Milwaukee Biz Blog: The Epic Value of TIF

It's an important tool for economic development

One of the few tools Wisconsin communities have to invest in their economic development is tax incremental financing (“TIF”). In many cases, communities will use TIF to fund the infrastructure necessary to grow their tax base and create jobs by fostering a partnership with a new business, or attracting an existing business to their borders.

Tax increment financing was first enacted in the state in 1975. The goal was to provide local municipalities with a flexible tool to fund infrastructure for economic development. Communities use the tool differently, but in most cases it is to advance a common goal for development.  The “but/for” test was established to protect taxpayers, requiring that to open a Tax Incremental District (TID), the municipality had to demonstrate that but for the TIF financing, the development would not happen.

In 2002, the City of Verona in Dane County used TIF to attract Epic Systems, which was seeking to build a corporate campus. Since that time, 17 buildings have been erected and the campus hosts more than 9,000 employees.

In Verona, the city invested $31.4 million into infrastructure and incentives for the development of the corporate campus. In 2002, the value of the property in the TIF district in 2002 was approximately $320,400. Epic continued to pay property taxes on this amount to the City of Verona, and other taxing jurisdictions, and the additional property taxes resulting from the increased assessed value in the property was used to pay off the original investment by the city.

In May of 2016 the City of Verona Common Council voted to close the TIF district, approximately 9 years ahead of schedule. The value of the property returned to the tax rolls increased to over $390 million.

In addition to this meteoric rise in property value, the city’s original investment was repaid, with interest, and the TIF closed with a surplus resulting in an additional $21 million being returned to the city, school district, and other public bodies in the taxing area.

The City of Verona invested in itself, to the tune of $31.4 million. That investment was not only repaid by the increase in taxes on the property, but from 2016 forward the majority of the property in the TIF district will now be on the property tax rolls….at more than $390 million in equalized value.

Epic Systems, which began as a start-up at the UW Madison Research Park, has seen tremendous growth and expansion. The City of Verona bet on this growth and invested in the infrastructure to make their city affordable and attractive to the company. The investment paid off for the taxpayers, the community, the region, and Epic.

NAIOP Wisconsin along with the Commercial Association of REALTORS® Wisconsin (CARW), League of Wisconsin Municipalities, Wisconsin Economic Development Association, and the Wisconsin REALTORS®Association represent a broad perspective of professional experiences and expertise, and collectively advocate for responsible development and flexibility in TIF policy. Learn more at http://naiop-wi.org/ga/tif/.

TIF is one of the most important, and in many cases the only tool local municipalities have to directly engage in economic development. Some will argue that there are not enough protections for taxpayers or that TIF has been used beyond the original intent. We appreciate this concern and welcome a serious, fact-driven dialogue about how to ensure taxpayers realize the best return for their investment.

We cannot ignore, however that we are seeing significant investment and development in Wisconsin. The precarious nature of the financial markets and the competition by communities, states, and nations demands that we work with caution so as not to jeopardize investment in Wisconsin. Instead, we should demonstrate Wisconsin’s commitment to being open for business, open to investment, and open to public/private partnerships.

The City of Verona TIF was a success of epic proportions. This is a great example of what is possible when communities work with developers, private investors, and/or businesses to invest in their future.

Jim Villa is the CEO of NAIOP Wisconsin.

Comments

  1. DA Gee says:

    How oh HOW did the world exist before TIF’s? Obviously. many others are profiting from them…such as banks, developers, and real estate people, who are making OODLES of money, or else they would not be pushing for them. Back in the 60’s and 70’s, municipalities like MILWAUKEE complained about the cost of such huge developments, because oftentimes, like in the case of the “old” First Wisconsin Center, the City had to pay for the cost of new sewers and roads. So how has this changed? If I want to build a house, I have to pay for the new curb.driveway cut, the sewers, and even the waterline to the house, yet no-one gives me a deal–yet I would create jobs and bring new taxes to the community. It real is a scam disguised as something for the public good…when the real people to profit are the developers.

  2. Jim Maurer says:

    Thank you for the example of where Tax Incremental Financing was applied responsible by fiscally conscious elected officials.
    Now on to Wauwatosa where the overuse and misuse of TIF Districts has sequestered property taxes for the length of 17 or 27 years. The Wauwatosa officials have also ballooned the City’s debt service from $35 Million in 2010 to $115 Million in 2016 and want to raise the debt limit in 2017. All this while the city is cutting Taxpayer services to the bone.
    These TIF are being used in this highly desirable community where land for development or redevelopment is scarce as hen’s teeth. There is no need to use TIF incentives in this community where single family homes and duplexes are being sold for, often, $10,000.00 over the asking price. Three blocks from one of my properties a clapboard Colonial sold for $50,000.00 over the asking price in 2016.
    The jobs the Mayor is claiming to be creating are ether temporary construction jobs for workers residing outside the City of Wauwatosa or minimum wage, service, non family supporting jobs. Wauwatosa taxpayers cannot support themselves, yet alone a family, on the wages paid from working at Meijer or as wait staff, clerks or hotel staff. The vast majority of these employees come from Milwaukee. How is this is benefiting the Wauwatosa Taxpayer ?
    The TIF District apartments have been overbuilt and provide units that start at $1,295.00 a month for approximately 600 square feet as pointed out in a letter to City officials written by a local real estate agent.
    The proposed development on the Milwaukee County Grounds Northeast Quadrant Greenspace Corridor, marketed as the “Lifescience District” , will use TIF for yet more apartment buildings “no less than ten stories high”.
    I see resign or recall in the near future…Jim Maurer, Milwaukee, Wauwatosa

  3. The Sheriff says:

    Jim-
    Talk about cherry picking your way through the many TIF districts in Wisconsin. You used what is arguably the most successful company to come out of Wisconsin in the last 30 years!!! Of course they hit a homerun! But let’s not forget businesses like Third Wave Technologies, who had an empty hole in the ground for years. Did it work? Sure, but look around the greater Madison area…it’s not like growth/development didn’t occur all over the area. It’s very difficult to argue that the TIF was the spur that drove this success. I’d argue it was more the funding and intellectual capital from UW-Madison and the WARF that drove the growth of these businesses, not some property tax reduction.

    Now let’s talk about retail TIF’s and their long-term effects on community tax rolls. Right now retailers are fighting for new assessments at a dark store rate instead of an occupied rate…ie what was already a poor payback will now be impossible. And what are these municipalities to do…the retailers have deeper pockets, better lawyers, and more resources. Plus, they are “job creators” meaning politicians listen all too well.

    Biggest issues with TIF districts is the argument they drive development in areas where development would otherwise not occur. While that might be the case in some instances. most recent TIF”s are nothing but kickbacks to developers to make financially feasible projects look even sweeter. From the NML tower, to the Corners retail development, to TIFs for Wal-Mart to move to a new location, these TIFs amount to removing revenue from the public coffers and instead put that money into the hands of private developers and businesses. It’s nothing but a giant tax shift and risk shift focused on the wealthiest of individuals. For most TIF’s it’s simply a zero sum game.