The Municipal Development Tool

TIF: How Does It Work? Is It Necessary? Risky? Overused?

September 2016

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Since 1982, local governments in Wisconsin have used more than $6.2 billion of property taxes on tax incremental finance (TIF) projects, including $3.5 billion over the past 10 years. The state currently has 1,212 tax incremental finance districts, with nearly two-thirds located in municipalities with fewer than 15,000 residents. Despite its widespread use, most state residents know little about TIF.

Tax incremental financing (TIF) is a municipal development tool originally designed to help cities redevelop areas that were blighted, in need of rehabilitation or conservation work, or suitable for industrial development. Over the years, laws governing TIF have changed, resulting in a current law that is more expansive than the original. With expansion has come questions about appropriate use of TIF for some projects.
Unfortunately, most Wisconsin residents know little about TIF, even though local governments have used more than $6.2 billion of property taxes on these projects since 1982, including $3.5 billion over the past 10 years.
TIF BASICS
Wisconsin’s TIF law permits cities and villages—and in some cases towns—to divert property taxes from their typical uses to subsidizing private development in a specific area.
Often, to attract private investment in a city or village, the local government borrows money to make improvements (streets, sewers, etc.) in a certain area or to provide grants to the developer.
Property taxes generated from new or refurbished buildings within the designated area are used to repay the debt. The greater the private investment and property value growth in the TIF district (TID), the faster the borrowing is repaid. A basic TID timeline is outlined on page two.