While Gov. Doyle commits to spend billions to widen freeways that don’t need widening, city streets are falling apart. The situation is dire and aldermen are getting desperate to come up with some way of making things better or at least slow the descent into much, much worse.
Ald. Jim Bohl came up with an idea that will increase funding for street repairs by, in a roundabout way, increasing property tax rates for non-city units of government like the county, school district, Milwaukee Area Technical College and Milwaukee Metropolitan Sewerage District.
Bohl wants to use TIF district funds to pay for street repairs. TIFs are an economic development tool that allows municipalities to borrow to make improvements in an area, then use the new property tax revenue generated through the improvements and subsequent private development to pay off the loan. The borrowing municipality — in this case, Milwaukee — gets to use all of the new property tax money to pay down the loan instead of distributing the revenue to other taxing units as is customary.
Bohl’s idea — received warmly by several other aldermen — is to increase project costs within some or all of the city’s 48 TIF districts and use the extra money to fund street repairs outside of the districts, but within a half-mile of their borders, something state law allows. The city gets to keep the money generated by the TIF a little longer to pay off whatever the street work costs.
The other taxing units still need to collect the full amount of their levies and other property taxpayers simply will have to come up with more money to make up for the amount the city is withholding — they will, in short, be taxed at a higher rate because of the city’s keeping the TIF funds to pay for street repairs.
Yes, the streets really, really need fixing and Bohl is at least making an effort to get the damned streets fixed. Unless I’m really missing something, though, Bohl’s plan essentially would force other units of governments to put the cost of the street projects on their tax levies. This does not seem like a development likely to foster goodwill and cameraderie amongst all those starving local units of governments who can barely cover their own expenses.
Road-builders pouring concrete and money on the ground all over the state are having a good chuckle, though. No starvation worries for them. They’re eating well at the state trough.
You’re right that is an issue, though they could select only TIFs not expected to come due this or say next year so by the time this would of impacted the levy we could all be in better financial shape.
This plan wouldn’t raise taxes for those entities as you’ve indicated. It merely prolongs the increased revenue a year or so on each TIF (most which will not come on line as available tax revenue for many years to come). It also will increase the value of property in the areas where the road work is occuring and thus offset the additional payout for extended bonding to pay for the road. This plan doesn’t decrease current property tax revenue coming from those propeties– which will remain the same as previous years. The increment is what pays off the bonding.
It doesn’t raise the taxes for the taxing units — it raises taxes for the remaining taxpayers, who must pay more per $1,000 assessed valuation because there is less tax-generating property than there would be if the TIF were ended. To oversimplify: If a local government needs to raise $1,000, each property owner pays $1 if there are 1,000 properties, but each property owner must pay $500 if there are only two property owners.
Gretchen,
Extending the boundaries for road repairs doesn’t extend the TID district to that farther boundary. TIF’s also work off of increment and the property taxes generated prior to the TIF are still paid into the coffers, so nothing is lessened as far as tax dollars being received by the governmental tax entities that receive property taxes. In fact, if anything, without the TIF’s the land wouldn’t have been improved and the unimproved land wouldn’t have appreciated so nobody would have received anything more. Additionally, if there had been no development, there would have been no jobs added (either in construction or via any business that would be created in the TIF area). Finally, added population density in the form of new residents via housing or employees become a catalyst for other development surrounding the areas where TIFs are employed. More people around to shop, buy lunches, etc. This adds value to properties surrounding the TID but are not in it. This appreciated property does add immediate benefit to the governmental taxing entities.
Maybe it’s just me, but I believe there is a lack of understanding about how TIF works here?
No, I understand how TIFs work. If I understand the proposal, TIF funding would be used to fund road improvements outside the TIFs. The life of the TIF would be extended by a year (at least). Thus, governments who would be able to tax that increment will have to wait another year to do it — in essence, they would have to levy higher taxes on the rest of city taxable properties, thus subsidizing the city’s street work.
I’m willing to be convinced this is a good idea, but I’m not there yet.