Wisconsin Adopts New Legislation to Help Troubled TIF Districts

The Wisconsin Governor signed Senate Bill 291 into law on May 13, 2010 which allows cities to declare TIF districts (TIDs) created before October 1, 2008 as distressed or severely distressed.  Such designations, which must be made by a local legislative body before October 1, 2011, would allow these TIDs to exist for longer periods than otherwise permitted under the Wisconsin Tax Increment Law.  If the revenue generated in a TID during its life is inadequate to pay off all project costs incurred, it can be declared a distressed TID.  In order to be declared a severely distressed TID, the value increment in the TID, derived from the equalized value of all taxable properties in the TID minus the tax incremental base, must have declined by at least 25% from its highest annual value increment.  Only TIDs that have been in place for a minimum of 7 years are eligible to be designated as distressed or severely distressed.

Under the new law, the term of a distressed TID can be extended for up to 10 years after it would otherwise be required to terminate (generally, 20 years, 23 years or 27 years depending on the type of TID and the year in which it was created).  A severely distressed TID can be extended for up to 40 years after the district is created.  If a TID is designated as distressed or severely distressed, the project plan may not be amended to add new project costs or to allow for funds to be expended outside of the TID’s boundaries.

To designate a TID as a distressed or a severely distressed TID, the local legislative body must hold a public hearing and adopt an appropriate resolution, and the Joint Review Board must approve the designation after consultation with the Wisconsin Department of Revenue.

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