TIF: An out of control monster?
The county board recently approved a new TIF task force - but not everyone is happy about it
Peter Weinschenk stood in front of a county committee in the Courthouse’s Assembly room, where most of the county’s committee meetings take place. He wore a suit, somewhat out of character for the now-retired editor of the Record-Review, which covered the western side of the county (Athens, Edgar, Marathon City).
For those who know Weinschenk, he typically has a quiet demeanor: he has a way of asking you a question and letting that answer hang while you struggle to fill the space. It’s nearly a Columbo-esque ability to drag an answer out of someone. (Sorry, dated reference to an old TV series.)
Weinschenk was anything but quiet on this particular Thursday afternoon. “Marathon County TIF is an out of control monster,” Weinschenk led with, while asking for support for a task force that would look at the use of TIF in the county and possibly recommendations for reigning it in. He later called Marathon County TIF a “stink pile.”
Though retired, the instincts of a reporter never quite leave. Weinschenk came armed with facts to support his case.
In 2000, Marathon County had $168 million of Marathon County property was in TIF. In 2022, that number ballooned to $1.2 billion, a 614% increase over 20 years. That means the percentage of all Marathon County property located within a TIF went from 2% to 8%, Weinschenk says.
Weinschenk makes a liberal, moderate and conservative case against TIF. He says for conservatives, it distorts the marketplace via government interference; for moderates, it deprives from local governments needed tax revenues; and for liberals, it uses money from the average person to fund lavish business ventures.
Weinschenk says if TIF were a department, at $24 million annually it would be bigger than the sheriff’s office and social services department.
Weinschenk says that the county would see $1.2 million in additional tax revenue if the state capped municipalities at 12% of their tax based be allowed to be in TIF, versus the current 15%.
And, Weinschenk says, TIF never seems to live up to the promise of future returns for taxpayers. He cites the mall, for instance: built with TIF, spent most of its life in TIF, and only returned to the tax rolls after its glory days were over. Now it’s in a TIF again while a new developer seeks to use TIF in order to build projects.
Weinschenck’s case is similar to one I’ve been making for years; though to be clear, it’s that TIF should be approached with caution/restraint. To start, here is how TIF works:
A district is formed, usually to fund some project within that district. All the current land values are recorded and a base is set. From then on, any value created beyond that amount generates taxes revenue that pays back the borrowing for projects within the district.
Municipal leaders will often point to TIF as being relatively consequence-free. After all, it’s not taxpayers footing the bill; it’s a new project, that generates new tax revenue, that pays back the money borrowed in the first place. Right?
Not exactly. Remember, values within those districts were “frozen” 1 at those old values. And districts typically exist for 27 years. Any new tax revenue for 27 years (and possibly longer with extensions) beyond the “frozen” amount goes toward the TIF district; not the school district, county, municipality, technical college and state. For them, it’s as if the district is frozen in time.
But municipal expenses are not frozen in time. Everything a city, village, school district does tends to cost more over time, as do most things in the economy. Yet in those districts, they’re generating the same tax revenue on year 10, year 15, or year 20 as they were the day they were formed. In times of high inflation, such as we’re in right now, the effect is magnified.
It’s why the state places a cap on how much property a municipality can have within a TIF district. If half a city were in a TIF District, the effect would be much more obvious; growth of expenses of a city would vastly outgrow tax revenue, and before long the city wouldn’t be able to perform basic services such as picking up garbage.
Of course, when districts close all that tax revenue goes toward those taxing entities again, and the idea is that those tax revenues are much higher than when the district first began. That’s kind of the point in the first place, right? Once the district closes, all that tax increment goes back to all the taxing entities, and now much more of it than when the district began.
Weinschenk’s argument is that as TIF grows, the amount of lost revenue increases and outpaces the gains from districts closing. Because a district that’s extended over 33 years means values as far as tax revenue for the city goes have been stuck in a time warp. A district on year 32 today (which would have one year left), for instance, would be stuck at 1991 values. The median home price in Wisconsin in 1990 (the closest data I could find) was $62,100. Median home prices in May reached nearly $300,000.
That’s where the task force comes in. Weinschenck says a task force would allow municipalities, as well as other interested groups, to have a seat at the table. That couldn’t be done as effectively through a committee structure.
