SB305: Bill Text

LRB-3137/1

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2003 - 2004 LEGISLATURE

2003 Senate BILL 305

November 5, 2003 - Introduced by Senators Stepp, Kanavas, Leibham, Darling, Jauch, Brown, Roessler, A. Lasee, Schultz, Kedzie, S. Fitzgerald, Wirch, Hansen, Zien and M. Meyer, cosponsored by Representatives M. Lehman, Wieckert, Albers, Nischke, Balow, Olsen, Freese, Boyle, Krawczyk, Huber, Kreibich, Hebl, Musser, Loeffelholz, Steinbrink, Gunderson, Hahn, Van Akkeren, F. Lasee, Van Roy, Ladwig, Petrowski, Townsend, Ott, Hundertmark, Stone, Lothian, Vrakas, McCormick, Underheim, Weber, Hines, Gottlieb, J. Wood, Jeskewitz and Gielow. Referred to Committee on Economic Development, Job Creation and Housing.

SB305,2,3 An Act to repeal 66.1105 (2) (f) 3., 66.1105 (4) (h) 3., 66.1105 (6) (a) 3. and 66.1105 (6) (e) 2.; to amend 66.1105 (2) (f) 1. i., 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 (6) (a) 4., 66.1105 (6) (c), 66.1105 (7) (a), 66.1105 (7) (ar), 66.1105 (8) (title) and 66.1105 (8) (a); to repeal and recreate 66.1105 (6) (am) 1. and 66.1105 (7) (am); to create 59.57 (3), 66.1105 (2) (cm), 66.1105 (2) (f) 2. d., 66.1105 (3) (g), 66.1105 (4) (gm) 6., 66.1105 (4m) (ae), 66.1105 (4m) (am), 66.1105 (4m) (b) 4., 66.1105 (6) (a) 7., 66.1105 (6) (a) 8., 66.1105 (6) (e) 1. d., 66.1105 (6) (f), 66.1105 (8) (c), 66.1105 (8) (d), 66.1105 (15) and 66.1106 (13) of the statutes; and to affect Laws of 1975, chapter 105, section 1 (1) and (2); relating to: making technical and policy changes in the tax incremental financing program based in part on the recommendations of the governor's December 2000 working group on tax incremental finance, authorizing certain counties to create tax incremental financing districts, and making a modification to 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 percent 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. Changes from 10 days to 60 days the time period in which a city or village must notify DOR of a TID's termination.

4. 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 the time period agreed on by the city or village and DOR, 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. Authorizes a city or village to create a TID if at least 50 percent 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 newly platted residential portion consists of no more than 35 percent, by area, of the real property within the district.

2. Authorizes a county that is not included in a metropolitan statistical area to create a TID in a town, if the town board agrees, if all contiguous cities and villages agree, and if the town and such cities and villages enter into a cooperative plan boundary agreement.

3. Specifies that, generally, the public schools representative to a TID's joint review board is the school board president or the president's designee; that the county representative is the county executive if there is one, or the county board chair, or the executive's or board chair's designee; that the city or village representative is the mayor or village board president, or a designee; that for a TID created by a county in a town, the town chooses a representative; and that the technical college representative is the director or the director's designee.

4. Repeals a provision which currently prohibits the inclusion, as project costs, of expenditures or monetary obligations for newly platted residential development of a TID for which a project plan is approved after September 30, 1995.

5. Changes the limits on how much of a city's or village's equalized value may be contained within a TID, although the limit does not apply if a city or village subtracts territory from a TID.

6. Allows TIDs to make expenditures for project costs at any time up to two years before the TID's mandatory termination date. Currently, in general, TIDs may make expenditures only for seven or ten years after the TID is created, depending on whether the TID was created after September 30, 1995, or before October 1, 1995.

7. Extends from 23 years to 27 years the maximum life of a "blighted area" or "rehabilitation or conservation" TID, and reduces from 23 years to 20 years the maximum life of an "industrial site" or "mixed-use development" TID. In the 18th year of an industrial or mixed use TID's life, however, the creating city or village may ask the joint review board to extend the TID's life for five years. The city or village may provide the joint review board with an independent audit that demonstrates that the district is unable to pay off its costs within its original 20 year life span. The joint review board may choose to approve or deny a request to extend a TID's life for five years but, if accompanied by an audit, the board must approve a request for a five-year extension.

8. Changes the period during which DOR may allocate positive tax increments for TIDs created on or after the effective date of the bill, from 23 years to 20 years after a TID's creation if the TID is classified as a mixed-use development or industrial TID, and from 23 to 27 years after a TID's creation if the TID is classified as a blighted area or rehabilitation or conservation TID.

