End TIF now
We seek a return to American fundamentals. Free markets. Local, democratic rule. Government for the people. To get there, we call for major reforms to local municipal finance. We seek the end of levy limits on property taxes and Tax Increment Finance (TIF) or, specifically, the current, widespread practice of local governments handing out bribes to businesses, wooing them to build new buildings in TIF districts and, in so doing, boosting “net new construction” as a way around levy limits.
The way we finance local government is a tangled, tainted mess. Local citizens must demand change at both the state and local level.
We’ve run the numbers. It’s clear what is happening. TIF is not helping taxpayers, just the opposite. Since 2013, Marathon County municipalities with TIF districts saw property taxes rise an average of 12.7 percent. This is more than double the percentage of municipalities without TIF.
State law requires every TIF to be based on a plan. The trouble is that these consultant-written plans are fairy tales of growth and development. They all predict a promised land when the temporary TIF loan is paid off, the development gets placed on the tax roll and taxpayers enjoy lower taxes as the “pie gets bigger.” None of the plans, however, calculate the cumulative effect of municipalities raising taxes beyond levy limits while the loan is paid down. Again, we have run the numbers. In an example from Marathon City, we found that a taxpayer owning a property worth $198,400 winds up with a $821 loss 20 years after a $8.3 million addition to that village’s two TIF districts.
The original sin here is a decision by the state legislature in 2005 to impose levy limits on local governments. This anti-democratic decision was fundamentally flawed. Officials in Madison can’t run 1,760 local governments. They lack the information. Faced with levy limits, local governments looked for ways to get around them. In 2013, the state legislature relaxed levy limits, allowing tax increases by the percentage of “net new construction” within their borders. Local cities and villages leaped at their new chance to get revenue. They have used TIF to stimulate development, boost net new construction and legally raise taxes. Loose state rules have allowed these municipalities to use TIF revenues not just to pay off development costs, but to fund various standard budget items, such as roadwork and sewers, parks and administrative salaries.
Thus what we have created is a complicated, Rube Goldberg-like money machine. TIF benefits businesses and municipalities. It, however, hurts taxpayers. It is a win-win-lose proposition.
Defenders of TIF point to all of the buildings in local business parks as proof it is good for communities. We aren’t impressed. The developments are mostly in the wrong place. Our local villages and cities need help downtown, not on the municipal outskirts. Further, we don’t buy the argument that villages and cities would die if not for TIF. We would only stop business owners demanding development ransoms from government as they play one municipality off the other. The pro-TIF view is a retreat from a free market philosophy. It gives valuable incentives to some businesses, but not others. It disturbs fragile, local economies. It is easy to point to a new structure in a town and say “Here, we are a success!” But what about other businesses in the same community that need to compete without getting free land, free blacktop or free storm sewer?
We called on nearly all of Wisconsin officialdom to defend TIF, but it refused. We asked the Wisconsin Department of Revenue, University of Wisconsin, League of Wisconsin Municipalities, Wisconsin Manufacturers and Commerce, Marathon County and many other organizations and officials to comment. All we received (except for the Village of Marathon City) is no comment.
And here we get to the nub of things. Current state law encourages municipalities to help business people, wealthy enough to put up big buildings, to get wealthier. They do so by raising property taxes on regular people. It’s yet another example of how this country creates extreme income inequality.
Government and business have become radically disconnected from the people. These centers of power can’t even answer a local newspaper’s questions about how government is financed.
So, what should we do? Citizens need to use what we have left of our democracy and elect representatives pledged to restore local control and end the taxpayer unfriendly game of governments subsidizing select businesses.
We need a return to American fundamentals.