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Wednesday, July 29, 2009

City Council Approves Industrial Base Expansion

JG Excerpt:
At least that's the opinion of Brad Cantrell, the city's community development director. And it appeared good enough for the city council, which voted unanimously to add 185 acres to TIF No. 26.
Just in case someone didn’t think that the GM industrial corridor in Janesville was unemployed enough at over 300 acres – and for good measure.

A TIF DISTRICT PRIMER (Tax Increment Financing District)

Janesville TIF Policy Excerpt:
Thus, the TIF law provides that all property taxes levied on increased property value within a TIF district are retained by the community to finance the public expenditures made within the TIF district.
Instead of “retained by the community,” it should have read property taxes... “withheld from the community.” A large portion of the property taxes paid within the boundaries of the district do not all go to service the same community (schools, police, fire, public works, etc.) as property taxes paid by everyone else. As the property values in the district incrementally improve, so does the costs to service the area. While the properties in the TIF district enjoy all the amenities provided for by the "community" general fund, someone else is shouldering the cost. That someone else is you and I. This tax shift can go on for as long as 23 years.
Janesville TIF Policy Excerpt:
The base value (the assessed value of the property that existed at the time the TIF district is created), however, continues to provide the same level of revenues to other taxing jurisdictions.
Because most of the 185 acres is being farmed, the land probably meets Wisconsin’s land-use value provisions. This means while the private land is being improved under TIF provisions with new added value (streets, infrastructure etc.) the only taxes being paid into the general fund is the same amount the property was paying at the time the TIF district was created. In the case of working farmland, the taxes paid are very, very low. Usually pennies on the dollar compared to non-farm assessments. Generally, the lower the base value of TIF district properties - the greater the burden the district places on taxpayers outside of its boundaries.
Janesville TIF Policy Excerpt:
Once all of the public expenditures have been repaid, all taxing jurisdictions can collect taxes levied on the new property value.
Keep in mind the 23 year time frame. If the TIF is successful, its property taxes will provide a surplus revenue over the costs incurred to improve. New state TIF rules allow local jurisdictions to "port" or divert the incremental tax surplus away from the taxpayer general fund and use it for other private business ventures within the 1/2 mile radius of the TIF boundaries. When anyone implies money coming from TIF surplus revenues does not effect our taxes - they are wrong. The money is still being withheld from the general fund. Just because taxpayers aren't made aware that tax revenue is being withheld, doesn't mean no one has to make up the difference.
Janesville TIF Policy Excerpt:
Total TIF incremental revenues over the maximum 23-year life of TIF No.26 equal $6.62 million, compared to total TIF costs of $5.78 million.
The cost to incentivize the privately owned land with infrastructure improvements is projected to cost $5.78 million. Once the $5.78 million for the improvements has been repaid by taxes collected in the district (remember, most of the taxes collected do not go to the general fund), then and only then will the district begin paying into the general fund. BUT if it's paid before the TIF expires (in this case 23 years!), the local jurisdiction (city government) can continue to withhold the incremental monies or surplus from the general fund to instead pay for other capital improvements within the 1/2 mile radius until the TIF finally expires.
Janesville TIF Policy Excerpt:
Since TIF revenues are projected to exceed TIF costs by $0.84 million, the TIF district should be economically viable.
If, after 23 years have passed and all goes as planned, this TIF district is expected to generate $840,000 more or less in surplus tax revenue. Remember, this may or may not be diverted away from the general fund.

So how will taxpayers wind up losing? While we are allowing the property taxes being paid by the improved properties to be used to pay down the debt for all the infrastructure, pipes, streets, curbs, etc. - someone else is shouldering the incrementally higher added costs for schools, fire, police, library, public works, snowplowing, street sweeping, etc., the TIF district has shifted onto the community...for a span of up to 23 years. When you figure that Janesville has over 25 active TIF districts, the tax shift is substantial.

Put another way, while the taxes paid by the property owners inside the TIF boundaries are being spent on improvements that return higher property values and increased speculative prospects, those outside the district are shouldering the incrementally higher tax burden to service the district. It’s a circular motion of revenue made in the name of progress that has only one loser – the local taxpayers outside the TIF boundaries.

The TIF District tool can be a great boost for economic development when used to remove blight or lift economically depressed areas. But it is also easily abused. When its drawn around working farmland to increase the supply of industrial buildings in an area with a glut of vacant industrial buildings - there's something seriously wrong with our policies.

Obviously, there is no way I can cover all aspects of TIF District agreements and the consequences they bring in this blog posting. While those with the loudest megaphone tout the advantages of new amendments to Wisconsin TIF law and keep the general public off balance with loosely constructed rhetoric, probably the best way to think of TIF Districts is as nothing more than a good old fashioned tax shift.

1 comment:

Anonymous said...

Excellent explanation without the spin on TIF's and the burden they put on taxpayers. Few people understand their impact and even fewer people want to know.

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