Ask an Official: City Administrator discusses use of TID incentives
This week’s featured question was submitted for Merrill City Administrator Dave Johnson
The question reads-
“What is a TIF incentive and how do they work? Like when or how does the city decide when to use them and so on? Is there a limit to how they are used and how much can be offered? Thank you”
Answer as given by Johnson:
“Tax Increment Financing, or TIF, is a public financing tool that is used to invest in development, infrastructure, and other community improvement projects. TIF uses future gains in property taxes to fund current improvements, which are projected to create the conditions for projected future increases in property values. When a Tax Incremental District (TID) is created, the current value of all the taxable property within the defined boundaries is established. This value is the “base value” of the TID. The taxes collected on this portion of the property value are shared by the overlying taxing jurisdictions, and once the TID is created this portion of the tax collections is allocated as it always has been. The city, county, school, and technical college continue to split revenues from the base value. Over the life of the TID, the county, school, technical college and municipality all collect taxes from the property in the TID base. Meanwhile, new construction and investment increase the value of the property. All of the taxes collected on the growth in value of the property (or the “value increment”) are turned over to the City as “tax increment” revenue. The City uses this revenue stream only to pay for the improvements that it made in the TID.
“TIF not only helps expand a municipality’s tax base, but also aids business expansion, retention, and encourages orderly development or redevelopment within the city. Improvements in the area must significantly enhance the overall value of real property within the district. Project costs must relate directly to eliminating blight, rehabilitation, or conservation of the area, or promote commercial/industrial development. TID incentives encourage private investment and may include land acquisition and/or building rehabilitation/construction. In return, the developer guarantees an increased assessed property value and/or the retention or creation of additional jobs over a period of time. The amount that is invested in any single project is based upon the amount of tax increment (increased value) generated, the type development, the need for the development, and jobs that are to be created or retained. The incentive given for any project must not be more than the tax increment generated by that project or there is a negative return on investment.
“A Tax Increment District (TID) usually lasts 20 or more years, or enough time to pay back any bonds issued to fund projects in the TID. The life of a TID may be extended with concurrence from the Joint Review Board which includes representatives of the City of Merrill, Lincoln County, Merrill Area Public Schools, and Northcentral Technical College. The important thing to note is that the city is fueled by property taxes. Just about everything we do or use in the city, other than sewer and water utilities – police, fire/EMS, streets, public transit, public library, Enrichment Center, Festival Grounds, our parks and the basic operations of the city, as well as public schools – are all powered by our property taxes. If you rent, then a portion of your rent will eventually make it into that pool, as the owner of the property must pay property taxes. Increasing our tax base is essential to the future of our city.”
Do you have a question or concern you would like to address with a local official? If so, simply email your question or concern to email@example.com. Currently, ten city, county and state officials participate in the Ask an Official feature. Participating officials are as follows: Merrill City Administrator Dave Johnson, Merrill Common Council President Rob Norton, Merrill Fire Chief Josh Klug, Merrill Police Chief Corey Bennett, Merrill Area Public Schools Superintendent Dr. John Sample, Lincoln County Administrative Coordinator Jason Hake, Lincoln County Forestry, Land and Parks Director Kevin Kleinschmidt, Tomahawk Police Chief Al Elvins, Wisconsin DNR Conservation Warden Curt Butler and Wisconsin State Patrol Lieutenant Richard Reichenberger. Please Note: Those who choose to submit a question or concern will remain anonymous.