AB478: Bill Text

LRB-2574/2

MES:cjs&wj:pg

2003 - 2004 LEGISLATURE

2003 Assembly BILL 478

August 26, 2003 - Introduced by Representatives M. Lehman, W. Wood, Hahn, Bies, Albers, Hines and Seratti, cosponsored by Senators A. Lasee and Darling. Referred to Committee on Ways and Means.

AB478,2,6 An Act to repeal 66.1105 (4) (h) 3. and 66.1105 (6) (e) 2.; to renumber and amend 66.1105 (6) (a) and 66.1105 (6) (am) 1.; to amend 66.1105 (2) (f) 1. i., 66.1105 (2) (f) 3., 66.1105 (3) (e), 66.1105 (4) (e), 66.1105 (4) (gm) 1., 66.1105 (4) (gm) 4. a., 66.1105 (4) (gm) 4. c., 66.1105 (4) (h) 1., 66.1105 (4) (h) 2., 66.1105 (4m) (a), 66.1105 (4m) (b) 2., 66.1105 (4m) (b) 2m., 66.1105 (5) (a), 66.1105 (5) (b), 66.1105 (5) (c), 66.1105 (5) (ce), 66.1105 (5) (d), 66.1105 (7) (am), 66.1105 (7) (ar), 66.1105 (8) (title), 66.1106 (1) (c), 66.1106 (1) (e), 66.1106 (1) (f), 66.1106 (1) (g), 66.1106 (1) (i), 66.1106 (1) (k), 66.1106 (2) (a), 66.1106 (4) (intro.), 66.1106 (4) (b), 66.1106 (7) (a), 66.1106 (7) (d) 1., 66.1106 (9), 66.1106 (10) (a), 66.1106 (10) (b), 74.23 (1) (b), 74.25 (1) (b) 1., 74.25 (1) (b) 2., 74.30 (1) (i), 74.30 (1) (j), 74.30 (2) (b), 79.095 (1) (c), 79.095 (2) (b) and 234.01 (4n) (a) 3m. a.; and to create 20.566 (1) (go), 66.1105 (2) (cm), 66.1105 (2) (f) 2. d., 66.1105 (3) (g), 66.1105 (4) (gm) 6., 66.1105 (4m) (am), 66.1105 (4m) (b) 4., 66.1105 (4m) (b) 5., 66.1105 (6) (a) 4., 66.1105 (6) (am) 1. c., 66.1105 (6) (e) 1. d., 66.1105 (7) (ae), 66.1105 (8) (c), 66.1105 (8) (d), 66.1105 (15), 66.1106 (1) (fm), 66.1106 (1) (jm), 66.1106 (1m), 66.1106 (10) (c), 66.1106 (10) (d), 66.1106 (11), 66.1106 (12), 66.1106 (13) and 73.03 (57) of the statutes; relating to: making technical and policy changes in the tax incremental financing program based on the recommendations of the governor's December 2000 working group on tax incremental finance and modifying the environmental remediation tax incremental financing program.

Analysis by the Legislative Reference Bureau

Under the current tax incremental financing (TIF) program, a city or village may create a tax incremental district (TID) in part of its territory to foster development if at least 50% of the area to be included in the TID is blighted, in need of rehabilitation, or suitable for industrial sites. Before a city or village may create a TID, several steps and plans are required. These steps and plans include public hearings on the proposed TID within specified time frames, preparation and adoption by the local planning commission of a proposed project plan for the TID, approval of the proposed project plan by the common council or village board, and adoption of a resolution by the common council or village board that creates the district as of a date provided in the resolution. Another step that must be taken before a TID may be created is the creation by the city or village of a joint review board to review the proposal. The joint review board, which is made up of representatives of the overlying taxing jurisdictions of the proposed TID, must approve the project plan within specified time frames or the TID may not be created. If an existing TID project plan is amended by a planning commission, all of these steps are also required.

