Tax Incremental Financing

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Wisconsin’s cities, villages, and towns have limited tools available to them to advance economic development in their community. Other states allow local municipalities to utilize tax abatement, local sales taxes, unique special district funding, and other enterprise zones. Each of these methods utilizes some diversion of tax dollars for supporting economic development activities or goals. In Wisconsin, the most common tool – and often the only one available at the city level of government – is tax increment financing or “TIF.” The intent of this article is to help Oak Creek residents better understand the City’s use of TIF to achieve its economic development goals. The City is not unique in its use of TIF. In 2017, there were 1,238 TIF Districts (TID) total in all of Wisconsin. In Milwaukee County, 107 TIDs are presently active, and every city and village in the County have at least one TID (with the exception of the Village of Bayside). In total, as of December 31, 2017, there was approximately $32.5 BILLION of property value in TIDs across Wisconsin. Clearly, the use of TIF remains the most prevalent tool for Wisconsin’s local governments to use for economic development and job creation.
How Does A TIF Work?

Every year when we pay our property tax bills, several different taxing entities receive a portion of this revenue. The jurisdictions include the City, Oak Creek-Franklin Joint School District, Milwaukee County, MATC, Milwaukee Metropolitan Sewerage District (MMSD), and the State of Wisconsin. Although the City collects the full property tax payment from you, we only retain about 29% of the total for our operations and finances. And while the City is the only entity involved in investing in the growth of the tax base, the other taxing jurisdictions also benefit from that growth.

When new development occurs within a TID, 100% of the new tax revenue is retained to pay off project costs. Projects could be new roads, water, sewer, blight elimination/raising of buildings (such as the AC Delco/Delphi site, which is now Drexel Town Square), development incentives, and other project costs permitted by state law. General city property taxpayers DO NOT pay for these costs – they are paid for only by developments that occur within the TID itself.

It is important to note that revenue from the original, pre-TID property values continues to go to the taxing entities, like the school district, to ensure they are not losing revenue. One of the common misconceptions about TIF is that properties within a district do not pay taxes. That is not true. Each property owner within the district is charged property taxes based on the value of their property, and at the same rate as everyone else in the community.

Essentially, the other taxing entities are foregoing new tax revenue (generated only from tax base that would not occur “but for” the TID being in place) for a period of years until the TID closes. When the TID closes, ALL of the taxing entities benefit from the increased tax revenues within the TID. The local city or village is the agent that invests in economic development, but from which all other entities benefit financially.

Prior to the creation of any TID, a “Joint Review Board” must approve it. This Joint Review Board, required by state law, has a voting representative from each of the affected taxing entities, as well as a citizen representative. Further, the Joint Review Board must be assured the TID is financially able to pay itself off so general taxpayers do not have to pay for costs associated with TID projects.

Why Would A Community Use TIF?
Cities and villages, even when they are neighbors, often compete for new tax base and job growth as they look for revenue to ensure they can continue to provide residents with the best possible public services with the lowest property tax burden. The desire to be the best possible place to live and work is a value held by all communities; thus, the associated competition for economic development. New tax base means new revenue; new job growth means more money available to spend in the local economy and on local businesses; new businesses and amenities (public and private) means more people viewing the community as a place to invest in a home and/or in which to raise a family. New economic development increases tax base so residents do not experience higher property tax bills in the future. The Oak Creek Common Council wishes to ensure high-quality services and amenities, with the lowest required taxes possible.
Use of TIF In Oak Creek.

Since the state law enacting TIF in the late 1970s, the City has created 15 TIDs. Currently, there are nine active TIDs in Oak Creek. New City projects that would not have occurred or would not be
possible in the future without the use of TIF include, but are not limited to:

  • Redevelopment of industrial property to create Drexel Town Square.
  • Future development of the lakefront around Lake Vista Park.
  • IKEA and the future development adjacent to it.
  • Retaining Master Lock as a large employer in the City.
  • OakView Business Park and the 27th Street Corridor.

Although a TID can last as long as 27 years, the City attempts to lose them as early as possible. This puts the additional revenue from property value growth back to the general fund in order to alleviate the property taxes we all have to pay. The City has closed a TID in as early as six years. The longest TID the City used was 17 years, still well below the maximum allowed time per state laws.

The City’s recently adopted Strategic Action Plan identified “Thoughtful Development and a Prosperous Economy” as a critical success factor for our community. While there may be legitimate debate about to what degree a local government should be investing in its economic future, there should be no disputing the positive impact that TIDs have had in creating jobs, growing tax base and stimulating the local economy in Oak Creek. 

Difference Between "TIF" vs. "TID"

TIF= Tax Increment Financing

The economic development program that helps promote local tax base expansion by using property tax revenue to fund site improvements in a specified area.

TID= Tax Increment District

The actual physical area designated for development projects and where the City is making public improvements (roads, water, sewer, etc.).

TID by the numbers

  • 1,238 TIDs in Wisconsin, including 107 in Milwaukee County, with total overall property value = $32.5 billion!
  • Every city/village in the county has at least one TID (except the Village of Bayside).
  • The City has had 15 total TIDs, but only nine are still active.