SB 257

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

under certain conditions. Currently, towns and counties also have a limited ability

to create a TID under certain circumstances. 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,

approval of the city's or village's proposed TID by a joint review board that consists

of members who represent the overlying taxation districts, 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 incremental 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 project 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. Also under current law, a city or village may not generally

make expenditures for project costs later than five years before the unextended

termination date of the TID. Under certain circumstances, the life of the TID, the

expenditure period, 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 general exception. Under the exception, a city or

village may simultaneously create a new TID and subtract territory from an existing

TID without adopting a resolution containing the 12 percent test if the city or village

demonstrates to DOR that the value of the territory that is subtracted at least equals

the amount that DOR believes is necessary to ensure that, when the new TID is

created, the 12 percent test is met. The city or village must also certify to DOR that

no other district created under this exception currently exists in the city or village.