Once these steps are accomplished, the city or village clerk is required to complete certain forms and an application and submit the documents to the Department of Revenue (DOR) on or before December 31 of the year in which the TID is created. Upon receipt of the application, DOR is required to determine the full aggregate value of the taxable property, and of certain city or village owned property, that lies within the TID.

Once the aggregate value is determined, DOR certifies the "tax incremental base" of the TID, which is the equalized value of all taxable property within the TID at the time of its creation. If development in the TID increases the value of the property in the TID above the base value, a "value increment" is created. That portion of taxes collected on the value increment is called a "tax increment." The tax increment is placed in a special fund that may only be used to pay back the project costs of the TID. The project costs of a TID, which are initially incurred by the creating city or village, include public works such as sewers, streets, and lighting systems; financing costs; site preparation costs; and professional service costs. DOR authorizes the allocation of the tax increments until the TID terminates or 23 years, or 27 years in certain cases, after the TID is created, whichever is sooner. Under current law, TIDs are required to terminate, with one exception, once these costs are paid back, 16 years, or 20 years in certain cases, after the last expenditure identified in the project plan is made, or when the creating city or village dissolves the TID, whichever occurs first. Under the exception, which is limited to certain circumstances, after a TID pays off its project costs, but not later the date on which it must otherwise terminate, the planning commission may allocate positive tax increments generated by the TID (the "donor" TID) to another TID that has been created by the planning commission.

This bill makes a number of technical and substantive changes to the TIF program. Among the technical changes, the bill does the following:

1. Prohibits DOR from certifying a tax incremental base of a TID until DOR reviews and approves the findings submitted by the city or village relating to the equalized value of taxable property in the TID and the equalized value of all of the taxable property in the city or village.

2. Allows a representative from a union high school district and a representative from an elementary school district to each have one-half vote on a joint review board.

3. Requires a city or village to provide DOR with a final accounting of TID project expenditures, project costs, and positive tax increments received. If the city or village does not provide this information to DOR within 60 days of the TID's termination, DOR may not certify the tax incremental base of any other TID in the city or village.

Among the substantive changes, the bill does the following:

1. Provides that, not later than five days after a joint review board submits its decision on a TIF proposal submitted by a city or village, a majority of the members of the board may request DOR to review the objective facts contained in the documents submitted to the board by the city or village. DOR must investigate the specific fact or item that the members believe is incomplete or inaccurate. If DOR finds that the proposal contains factual inaccuracies or does not comply with other statutory requirements, DOR must return the TIF proposal to the city or village for correction and resubmittal. However, the city or village is not required to correct or resubmit its proposal.

2. Requires DOR to prepare and update a manual on the TIF program.

3. For a TID that is created on or after the effective date of the bill, the bill increases from seven years to ten years the period during which expenditures related to the TID may be made by the city or village after the TID's creation. Currently, the ten-year period only applies to TIDs created before October 1, 1995, and the seven-year period only applies to TIDs created after September 30, 1995.

4. Requires that before a "donor" TID may transfer positive tax increments to another TID, it must demonstrate that it has sufficient revenues to pay for all incurred or expected project costs and surplus revenues to pay for some of the "donee" TID's eligible costs. Under current law, the "donor" TID need only have sufficient revenues to pay costs that are due in the current year.

5. Limits the inclusion in a TID of land that has been annexed by the city or village.

6. Prohibits a joint review board from approving a TID proposal unless the board asserts that, in its judgment, the development project described in the TID documents would not occur without the creation of a TID.

7. Provides that an amendment to a TID's boundary may subtract territory from the TID if the subtraction does not remove contiguity from the TID.

8. Allows a city or village to create a standing joint review board that may remain in existence for the entire time that any TID exists in the city or village. The city or village may also disband the standing joint review board. Currently, a joint review board may vote to disband following the approval or rejection of a TID proposal.

9. Specifically requires that an amendment to a project plan requires the same findings by a city or village relating to the equalized value of taxable property in the TID and the equalized value of all of the taxable property in the city or village as is currently required for the creation of a TID.

