June 2019 Tax Incremental Finance Districts 1-4 Review
Waterloo P3 means Public Private Partnerships. P3 is the Waterloo community partnering with private businesses or developers creating cost-effective win-win outcomes. Creative tax incremental financing is but one of several advantages Waterloo offers.
Waterloo P3 - Tax Incremental Finance (TIF) - How it works
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Tax Incremental District #1
- District Opportunity Overview
- Bare ground and commercial growth opportunities adjacent to Trek Bicycle and STH 19 available with custom district boundary expansion.
- District #1 Map
- Audited District #1 2018 Financial Reports
- TID #1 Project Plan - large PDF
Audited District Financial Reports
Tax Incremental District #2
- District Opportunity Overview
- Historic downtown with more than 6+ acres of shovel ready land. Riverfront access and fiber-to-the-facility incentive opportunities tied to unique historic buildings.
- Project Plan and associated information
- District #2 Map
- District #2 Zoning District (subject to amendment)
- Audited District #2 2018 Financial Reports
- National Registry of Historic Places Designation
- TID #2 Project Plan
Tax Incremental District #4
- District Opportunity Overview
- Adjacent to K-12 public schools, grocery store, pharmacy and other retail. Ten acres of prime bare ground land available.
- District #4 Map
- District #4 Zoning Districts (subject to amendment)
- Audited District #4 2018 Financial Reports
- TID #4 Project Plan
Helpful Definitions and Q&A(1) Waterloo P3 - Public Private Partnerships involving the City of Waterloo and private or non-profit developers with the aim of creating cost-effective win-win Waterloo economic opportunities. Creative tax incremental financing is but one of several advantages Waterloo offers.
- Facade Grants
- Interior Build-out Grants
- Waiver of all permit fee expense for single-family residentail development
- Combined one-stop state/local project plan review - speedy project approvals and lower project costs
- Municipal facilitation of PACE Financing
- Access to the amenities of Dane County and Waterloo small-town prices.
(2) TIF — an economic development program which helps promote local tax base expansion by using property tax revenues to fund site improvements to attract new industrial or mixed-use development, rehabilitate/conserve property, eliminate blight and remediate the environment
(3) TID — the actual physical area (whole parcels) designated for improvements using tax incremental financing
(4) How is TIF Funded?
When a TID is created, the municipality and other taxing entities agree to support their normal operations from the existing tax base within the district, assuming that if the TID was not created, there would be no additional growth to the existing tax base. Property taxes for the school, county, technical college, and municipality are based on the taxable value of the TID at the time it is created. The tax rates are applied to the TID value increment, which results in additional revenues collected for the district's fund. Eligible TID costs are paid from these revenues before the additional tax base is shared.
(5) How does TIF work?
TIF allows municipalities to promote tax base expansion. The municipality identifies an area for development; this is the TID. The municipality funds the necessary infrastructure and other projects to attract private development. Then as the property value increases, the municipality uses the taxes from that increase to pay the project costs. The municipality can only use TIF to fund infrastructure investment and other eligible projects that facilitate development.
When a municipality creates a TID, the municipality and other taxing entities agree to support their operation from the existing tax base within the TID. They agree the municipality will use the taxes on the value increase in the TID to pay for the investment.
Any new construction or investment in the TID property increases the value. The municipality collects the taxes on the growth in value of the property (the Value increment) as Tax increment revenue. The municipality can only use
this revenue to pay for the improvements it made to the property in the TID according to the approved project plan. Any agreement to use TIF depends on the "but for" concept. Review But For Test for more details.
(6) The "But For" Test
Tax Incremental Financing (TIF) benefits municipalities by encouraging development that would not occur without TIF assistance. This standard is called the "but for" test. The name comes from the assertion, "The development would not occur but for the use of TIF." In other words, the proposed development would not happen without financial support from TIF. For example, a development may not occur in a certain area because there are not enough streets, sidewalks, sewer lines or other types of physical infrastructure. After using TIF to build these improvements, the development becomes cost effective and proceeds.
It is important all local officials understand and can justify the "but for" finding. When the Plan Commission and local legislative body review new developments requesting TIF, they should consider how the development could help their municipality and the effect on projected profits for the developer. TIF law requires the Joint Review Board (JRB) to make the "but for" finding in its resolution, which approves the Tax Incremental District (TID) creation or amendment. This is one of three findings the JRB must make in its approval resolution. According to TIF law, the JRB must base its approval on three criteria listed in state law (sec. 66.1105 (4m) (c), Wis. Stats.), whether the: (a) Development expected in the TID would occur without the use of TIF; (b) Economic benefits of the TID, as measured by increased employment, business and personal income and property value, are sufficient to compensate for the cost of the improvements; and (c) Benefits outweigh the anticipated tax increments to be paid by the owners of the property in the overlying taxing districts.
The second and third criteria work with the "but for" test. Together meeting these criteria demonstrate that using TIF is justified. JRB members should ask relevant questions and request documentation to confirm claims related to the "but for" finding. They can hold additional public hearings if needed. Before JRB members agree to the "but for" finding, they must have convincing evidence showing the TIF is necessary to make the development possible. The members sacrifice some tax revenue for the taxing jurisdiction they represent many years into the future. If TIF assistance is not needed before a development proceeds, the JRB members should not agree to the "but for" finding. What the "but for" finding means: When considering a new development project, there is often substantial risk involved for the developer. As a reward for taking the risk, the developer must make a certain profit. Even if the developer expects a profit, it may not be large enough to compensate for the risk; therefore, the project may not be worthwhile. TIF can alter the profit picture by shifting some of the development costs from the developer to the taxpayer (ex: a site may require environmental cleanup, which can be costly. If a municipality cleans up the site and pays for it with TIF, the developer does not take on this cost). Why would a municipality take on expenses and risks to increase the profits of a private developer? The basic concept of TIF is that there are some projects the municipality finds desirable, but are not profitable enough for private developers. By accepting increased risk and paying for physical improvements in the short-run, the municipality will benefit from an increased tax base once the TID terminates. The municipality must evaluate the short-term risks and the long-term benefits to determine whether a TIF project is worthwhile. The JRB must also agree the long-term benefit is worth the short-term cost.
(6) Should you build it with TIF? LINK TO: Wisconsin League of Municpalities 2016 Conference Presentation
(7) Waterloo and state TIF reports and statistics. LINK TO: Wisconsin Department of Revenue TIF page