Tax Incremental Finance (TIF)

Project Costs

  1. Who determines eligible project costs and what are they?
  2. Can the costs of one project in a plan be reduced and that amount spent on a project not in the plan?
  3. Can we add additional funding/projects without adding territory?
  4. Can a municipality buy and improve land with TIF funds and place revenue from its sale into the general fund?
  5. Can expenses incurred before the Tax Incremental District (TID) is created be recovered?
  6. Can interest be charged to the TID fund for advances made to it by the municipality?
  7. If a municipality purchased land prior to the TID being created, but now wants to sell the land to the Community Development Authority (CDA) after the TIF is approved, can that be considered an expense? (The CDA is a separate entity and sells land to developers and somewhat manages the TID.)
  8. For mixed-use TIDs, are there restrictions as to the percentage allocation of the project costs?
  9. Can TIF funds be used to reduce special assessments to property owners once the improvements are installed?

  1. Who determines eligible project costs and what are they?

    The Department of Revenue (DOR) does not review project costs or determine cost eligibility. State oversight is minimal. It is the municipality's responsibility to make those determinations in accordance with sec. 66.1105(2)(f)1 & 2., Wis. Stats., where the type of TID will impact what types of costs are eligible and not eligible. The municipal attorney should be consulted on “questionable” costs to justify the municipality's decision.

    Costs related directly to establishing and improving the TID are eligible. Examples of costs for TID's include capital development, financing, real property assembly, consulting and legal services, organizational activities, annual fees, relocation, contributions and payments necessitated by the project plan, utility construction directly associated with the TID, or the removal or containment of lead contamination. Improvements outside the TID can be eligible costs, but only to the extent that the improvement serves property in the TID.

  2. Can the costs of one project in a plan be reduced and that amount spent on a project not in the plan?

    Spending less on one project and more on another is acceptable, however, a “new” project needs an amendment filed with DOR.

  3. Can we add additional funding/projects without adding territory?

    Yes. You will need to do a Project Plan Amendment. The steps to follow are similar to when you originally created the TID, such as notifications, publication of class 2 notices, public hearing and resolutions.

  4. Can a municipality buy and improve land with TIF funds and place revenue from its sale into the general fund?

    No, TIF is not meant as way for the municipality to make a profit. Revenue received from the sale of property purchased and improved with TIF funds should be used to offset all other project costs. See question #1 or refer to the Wisconsin TIF statutes for more details on eligible project costs.

  5. Can expenses incurred before the Tax Incremental District (TID) is created be recovered?

    Only to the extent that the expense was for planning the district. Costs of ‘bricks and mortar' cannot be incurred until after the project plan has been approved by the local governing body under sec. 66.1105(6)(am)3, Wis. Stats.

  6. Can interest be charged to the TID fund for advances made to it by the municipality?

    Generally, interest on advances is an eligible cost, if made after the TID is created.

  7. If a municipality purchased land prior to the TID being created, but now wants to sell the land to the Community Development Authority (CDA) after the TIF is approved, can that be considered an expense? (The CDA is a separate entity and sells land to developers and somewhat manages the TID.)

    This purchase would not be considered a TIF project expense. In fact, it would have to be listed as municipal-owned at Full Market Value, since the municipality is the listed owner as of January 1st in the year the TID is created. Also, when they sell it (to whomever), the proceeds would be considered TIF revenue and used to offset project costs.

  8. For mixed-use TIDs, are there restrictions as to the percentage allocation of the project costs?

    No. For example, a mixed-use TID can contain 90% of the project costs for industrial projects and 10% for commercial projects.

  9. Can TIF funds be used to reduce special assessments to property owners once the improvements are installed?

    No. Based on sec. 66.1105(2)(f), Wis. Stats., the municipality should not use TIF funds for that purpose.

FOR MORE INFORMATION PLEASE CONTACT:

Wisconsin Department of Revenue
Attn: Office of Technical and Assessment Services
PO Box 8971, MS 6-97
Madison, WI 53708-8971
Phone (608) 266-5708
Fax (608) 264-6897
Email additional questions to tif@revenue.wi.gov

July 9, 2014