t clearly spelled out on her property tax bill. “You are dealing with public money,” she said. “You need transparency.”
Anderson, too, is bugged that while she is helping to pay for TIFs she doesn’t have much say in what’s approved or not approved.
For example, the town of Marathon resident knows that the neighboring Village of Marathon City has used TIF funds to finances various development projects Anderson thinks she should have the opportunity to say something about TIF funded projects if she is helping to pay for it. It’s a taxation and representation concern. Under state law, all TIFs are reviewed and approved by a Joint Review Board. The board is made up of representatives from the village or city, county, tech school and K-12 school. This body, however, typically only looks at overall TIF plans and finances. It doesn’t consider possible citizen objections to any specific project.
That leaves Anderson disappointed with TIF projects and how rural people, like herself, help fund them.
“TIFs are very hard to deal with,” she said.
Mike Koles, executive director of the Wisconsin Towns Association, has heard Anderson’s complaint before and he has a suggestion to answer it.
He suggests the citizen member of a Joint Review Board be a township resident. This person could voice township concerns about TIF projects. “The Joint Review Board doesn’t talk about the concerns town residents might have per se,” he said. “There is, for example, a school district resident on the board, but this person typically talks about concerns that all residents might have. If you had a town resident, there would be a focus on township concerns.”
One of these concerns, Koles said, is whether use of TIF in a project is truly a remedy for “blight” or whether it is accelerating urban sprawl, gobbling up township tax base through repeated annexations. A second concern is whether taxpayers will see an actual return on investment from their tax dollar once the 27-year life of a project lapses.
He thinks a town resident on a Joint Review Board would demand village and city planners be accountable for the investment people outside their borders are making in indirect TIF taxes.
Koles said it would take an act of the legislature to change the composition of the Joint Review Board and that this might be difficult to achieve, given urban support for TIF in Madison.
Still, he thinks town residents earn a spot on the Joint Review Board given their financial support for TIF.
Kathy Anderson is on board.
“I think it would be an excellent idea,” she said.
Anderson said Joint Review Boards with township representation would help urban communities and their rural neighbors be better partners.
“Towns and villages need to work together,” she said. “They need each other. In my own mind, I don’t divide them.”