SB 103

This bill allows cities, villages, and certain towns to create developer-financed

tax incremental districts, which are excepted from the general rule that the

equalized value of taxable property of a new or amended tax incremental district

(TID) plus the value increment of all existing TIDs in a city or village may not exceed

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

percent rule) and the requirement that all areas of a TID be contiguous.

Under current law, cities and villages may use tax incremental financing (TIF)

to encourage development in the city or village. In general, under TIF, a city or

village pays for improvements in a TID and then collects tax moneys attributable to

all taxing jurisdictions on the increased property value in the TID for a certain period

of time to pay for the improvements. Ideally, after the period of time, the city or

village will have been repaid for its initial investment and the property tax base in

the TID will have permanently increased in value.

In general and in brief, a city or village makes use of TIF using the following

procedure:

1. The city or village designates an area as a TID and creates a project plan

laying out the expenditures that the city or village will make within the TID.

2. The Department of Revenue establishes the “base value” of the TID. This

value is the equalized value of all taxable property within the TID at the time of its

creation.

3. Each year thereafter, the “value increment” of the property within the TID

is determined by subtracting the base value from the current value of property

within the TID. The portion of taxes collected on any positive value increment is

collected by the city or village for use solely for the project costs of the TID. The taxes

collected by the city or village on positive value increments include taxes that would

have been collected by other taxing jurisdictions, such as counties or school districts,

were the TID not created.

4. Tax increments are collected until the city or village has recovered all of its

project costs or until the TID reaches its statutory termination date.

This bill allows a city or village to create a TID designated as a

developer-financed TID. To create a TID as a developer-financed TID, the local

legislative body must adopt a resolution making certain findings, and the joint

review board must approve the creation of the TID as a developer-financed TID. The

following are the findings that must be included in the resolution:

1. That all project costs of the TID will be paid directly from tax increments or

financed by a developer.

2. That the aggregate of all payments made to a developer providing financing

for a developer-financed TID will not exceed an amount equal to 90 percent of the

estimated tax increments to be generated by the TID.

Under the bill, developer-financed TIDs differ from other TIDs in that: