Tax Incremental Finance (TIF) - Project Costs

Secs. 60.23(32), 60.85, 66.1105, and 66.1106, Wis. Stats.

1. What are eligible project costs?


2. Do eligible costs include capitalized interest, other costs of issuing debt, and refinancing temporary debt for the Tax Incremental District (TID)?


3. Who determines if project costs are eligible?


4. Can a municipality reduce the costs of one project in a plan and use that amount for another project not in the plan?


5. Can a municipality add projects without adding territory?


6. For mixed-use TIDs, are there restrictions on the project costs' percentage?


7. What are non-project costs?


8. Can a municipality include projects within a half-mile radius of the TID?


9. Is a property tax refund an eligible TID project cost?

1. What are eligible project costs?
   
   Eligible project costs are those costs related directly to establishing and improving the Tax Incremental District (TID), including:
   • Capital development
   • Financing
   • Professional services (ex: consulting, accounting, legal services)
   • Organizational and administrative activities
   • Annual fees
   • Relocation
   
   TID project cost examples:
   • Creation of TID maps or architectural drawings
   • Utility or street construction directly associated with the TID
   • Removal or containment of lead contamination
   • Demolition or building repairs
   • Developer incentive (if municipality signs an agreement with the developer)
   
   Under state law (sec. 66.1105(2)(f)1.k), improvements outside the TID may be eligible costs, but only to the extent that the improvement serves property in the TID (ex: water or sewage lines, treatment plants, and water towers).


2. Do eligible costs include capitalized interest, other costs of issuing debt, and refinancing temporary debt for the Tax Incremental District (TID)?
   
   Yes. These are eligible financing costs authorized in sec. 66.1105(2)(f)1.b., Wis. Stats.


3. Who determines if project costs are eligible?
   
   It is the municipality's responsibility to determine if a project cost is eligible under state law (sec. 66.1105(2)(f)1 & 2., Wis. Stats.). The municipality should consult its attorney for assistance on whether a specific cost is eligible. The Wisconsin Department of Revenue does not review project costs or determine cost eligibility.


4. Can a municipality reduce the costs of one project in a plan and use that amount for another project not in the plan?
   
   No. However, the municipality may shift TIF funds to a new project if the municipality completes a project plan amendment to include the additional project.


5. Can a municipality add projects without adding territory?
   
   Yes. This is possible if the municipality completes a project plan amendment to add projects. See Project Plan Amendments.


6. For mixed-use TIDs, are there restrictions on the project costs' percentage?
   
   No. The costs for each area do not need to match the land type percentages. For example, a mixed-use TID may contain 90 percent of the project costs for industrial projects and 10 percent for commercial projects even though 10 percent of the land is industrial, and 90 percent is commercial.


7. What are non-project costs?
   
   Non-project costs are expenses that are not eligible to be paid with TIF funds or public works projects that only partly benefit the TID. A municipality cannot use tax increments to pay these costs.
   
   Non-project costs examples include:
   • Public improvement made:
     • Within the TID – that also benefits property outside the TID. The portion of the total project costs allocated to the properties outside the TID is a non-project cost.
     • Outside the TID – that also benefits property within the TID. The portion of the total project costs allocated to the properties outside the TID is a non-project cost.
   • Projects within the TID as part of the project plan implementation that are paid fully or in part by impact fees, grants, special assessments or revenues other than TIF increments
   • Project costs for construction or expansion of administrative buildings and general government operating expenses unrelated to the TID


8. Can a municipality include projects within a half-mile radius of the TID?
   
   Yes. A municipality may include projects outside the TID but within a half-mile radius if the projects are documented in the approved project plan. Only eligible costs within the half-mile radius can be paid for with TIF funds.


9. Is a property tax refund an eligible TID project cost?
   
   No. A property tax refund is not an eligible TID project cost.