Equalized value calculations, project costs, and local levy limits relating to tax incremental districts. (FE)

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 (the tax increment) is collected by the city or village for use solely for the project costs of the TID. Tax increments collected by the city or village include taxes that would have been collected by other taxing jurisdictions, such as counties or school districts, if the TID had not been 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.

TID valuation limit (the “12 percent rule”) Under current law, when creating a new TID or amending a TID, a city or village must make a finding that the equalized value of taxable property of the new or amended TID, plus the value increment of all existing TIDs in the city or village, does not exceed 12 percent of the total equalized value of taxable property in the city or village. The bill increases that limit to 18 percent.

Local levy limits relating to TIDs The bill repeals the changes made in 2023 Wisconsin Act 12 to the calculation of local property tax levy limits with regard to taxable property located within a TID.

Generally, under current law, local levy limits are applied to the property tax levies that are imposed by a city, village, town, or county (political subdivision). A political subdivision may not increase its levy by a percentage that exceeds its “valuation factor,” which is the greater of either 1) 0 percent or 2) the percentage change in the political subdivision’s equalized value due to new construction, minus the value of any improvements that were removed (net new construction).

2023 Wisconsin Act 12 changed the calculation for determining the value of net new construction so that it includes only 90 percent of new construction that occurs within TIDs created after December 31, 2024. The bill repeals this change.

Prior to 2023 Wisconsin Act 12 , the statutes provided for an increase in a political subdivision’s levy limit upon the termination of a TID. If DOR did not certify a value increment for a TID for a year because the TID had terminated, the levy limit of the political subdivision in which the TID was located increased by an amount based on 50 percent of the previous year’s value increment for the TID.

Current law now provides that, upon termination or amendment of a TID created after December 31, 2024, the political subdivision’s levy limit is increased by an amount based on 10 percent of the TID’s lifetime equalized value increase. This levy limit increase may be further increased by an amount based on 15 percent of the TID’s lifetime equalized value increase if the TID terminates earlier than was anticipated at the time of the TID’s creation. The bill eliminates these changes that were made by 2023 Wisconsin Act 12 for TIDs created after December 31, 2024.

Project costs and expenditures for residential development Under current law, the project costs of a TID must be enumerated in the TID’s project plan. These project costs are the expenditures that the city or village expects to make in carrying out the project plan. Current law limits the types of expenditures that may be included as project costs. For example, public works such as sewers, streets, and lighting systems; financing costs; and site preparation costs may be included. The costs of constructing administrative buildings, for example, may not.

Generally, under current law, project costs may, under certain circumstances, include expenditures for newly platted residential development. Currently, such expenditures may qualify as project costs only in TIDs for which a project plan was approved before September 30, 1995, or for mixed-use TIDs. With regard to a mixed-use TID, such expenditures qualify only if certain density or development quality standards are also satisfied.

The bill eliminates the restrictions on including expenditures for newly platted residential development as project costs and specifically provides that costs of constructing residential buildings may be included as project costs. The bill also adds the costs of developing, improving, or expanding parks as expressly authorized project costs.

Because this bill may increase or decrease, directly or indirectly, the cost of the development, construction, financing, purchasing, sale, ownership, or availability of housing in this state, the Department of Administration, as required by law, will prepare a report to be printed as an appendix to this bill.