SB 825

This bill extends the maximum length of a tax incremental district (TID) life

extension for housing stock improvement from one year to three years.

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.

Currently, a city or village may extend the life of a TID for up to one year for

housing stock improvement if all of the following occur:

1. The city or village pays off all of the TID's project costs.

2. The city or village adopts a resolution stating that it intends to extend the

life of the TID, the number of months it intends to do so, and how it intends to improve

housing stock.

3. The city or village notifies DOR.

Current law requires the city or village to use 75 percent of the tax increments

received during the period specified in the resolution to benefit affordable housing

in the city or village and 25 percent to otherwise improve the city's or village's

housing stock.

Under the bill, a TID's life may be extended for up to three years for housing

stock improvement. However, for any extension of more than one year, the other

taxing jurisdictions must approve of the extension.

Because this bill may increase or decrease, directly or indirectly, the cost of the