10. Limits the life of a TID that is predominantly suitable for industrial sites to ten years after the last expenditure in the project plan is made, or a total of 20 years after its creation.

11. Authorizes DOR to impose a fee of $1,000 on a city or village to determine or redetermine the tax incremental base of a TID. The money generated by the fees goes to DOR to pay for staff and administrative service costs related to the TIF program. The bill also creates a new position in DOR to perform auditing related to TIDs.

12. Authorizes a city or village to create a TID if at least 50% of the area to be included in the TID is a "mixed-use development," which is defined as a development that contains a combination of industrial, commercial, and residential uses and in which the residential portion consists of no more than 35%, by area, of the real property within the district.

This bill also modifies the environmental remediation tax incremental financing program. Under current law, the environmental remediation tax incremental financing program permits a city, village, town, or county (political subdivision) to defray the costs of remediating contaminated property that is owned by the political subdivision. The mechanism for financing costs that are eligible for remediation is very similar to the mechanism under the TIF program. If the remediated property is transferred to another person and is then subject to property taxation, environmental remediation tax incremental financing may be used to allocate some of the property taxes that are levied on the property to the political subdivision to pay for the costs of remediation.

A political subdivision that has incurred "eligible costs" to remediate environmental pollution on a parcel of property may apply to DOR to certify the "environmental remediation tax incremental base" of the parcel. DOR is required to certify the environmental remediation tax incremental base if the political subdivision submits to DOR all of the following: 1) a statement that the political subdivision has incurred some eligible costs, together with a detailed proposed remedial action plan approved by the Department of Natural Resources (DNR) that contains cost estimates for anticipated eligible costs, a schedule for the design and implementation that is needed to complete the remediation, and certification from DNR that has approved the site investigation report that relates to the parcel; 2) a statement that all taxing jurisdictions with authority to levy general property taxes on the parcel of property have been notified that the political subdivision intends to recover its environmental remediation costs by using an "environmental remediation tax increment"; and 3) a statement that the political subdivision has attempted to recover its environmental remediation costs from the person who is responsible for the environmental pollution that is being remediated.

This bill makes technical changes to the environmental remediation tax incremental financing program. These changes include creating a definition of "project expenditures" and a definition of "environmental remediation tax incremental district" (ERTID) that is somewhat similar to the definition of "tax incremental district" under the TIF program; making changes to the definitions of "environmental remediation tax increment," "environmental remediation tax incremental base," "period of certification," and "taxable property"; creating procedures for the termination of an ERTID that are similar to the termination procedures for a tax incremental district under the TIF program; requiring that the final report under the program include an independent certified financial audit; requiring that DOR be provided with a final accounting of the ERTID's project expenditures and the final amount of eligible costs that have been paid for an ERTID; and modifying certain provisions of the program to apply to contiguous parcels of property or land, as well as a parcel of property or land. Also under the bill, if a city or village annexes property from a town that is using an ERTID to remediate environmental pollution on all or part of the territory that is annexed, the city or village must pay to the town that portion of the eligible costs that are attributable to the annexed territory. The city or village, and the town, must negotiate an agreement on the amount that must be paid.

Generally, this bill takes effect on the first day of the 4th month after the bill is enacted.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB478, s. 1 Section 1. 20.566 (1) (go) of the statutes is created to read:

AB478,6,2 20.566 (1) (go) Administration of tax incremental financing program. All moneys received from the fees imposed under s. 66.1105 (5) (a) to pay the costs of the department of revenue in providing staff and administrative services associated with tax incremental districts under s. 66.1105.

AB478, s. 2 Section 2. 66.1105 (2) (cm) of the statutes is created to read:

AB478,6,7 66.1105 (2) (cm) "Mixed-use development" means a development that contains a combination of industrial, commercial, or residential uses, except that residential use, as shown in the project plan, may not exceed 35%, by area, of the real property within the district.

