Damakant Jayshi
Days after Marathon County created a task force to study the impact of tax increment financing districts on the county’s budget, the leaders of some municipalities are criticizing the move.
“I feel that the creation of a task force isn’t necessary,” Kregg Hoehn, mayor of the City of Schofield, told Wausau Pilot & Review.
Tax increment financing burgeoned from an obscure law passed in the 1970s to what critics call a “slush fund” that captures property taxes that would otherwise be split between schools, the municipality and other taxing districts. The program was created to spur development in blighted areas by declaring them TIF districts. For the life of the district, which can extend for 20 to 30 years or even longer, any increase in property tax revenue in the area goes into a fund that’s set aside for development projects. The logic is that new development will increase property values, generating revenue that the city can use to subsidize development.
But for many years, critics see TIF as an out-of-control beast that lacks transparency and has been used to subsidize development in areas that don’t need it, benefiting developers who are simply getting wealthy at taxpayer expense.
Hoehn said that without tax increment districts “very little growth would occur in our city. Every manufacturer is looking for the best deal and fit possible. As a land locked community, we have very little open space to expand, therefore improving what we do have is all we can offer.”
Dollars stemming from tax increment districts are are used for fixing and upgrading roads and sewer lines, and adding infrastructure needed to attract growth, Hoehn said. He said state aid has dwindled to a trickle over the years, “but costs of running a city have increased tremendously.”
Marathon County created the TIF task force last week. Wausau Pilot & Review reached out to all 17 municipalities that together have 40 active TIDs within the county. Four provided responses, while clerks from Colby and Athens said elected officials were not immediately available to comment.
Other municipal leaders or administrative officials did not respond to questions, nor did Marathon County Board Chair Kurt Gibbs.
Among the top criticisms of the task force was over its proposed composition. Marathon County’s 15 incorporated villages and six cities have the authority under Wisconsin statutes to create tax incremental districts under TIF to “revitalize” development, many of which involved blighted properties or brownfields. TIF districts are regulated by the Wisconsin Legislature.
But the language of the ordinance creating the TIF task force implies that only two of the 21 municipalities will be represented in the nine-member body. Five will be county supervisors, along with one representative from the business community and one from a local taxing district.
“(The) Task force seems to be very light on municipal representation,” said David Narloch, president of the Board of Trustees of the Village of Hatley. “I have (a) feeling many board members are NOT educated on TIF/TID districts.”
“These districts help fund projects and are not wasted dollars,” Narloch said.
A joint review board considers applications to create new districts under TIF or extend the life of existing TIDS. Marathon County, Wausau, Northcentral Technical College and the Wausau School District are all represented on the board, along with a former Wausau mayor.
The task force aims to study the effect of TIF and TID on the county’s revenue. Critics of TIF say that more than a billion dollars in value is locked within such districts but the county can only tax those properties at base value. But some municipal leaders applaud TID and say the tool is the only method they have to develop some areas and grow their local economy.
Spencer Administrator-Clerk-Treasurer Paul Hensch credited TID-funded infrastructure as a major factor in the village’s growth.
“These billions of dollars would not exist if it wasn’t for the appropriate use of TID funds to open up Marathon County for building and growth,” he said.
He was also critical of the approach taken by county leaders.
“No one from the county has approached the Village with one question about how TIDs work, how they are operated, and how they ultimately benefit the county,” said Hensch. “These issues and the county’s question probably could have been resolved by the county working with their staff and municipal staff that are versed in TID operations and laws.”
He also said the village recently closed one district without extending its life.
“Next year $6 million will be on the County’s tax rolls that would not exist if TID #2 wasn’t utilized,” he said. “While they may not have seen a benefit during the lifetime of the TID, they will be seeing benefit of the results of that TID, just as the TID laws in Wisconsin intend.”
Is TIF misleading? And is it doing what it should?
One central factor in tax increment funding centers on the “but for” principle, which requires a developer to certify that “but for” the TIF, the project improvements would not otherwise occur.
This is a controversial concept that critics say could be misleading because states do not give cities the right to investigate a company’s internal records about such decisions. In other words, municipal leaders are forced to “take a company’s word for it,” according to Good Jobs First, a national policy center on governance. At the end of the day, the public never really knows what factors drove the company’s decision.
Some municipalities including Chicago have announced major reforms to the TIF approach as they work to elevate transparency, accountability and equity in how spending decisions are made. In February 2020, for example, Chicago Mayor Lori Lightfoot rolled out a series of reforms including a rigorous analysis of TIF proposals and a new TIF investment committee to review expenditures.
And some experts are reconsidering the economic development tool amid questions over whether land use policies long touted for their ability to generate development and create economic opportunities for underserved neighborhoods are doing what they are intended to do. Molly Metzger, a professor at the Brown School of Social Work at Washington University in St. Louis, told the Lincoln Institute of Land Policy it may be time to pump the brakes.
Wausau mayor says city is open to discussion on TID
Wausau Mayor Katie Rosenberg is open to the idea of the task force but suggested that county supervisors, municipal leaders, or citizen members included in the body should consider “a variety of sources and opinions on the matter but especially people who understand the tool.” Wausau has the highest number of the currently operations TIDs in the county: eight of the 40 active TIDs.
But she pushed back on the idea that more than a billion dollars of property value is locked.
“I think that’s a bombastic use of the data,” she said. “I didn’t dive into the veracity of the claim but if that’s the case, wouldn’t a billion dollars in created revenue be a good thing? Even for the county?”
Just like some county supervisors, the Wausau mayor said there might be some TIDs that didn’t accomplish what the governing bodies envisioned.
“We certainly want to learn from those challenges so we can ensure we’re as successful as we can be when we’re working through financing options on future developments,” she said.
On allegations leveled by some supervisors and county residents that TIDs have “gone out of hand/control,” said Rosenberg. “I certainly don’t think keeping a TID open for entire generations is appropriate in most cases. But again, it’s also easy to point to a thing, in this case the increase in tax base that’s being created through the ‘but for’ test.”
A first meeting of the new task force has not yet been scheduled.
