Tax Incremental Finance (TIF)

Project Costs

  1. What are eligible project costs?
  2. Who determines if project costs are eligible?
  3. Can we reduce the costs of one project in a plan and use that amount for another project not in the plan?
  4. Can we add additional funding/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. Can expenses incurred before the Tax Incremental District (TID) is created be recovered?
  7. Can the TID fund be charged interest for advances made to the fund by the municipality?
  8. If a municipality purchased land before a TID is created, and would like to sell the land to the Community Development Authority (CDA) after the TIF is approved, can it be considered an expense? (Note: The CDA is a separate entity and sells land to developers and somewhat manages the TID.)
  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?

  1. What are eligible project costs?

    Eligible project costs are those costs related directly to establishing and improving the TID.
    TID cost examples 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
    • Removal or containment of lead contamination

    Note: Improvements outside the TID can be eligible costs, but only to the extent that the improvement serves property in the TID.

  2. Who determines if project costs are eligible?
  3. 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 municipal attorney should be consulted on “questionable” costs to justify the municipality's decision.
    Note: The Wisconsin Department of Revenue (DOR) does not review project costs or determine cost eligibility. State oversight is minimal.

  4. Can we reduce the costs of one project in a plan and use that amount for another project not in the plan?
  5. Yes. Spending less on one project and more on another is acceptable; however, you must file a project plan amendment with DOR for the “new” project.

  6. Can we add additional funding/projects without adding territory?
  7. Yes. You must create a Project Plan Amendment. Creating a project plan amendment is similar to creating the original TID. Steps include, creating: notifications, publication of class 2 notices, public hearing, resolutions and project plans.

  8. Can a municipality buy and improve land with TIF funds and place revenue from the improved land's sale into the general fund?
  9. No. A municipality cannot make a profit with TIF. You must use revenue received from the sale of property purchased and improved with TIF funds to offset all other project costs. Review question #1 or refer to the Wisconsin TIF statutes for more details on eligible project costs.

  10. Can expenses incurred before the Tax Incremental District (TID) is created be recovered?
  11. 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 is approved by the local governing body. (sec. 66.1105(6)(am)3, Wis. Stats.)

  12. Can the TID fund be charged interest for advances made to the fund by the municipality?
  13. Yes. Generally, interest on advances is an eligible cost if made after the TID is created.

  14. If a municipality purchased land before a TID is created, and would like to sell the land to the Community Development Authority (CDA) after the TIF is approved, can it be considered an expense? (Note: The CDA is a separate entity and sells land to developers and somewhat manages the TID.)
  15. No. This purchase would not be considered a TIF project expense. The land must be listed as municipal-owned at Full Market Value, since the municipality is the listed owner as of January 1 in the year the TID is created. Also, when the municipality sells the land, the proceeds would be considered TIF revenue and used to offset project costs.

  16. For mixed-use TIDs, are there restrictions on the project costs' percentage allocation?
  17. No. For example, a mixed-use TID can contain 90% of the project costs for industrial projects and 10% for commercial projects.

  18. Can a municipality use TIF funds to reduce special assessments to property owners after the improvements are installed?
  19. No. Per state law (sec. 66.1105(2)(f), Wis. Stats.), a municipality should not use TIF funds for that purpose.

  20. What are non-project costs?
  21. Non-project costs are public works projects that only partly benefit the TID. These costs cannot be paid with tax increments or TIF increments.

    Examples include:

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) 261-5335
Fax (608) 264-6897
Email additional questions to tif@revenue.wi.gov

April 6, 2016