Tax Increment Financing (TIF)

TIF (Tax Incremental Finance) is an economic development program that helps promote local tax base expansion by using property tax revenues to fund site improvements to attract new development or eliminate blight. A TID (Tax Incremental District) is the actual area designated for expansions and where improvements are being made.

Owners of property in a TID pay the same rate of taxes that owners outside the TID pay. TIF is neither a tax freeze nor a tax increase, but a special allocation method for taxes collected on property value increases within the district.

Cities and villages can create TIDs. Towns also have the authority to use TIF on a very limited scale. The required forms and process timeline for cities and villages can be found at the Department of Revenue>> website. Town forms can also be found at the Department of Revenue website.

Costs related directly to establishing and improving the TID are eligible. Examples of costs for TID's include capital development, financing, real property assembly, consulting and legal services, organizational activities, relocation, contributions & payments necessitated by the project plan, utility construction directly associated with the TID, or the removal or containment of lead contamination. Improvements outside the TID can be eligible costs, but only to the extent that the improvement serves property in the TID.

The maximum life of a TID depends on the type of TID and when it was created.
Maximum life is as follows:
For TIDs created under s.66.1105:

• Existing TID's created before 10/1/95 27 years

• Blight or Rehab TIDs created after 9/30/95 27 years *

• Industrial TIDs created after 10/1/95 and before 10/1/04 23 years*

• Industrial or mixed use TID’s created after 10/1/04 20 years*

*With Joint Review approval the life of TID may be extended for 3 or 4 years.

Limits are applied to the creation of new districts or the addition of property to existing districts. The equalized value of property in the district, plus the value increment of all existing districts cannot exceed 12 percent of the total equalized value of taxable property within the municipality. This restriction does not apply when subtracting territory from a district.

Each year municipalities with a TID are required to distribute an Annual Report to all overlying taxing jurisdictions summarizing the status of the TIDs they administer. Three accounting audits are also required as part of operating a TID: one after 30% of the expenditures are made, another 12 months after the end of the expenditure period, and the final audit 12 months after the termination of the TID. Upon final termination, an accounting report must also be submitted to DOR.

Property tax rates for the school, county, technical college, and municipality are based on the taxable value of the TID at the time it is created. These rates are then applied to the TID value increment which results in additional revenues collected for the district's fund. Development costs are paid from these revenues before the added tax base is shared. The State of Wisconsin does not collect or pay increments to municipal governments.