The task force
The Marathon County Board last month approved the TIF Task Force, and only narrowly at that. Task Forces require a 2/3 majority, and the board barely eked out a yes vote with 23 in favor and 11 against (and four members not present for various reasons).
Weinschenk’s TIF conservative, moderate and liberal case against TIF ultimately proved somewhat prophetic. The vote didn’t fall alone easily identifiable partisan lines. The task force’s strongest supporters were John Robinson (who once served in the statehouse as a Democrat) and Jacob Langenhahn who tends to side with board conservatives.
Even amongst young liberals, Alyson Leahy voted for it, while Michele Van Krey voted against it. Young conservative Bobby Niemeyer voted against it, while Stacey Morache voted in favor.
That the vote didn’t fall along partisan lines signals a return to the old days when projects were debated more on their merits, and allegiances weren’t easy to identify.
Dave Oberbeck shared his comments on why TIF ought to be looked at. Oberbeck had been sounding the alarm around TIF since he served on the Wausau city council last decade.
Oberbeck had been telling anyone who would listen that an over-reliance on TIF could backfire. While TIF had been supposed to help put blighted areas on level playing fields with greenfield sites (in other words, with sites that require no rehab or environmental cleanup). It’s suppose to help the first couple of projects get started to spur further development in an otherwise challenged area.
Instead, it’s become something very different.
It’s gotten out of hand. It’s become a vehicle to generate money for one entity, while others have to find a way of subsidizing their operations.
Oberbeck points to as an example the Wausau Center mall. By removing the building from the tax rolls, it removed $33 million from the tax rolls.
Weinschenk also cited the mall as an example. He argued that taxpayers never gained most of the value from the mall being created, since it spent so much time inside a tax district.
Weinschenk, who besides being a reporter spent time chairing Edgar’s Plan Commission, says he saw firsthand an effect no one talks about. Sure, you’re adding a lot of value in a TIF district, but by the time the project comes out of the district, it’s nearly 30 years later (or more) and those brand new building and any infrastructure created for it are now in need of repair. But now the district is closed.
Is it benefiting taxpayers? The promise of TIF is that it’s supposed to eventually lead to higher property values when those districts close, reducing the burden on taxpayers. Weinschenk told The Wausonian that his analysis shows that’s not what happens. Instead, he says, municipalities that heavily use TIF have higher tax rates than municipalities who don’t use it much. And that’s especially true for municipalities that often use donor districts and apply for extensions.
Reaction to the task force
Gaylene Rhonden had a quick answer when contacted by The Wausonian about how she felt about the task force. The town is on the verge of becoming a village if voters approve a referendum that might have already happened by the time you read this. That would provide more options for TIF, though the administrator pointed out the town already has a TIF district:
Our two County Board representatives voted no against the Task Force. We have not discussed internally what this may mean for Rib Mountain. As you may be aware, Rib Mountain already has a TID. I did suggest to Administrator Leonard that Rib Mountain be considered for a representative spot on the Task Force since we were the only Town to qualify for a TID. As a matter of fact, the TID legislation for Towns was signed in Rib Mountain by Governor Scott Walker.
Al Opall, the town’s chairman, said he’s a solid no in voting on the task force. Opall said he heard a lot about a number of bad examples of TIF, but not the good ones.
The county board is not a developer, we depend on the municipalities to handle development. That’s where we get our tax revenue from.
Mark Maloney, village president of Weston, was enthusiastic about the task force, though he also said Weston has had one of the more successful districts. While Weston has had a much higher percentage of its total property valuation in TIF Districts than is mandated by law, that’s because the district has been so successful.
Maloney told The Wausonian while he supports using TIF he also is enthusiastic about getting them closed, so the increased value can benefit the taxpayers.
A new project proposed by then-administrator Daniel Guild to develop a retail corridor in the village, which would have relied heavily on TIF, was one of the reasons Maloney got involved in the village board again. And TIF was one of the reasons he was against the project (mixed with major declines in retail).
The Wausonian reached out to Mayor Katie Rosenberg, Community Development Director Liz Brodek, and John Robinson for comment. None of them have responded as of yet for this story.
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Frozen is a really imprecise word to use but it’s kind of hard to explain otherwise.