Marathon County could form a task force to study pros and cons of tax increment financing, an economic development tool used heavily in Wausau.
TIF subsidizes companies by refunding or diverting some of their taxes, or consumer-paid taxes, to pay for re/development in a “TIF district.” In some states, TIF is frequently used – and is also very controversial, according to Good Jobs First. The discussion Wednesday by a Marathon County committee comes amid talks that the Wisconsin Legislature could expand the current cap on TIF-sheltered properties.
During a meeting of the Human Resources, Finance & Property Committee on Wednesday, members agreed that a task force should study the impacts of TIF on the county’s revenues and whether creation of tax incremental districts, or TIDs, is needed at all.
State statutes limit the total value of TIDs in municipalities at 12% of its tax base. Some estimates say the value is over the cap, in both the Marathon County and the City of Wausau. The practice of creating TIDs has led to concerns that the county is missing out on incremental tax funds.
“I urge the committee to do so,” said a speaker during public comments at the HRFC meeting on Tuesday. He was referring to the agenda item on creating a task force on TIF. “TIF needs to be understood for the bad government policy that it is. Municipalities and their engineering firms have for decades TIF as their tool in the toolbox.’ But the truth is, TIF hurts taxpayers.”
According to Good Jobs First which in principle is opposed to TIF, says it is “a geographically targeted economic development tool.” And while corporations, TIF consultants and public officials often claim TIF is too complicated for the public to understand, Good Jobs First disagrees with that assessment.
The Wisconsin Department of Revenue explains the difference between TIF and TID. While TIF is “an economic development technique to expand the property tax base,” TID, on the other hand, is “the actual physical area designated for improvements using tax incremental financing.”
Committee chair John Robinson said he put the item on the agenda to discuss TIF-related concerns that have arisen and said some municipalities are showing interest in joining a proposed task force. “There’s $1.2 billion of properties in TIFs right now, in context of the incremental value out of the $14 billion value,” Robinson said.
According to the figures compiled in the meeting packet, Marathon County has about 40 TIDs in 2022. Last year, the Wisconsin legislature killed a secret Wausau TIF expansion bill after this newspaper exposed the secret maneuver by city staff to create TIF for a former mall property.
HRFC member and County Board Chair Kurt Gibbs said the county does not receive property tax on incremental value of the property in a TID, and said “almost 12% of the total valuation in the county in the increment is going exclusively to the municipalities that are using it for their TIF that the county is not receiving.”
He also said he is unsure if the cap stated by the state statutes, at 12%, is about the total value or applied only to increments. “But either way, it’s a large chunk of money.”
Therefore, Gibbs said, he is in favor of creating the task force to understand what the economic benefits of TIF in reality are.
“There is a need to a create a task force – to understand the impacts, understand maybe we need better teeth in legislation that says the county has more authority, especially when TIFs…extensions are brought up,” Gibbs said, adding that county officials need to be able to take a position on TIF legislation as it comes up because “there’s also been discussion about expansion of the TIF – from 12% to 15% which would impact the county even more.”
He also expressed concern over what is known as ‘donor TIDs’ – the TIF district whose primary goal has been accomplished and has surplus funds. Municipalities divert those funds to the districts that are not doing well financially, thus depriving tax-collecting entities to lose out on property tax on the increased value.
The county chair said other municipalities should have representation on the task force. He also said their representative on the Joint Review Board on TIF should be able to have some kind of “significant say” while discussing expansion.
Committee Vice Chair Alyson Leahy asked for more clarification about the need to create the task force. She said that the county now has only one seat on the Joint Review Board, and their only other option is emailing their legislators.
The JRB has five members, with one representative each from the county, the city, Northcentral Technical College, Wausau School District, and a citizen member who at present is the former mayor of Wausau, Jim Tipple. The board’s decision to approve or deny a proposal is based on the following criteria: whether the development expected in the tax incremental district would occur without the use of tax incremental financing.
The controversial “but for” provision
One rationale for creating TIF is the “but for” principle, which requires a corporation developer to certify that “but for” the TIF, the project improvements would not otherwise occur.
However, critics of TIF say this is misleading.
“But we don’t consider this valid, because states don’t give cities the right to investigate a company’s internal records about such decisions (such as board minutes, emails, phone records, site location consultant memos, etc.,”the resource center says on its website. “Simply put, the “but for” language enables the developer to say ‘trust me.’ At the end of the day, public officials and the general public never really know what factors drove the company’s decision.”
In Wausau, the use of TIF has been a source of controversy for years, prompting debate by current and former city leaders. Last year, Doug Diny, then a City Council candidate, submitted a letter to the editor in which he called for closing TID #7 and minimizing “donor TIDs” in Wausau since “all of its projects are complete, and it is projected to have a $340,000 surplus this year.” The district was created in January 2006 to “promote commercial development along the I-39 corridor.”
Former City Council member Keene Winters said municipalities are “addicted” to revenues generated by TIF, and cited TID #5, which set up in 1997 to support the third expansion of the industrial park, as an example.
“The 2014 city budget showed all of the TID 5’s debt as being repaid and the TID closing in 2015,” Winters wrote in an article on this newspaper in 2018. “However, the city is going to keep it open until 2020 so that it can transfer more than $1.1 million per year to other TIDs. It now exists as a ‘donor TID’.”
No formal action on the task force was taken.