Tax Incremental Finance (TIF) - Project Costs

  1. What are eligible project costs?

  2. Who determines if project costs are eligible?

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

  4. Can a municipality add projects without adding territory?

  5. Can a municipality buy and improve land with TIF funds and place revenue from the improved land's sale into the general fund?

  6. If a municipality incurs expenses before it creates a Tax Incremental District (TID), can these expenses be recovered?

  7. If a municipality transfers money from another source to the TID fund, can the TID fund be charged interest?

  8. If a municipality purchased land before it creates a TID and would like to sell that land to the Community Development Authority (CDA) after the TIF is approved, can the land be considered an expense?

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

  10. Can a municipality use TIF funds to reduce special assessments to property owners after the improvements are installed?

  11. What are non-project costs?

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

  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
    • Real property assembly
    • Consulting and legal services
    • Organizational activities
    • Annual fees
    • Relocation

    TID project cost examples:
    • Contributions and payments necessitated by the project plan
    • Utility construction directly associated with the TID
    • Removal or containment of lead contamination

    Under state law (sec. 66.1105(2)(f)1.k), improvements outside the TID can 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. 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 (DOR) does not review project costs or determine cost eligibility.

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

    Yes. Spending less on one project and more on another is acceptable; however, the municipality must file a project plan amendment with DOR for the “new” project.

  4. Can a municipality add projects without adding territory?

    Yes. This is possible if the municipality adopts a project plan amendment. Amending a project plan is similar to creating the original TID. Steps include: notifying the overlying taxing jurisdictions, publishing notices, holding a public hearing, and adopting resolutions and project plans. See our web page on Project Plan Amendments.

  5. Can a municipality buy and improve land with TIF funds and place revenue from the improved land's sale into the general fund?

    No. A municipality cannot make a profit with TIF. It must use revenue from the sale of property purchased and improved with TIF funds to offset all other project costs.

  6. If a municipality incurs expenses before it creates a Tax Incremental District (TID), can these expenses be recovered?

    If a municipality incurs expenses before it creates a TID, the municipality can only recover expenses directly related to planning the district. The municipality cannot incur other expenses until after the local governing body approves the project plan (sec. 66.1105(6)(am)3, Wis. Stats.).

  7. If a municipality transfers money from another source to the TID fund, can the TID fund be charged interest?

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

  8. If a municipality purchased land before it creates a TID and would like to sell that land to the Community Development Authority (CDA) after the TIF is approved, can the land be considered an expense?

    No. This purchase is not considered a TIF project expense. When the municipality sells the land, the proceeds are considered TIF revenue and used to offset project costs.

    If a municipality purchases land within one year before the TID creation, the land must be valued as if the purchase did not occur. (sec 66.1105(5)(e), Wis. Stats.)

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

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

  10. Can a municipality use TIF funds to reduce special assessments to property owners after the improvements are installed?

    No. Under state law (sec. 66.1105(2)(f), Wis. Stats.), a municipality may not use TIF funds for this purpose.

  11. What are non-project costs?

    Non-project costs are public works projects, which only partly benefit the TID. A municipality may not pay these costs with tax increments or TIF increments.

    Examples include:
    • A 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 only partially benefits property within the TID. The portion of the total project costs allocated to the properties outside the District is a non-project cost.
    • Projects started 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.

  12. 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 project plan.

FOR MORE INFORMATION PLEASE CONTACT:

MS 6-97
WISCONSIN DEPARTMENT OF REVENUE
Office of Technical and Assessment Services
PO Box 8971
Madison, WI 53708-8971
Phone: (608) 261-5335 or (608) 266-5708
Email additional questions to ​tif@wisconsin.gov

​July 13, 2017