AB478, s. 3 Section 3. 66.1105 (2) (f) 1. i. of the statutes is amended to read:

AB478,6,13 66.1105 (2) (f) 1. i. Payments made, in the discretion of the local legislative body, which are found to be necessary or convenient to the creation of tax incremental districts or the implementation of project plans, including payments made to a town that relate to property taxes levied on territory to be included in a tax incremental district as described in sub. (4) (gm) 1.

AB478, s. 4 Section 4. 66.1105 (2) (f) 2. d. of the statutes is created to read:

AB478,6,17 66.1105 (2) (f) 2. d. Cash grants made by the city to owners, lessees, or developers of land that is located within the tax incremental district unless the grant recipient has signed a development agreement with the city.

AB478, s. 5 Section 5. 66.1105 (2) (f) 3. of the statutes is amended to read:

AB478,6,24 66.1105 (2) (f) 3. Notwithstanding subd. 1., project costs may not include any expenditures made or estimated to be made or monetary obligations incurred or estimated to be incurred by the city for newly platted residential development for any tax incremental district for which a project plan is approved after September 30, 1995, or for which an amendment of a project plan is approved after the effective date of this subdivision .... [revisor inserts date].

AB478, s. 6 Section 6. 66.1105 (3) (e) of the statutes is amended to read:

AB478,7,20 66.1105 (3) (e) Enter into any contracts or agreements, including agreements with bondholders, determined by the local legislative body to be necessary or convenient to implement the provisions and effectuate the purposes of project plans. The contracts or agreements may include conditions, restrictions, or covenants which either run with the land or which otherwise regulate the use of land. A city may not enter into a development agreement as described under sub. (2) (f) 2. d. unless, at least 14 days before entering into the agreement, a public hearing is held by the city or by the planning commission at which interested parties are afforded a reasonable opportunity to express their views on the proposed development agreement. Notice of the hearing shall be published as a class 2 notice, under ch. 985, shall state that the proposed project plan's project costs include cash grants, and shall state that the cash grants will be on the agenda of the public hearing. The hearing may be held in conjunction with the hearing provided for in sub. (4) (e). The notice shall include a statement advising that a copy of the proposed development agreement will be provided on request. Before publication, a copy of the notice shall be sent by 1st class mail to the chief executive officer or administrator of all local governmental entities having the power to levy taxes on property within the district and to the school board of any school district which includes property located within the proposed district. For a county with no chief executive officer or administrator, notice shall be sent to the county board chairperson.

AB478, s. 7 Section 7. 66.1105 (3) (g) of the statutes is created to read:

AB478,8,2 66.1105 (3) (g) Create a standing joint review board that may remain in existence for the entire time that any tax incremental district exists in the city. All of the provisions that apply to a joint review board that is convened under sub. (4m) (a) apply to a standing joint review board that is created under this paragraph. A city may disband a joint review board that is created under this paragraph at any time.

AB478, s. 8 Section 8. 66.1105 (4) (e) of the statutes is amended to read:

AB478,8,20 66.1105 (4) (e) At least 30 14 days before adopting a resolution under par. (gm), holding of a public hearing by the planning commission at which interested parties are afforded a reasonable opportunity to express their views on the proposed project plan. The hearing may be held in conjunction with the hearing provided for in par. (a). If the proposed project plan's project costs include cash grants made by the city to owners, lessees, or developers of land that is located within the tax incremental district, the hearing agenda shall include a separate item for the cash grants and for any development agreement described under sub. (2) (f) 2. d., and the hearing notice shall state that the cash grants are a proposed project cost that will be on the agenda of the hearing. Notice of the hearing shall be published as a class 2 notice, under ch. 985. The notice shall include a statement advising that a copy of the proposed project plan will be provided on request. Before publication, a copy of the notice shall be sent by 1st class mail to the chief executive officer or administrator of all local governmental entities having the power to levy taxes on property within the district and to the school board of any school district which includes property located within the proposed district. For a county with no chief executive officer or administrator, notice shall be sent to the county board chairperson.