Key Items Discussed Today What is TID and how does TID work? When can TID be used for housing? One-year housing extension for TID One-year housing extension examples

Your Primary Development Tool Since 1976 Several Changes From 1976 Interest Rates Year End Federal Reserve was 6.25% (Current 1.40%) End Close Dow Jones Industrial Average was 1004 (Current 26,000) Average Cost of new house was $43,400.00 (Current $206,300) What Hasn’t Changed TIF is still the primary economic development tool in WI. The Minnesota Vikings still haven’t won a Super Bowl. Wis. Stats. 66.46 (now renumbered 66.1105) enacted in the 1975/1976 legislative session to enable “TIF”

What is Tax Incremental Financing Allows cities to capture incremental property tax revenue from growth in defined area and use that revenue to benefit that area Key acronyms: TIF = Tax Increment Financing (the tool) TID = Tax Increment District (where the tool is used - boundary)

How Does TIF Work?

The “But For” Test “But for” the use of TIF, the proposed development would not occur: As proposed Within the same/similar time period With the same level of Property value Jobs Amenities

TID Types At least 50% of land area in proposed TID is: Blighted or in need of conservation/rehabilitation Suitable and zoned for industrial use Suitable for mixed-use development as determined by any combination of: Industrial Commercial “Qualifying” Residential (limited to 35% of total area newly platted) Property must represent contiguous area and cannot extend beyond corporate limits

Maximum Life A district may remain open until the earliest of the following: The district’s maximum life is reached, which varies by type of district and when created When total tax increments (revenues) collected are sufficient to pay all of the district’s project obligations (expenses) When the City/Village/Town passes a resolution to close the district, but no later than the anniversary date in the year of max life At closure: Remaining funds (surplus) distributed proportionately to taxing jurisdictions (shared benefit); OR, Any unreimbursed project costs become general liability of the municipality (this risk not shared)

Expenditure Period Maximum time period TID can incur expenses or obligate revenues related to project plan Generally five years shorter than maximum life After expenditure period ends, TID may continue to pay: Debt service on existing obligations Contractually-obligated expenses Ongoing administrative expenses

TIF and Housing Essentially three conditions when TIF is used for housing: 1) Mixed-Use District No more than 35% of the total area limited to newly platted residential development 2) Within a blighted district, or rehabilitation or conservation district 3) A up to one year extension to the TIDs life for the improvement of housing stock

Affordable Housing Extension (AHE) Added to TIF law in 2009 Statute 66.1105(6)(g) City or Village with a TID that has retired its debt and paid all of its project costs can extend the life of the district for up to one year City or Village must use at least 75% of tax increments collected to “benefit affordable housing” Costs can be incurred anywhere within the municipality Any remaining portion of the increments must be used by the municipality to improve its housing stock

Affordable Housing Extension (AHE) Affordable housing is defined as housing costing no more than 30% of the household’s gross monthly income A household consists of an individual and his or her spouse and all minor dependents

Procedures for One-Year Housing Extension Procedures for extending the life of TID for housing: Municipality adopts a resolution extending the life of the District for a specified number of months (up to one year) Resolution must specify how the municipality plans to improve its housing stock Resolution must be forwarded to the Department of Revenue (DOR) No action by the Joint Review Board (JRB) is required for approval DOR must authorize the allocation of tax increments to the district during its extended life

One Year Housing Extension Examples Since this option was added to TIF law, relatively few municipalities have taken advantage of this option City of Milwaukee: Since 2015 the City has extended seven TIDs for an additional year to benefit affordable housing Over $2 million of increment realized to date for this purpose Used to fund many of the programs within the City’s Strong Neighborhoods Plan

One Year Housing Extension Examples City of Madison Used the extension five times to help fund the City’s Affordable Housing Initiative Fund Used to incentivize developers to purse Section 42 federal tax credits for affordable housing developments Specifically encouraged to develop in amenity-rich areas with easy access to public transportation Rent set at 30, 50, and 60 percent of area median income The Initiative Fund has led to the funding of 486 affordable housing units over the last three years, equating to approximately $100 million in development Supported largely by GO bonding, but when TID increment revenue is able to be used it is added to the Fund

One Year Housing Extension Examples City of Fitchburg Recently kept one of its TIF districts open to pay into a fund for affordable housing $127,000 in increment generated City is using $40,000 of those funds to begin Fitchburg Housing Goals, Strategies, Toolkit, and Implementation Plan with a focus on affordability

One Year Housing Extension Examples City of Monona Used the extension to keep TID #3 open an additional year to help fund a new program called “Renew Monona” Housing stock renewal program created by its CDA and administered by the City Program offers 0% interest loans to those purchasing or residing in a home in the City to make energy efficiency improvements and bring up to modern standards

One Year Housing Extension Examples City of La Crosse Used a combination of CDBG grants and TIF dollars from the affordable housing extension for purchase and resale of five energy efficient homes Homes were in a struggling neighborhood and were sold to low-moderate income households at an average sale price of $154,000 City of Racine Extended life the TID #8 by one year ($625,000 of increment) for: Homeowner housing development Homeowner code compliance grants

One Year Housing Extension Examples City of Appleton Extended TID #2 by one additional year Used to pay for street repairs in a low-moderate income neighborhood City of Oshkosh Extended the life of TID #7 Created a Healthy Neighborhood Imitative Utilized TIF revenue along with other revenue sources to help maintain or increase property values in transitional and distressed neighborhoods

Summary of Key Takeaways Tax Incremental Financing is still the primary economic development tool in Wisconsin for attracting and retaining economic development State Statute allows municipalities to use TIF dollars for the improvement of housing, primarily through the one year housing extension Relatively few municipalities have taken advantage of the one-year extension, but it can be a valuable funding source to improve housing stock

Senior Municipal Advisor/Vice President Jon Cameron Senior Municipal Advisor/Vice President (262) 796-6179 jcameron@ehlers-inc.com Source documentation cited in this presentation: (1) The examples cited in this presentation for the Cities of Milwaukee, Madison, Fitchburg, Monona, La Crosse and Appleton were taken from “Using TIF to Benefit Affordable Housing” as part of the January, 2018 publication of the Municipality Magazine. The article was prepared by Curt Witynski, J.D., Deputy Executive Director, League of Wisconsin Municipalities.