AB 173

Under the current tax incremental financing program, a city or village may

create a tax incremental district (TID) in part of its territory to foster development

if at least 50 percent of the area to be included in the TID is blighted, in need of

rehabilitation or conservation, suitable for industrial sites, or suitable for mixed-use

development. Before a city or village may create a TID, several steps and plans are

required. These steps and plans include public hearings on the proposed TID within

specified time frames, preparation and adoption by the local planning commission

of a proposed project plan for the TID, approval of the proposed project plan by the

common council or village board, and adoption of a resolution by the common council

or village board that creates the TID as of a date provided in the resolution.

Also under current law, once a TID has been created, the Department of

Revenue (DOR) calculates the "tax increment base" value of the TID, which is the

equalized value of all taxable property within the TID at the time of its creation. If

the development in the TID increases the value of the property in the TID above the

base value, a "value increment" is created. That portion of taxes collected on the

value increment in excess of the base value is called a "tax increment." The tax

increment is placed in a special fund that may be used only to pay back the project

costs of the TID. The costs of a TID, which are initially incurred by the creating city

or village, include public works, such as sewers, streets, and lighting systems;

financing costs; site preparation costs; and professional service costs. DOR

authorizes the allocation of the tax increments until the TID terminates or, generally,

20 years, 23 years, or 27 years after the TID is created, depending on the type of TID

and the year in which it was created. Under certain circumstances, the life of the TID

and the allocation period may be extended.

Currently, before a TID may be created or its project plan amended, the city or

village must adopt a resolution containing a finding that the equalized value of

taxable property of the TID plus the value increment of all existing TIDs does not

exceed 12 percent of the total equalized value of taxable property in the city or village

(the "12-percent test"), subject to one exception.

Notwithstanding the 12-percent test, this bill specifies, with regard to TID

number 4, which the village of Elmwood created, or attempted to create on January

1, 2006, based on action taken by the village board on May 8, 2006, that DOR must

proceed as if the TID was created on January 1, 2006, except that DOR may not

certify a value increment before 2009.