9. Authorizes a TID's project plan to be amended at any time during the TID's life, up to four times, to allow the addition or subtraction of territory from the TID. Currently, a TID's project plan may only be so amended once, and only during the TID's first seven years of existence.

10. 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 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.

11. Subject to joint review board approval, allows a TID that has not otherwise reached its mandatory termination date, to share its positive tax increments with certain other TIDs that share its overlying taxing jurisdictions.

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

13. 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.

14. 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.

15. 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.

16. 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.

This bill also makes a technical modification to 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. 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:

SB305, s. 1 Section 1. 59.57 (3) of the statutes is created to read:

SB305,5,7 59.57 (3) County tax increment powers. (a) Subject to par. (b), a county that was completely outside of a metropolitan statistical area, as defined in s. 560.70 (5), before the 2000 census may exercise all powers of a city under s. 66.1105. If a county exercises the powers of a city under s. 66.1105, the county board of the county is subject to the same duties as a common council under s. 66.1105, and the county is subject to the same duties and liabilities as a city under s. 66.1105.

SB305,5,10 (b) A county that wishes to create a tax incremental district as provided in par. (a) may do so only in a town that is contiguous to a city or village and whose board has approved the creation of such a district and only if all of the following occur:

SB305,6,3 1. The common councils of every city that is contiguous to the town and the village boards of every village that is contiguous to the town adopt resolutions approving the creation of a tax incremental district in the town.

SB305,6,5 2. The town and every city and village that is contiguous to the town enter into a cooperative plan boundary agreement under s. 66.0307.

SB305, s. 2 Section 2. 66.1105 (2) (cm) of the statutes is created to read:

SB305,6,10 66.1105 (2) (cm) "Mixed-use development" means development that contains a combination of industrial, commercial, or residential uses, except that lands proposed for newly-platted residential use, as shown in the project plan, may not exceed 35 percent, by area, of the real property within the district.

SB305, s. 3 Section 3. 66.1105 (2) (f) 1. i. of the statutes is amended to read:

SB305,6,16 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.

SB305, s. 4 Section 4. 66.1105 (2) (f) 2. d. of the statutes is created to read:

SB305,6,22 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, a copy of which shall be sent to the appropriate joint review board or, if that joint review board has been dissolved, retained by the city in the official records for that tax incremental district.

SB305, s. 5 Section 5. 66.1105 (2) (f) 3. of the statutes is repealed.

SB305, s. 6 Section 6. 66.1105 (3) (g) of the statutes is created to read:

SB305,7,6 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.

SB305, s. 7 Section 7. 66.1105 (4) (e) of the statutes is amended to read:

SB305,7,22 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 city anticipates that the proposed project plan's project costs may include cash grants made by the city to owners, lessees, or developers of land that is located within the tax incremental district, the hearing notice shall contain a statement to that effect. 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.

SB305, s. 8 Section 8. 66.1105 (4) (gm) 1. of the statutes is amended to read:

SB305,9,4 66.1105 (4) (gm) 1. Describes the boundaries, which may, but need not, be the same as those recommended by the planning commission, of a tax incremental district with sufficient definiteness to identify with ordinary and reasonable certainty the territory included in the district. The boundaries of the tax incremental district may not include any annexed territory that was not within the boundaries of the city on January 1, 2004, unless at least 3 years have elapsed since the territory was annexed by the city, unless the city enters into a cooperative plan boundary agreement, under s. 66.0307, with the town from which the territory was annexed, or unless the city and town enter into another kind of agreement relating to the annexation except that, notwithstanding these conditions, the city may include territory that was not within the boundaries of the city on January 1, 2004, if the city pledges to pay the town an amount equal to the property taxes levied on the territory by the town at the time of the annexation for each of the next 5 years. If, as the result of a pledge by the city to pay the town an amount equal to the property taxes levied on the territory by the town at the time of the annexation for each of the next 5 years, the city includes territory in a tax incremental district that was not within the boundaries of the city on January 1, 2004, the city's pledge is enforceable by the town from which the territory was annexed. The boundaries shall include only those whole units of property as are assessed for general property tax purposes. Property standing vacant for an entire 7-year period immediately preceding adoption of the resolution creating a tax incremental district may not comprise more than 25% of the area in the tax incremental district, unless the tax incremental district is suitable for industrial sites under subd. 4. a. and the local legislative body implements an approved project plan to promote industrial development within the meaning of s. 66.1101. In this subdivision, "vacant property" includes property where the fair market value or replacement cost value of structural improvements on the parcel is less than the fair market value of the land. In this subdivision, "vacant property" does not include property acquired by the local legislative body under ch. 32 or, property included within the abandoned Park East freeway corridor or the abandoned Park West freeway corridor in Milwaukee County, or property that is contaminated by environmental pollution, as defined in s. 66.1106 (1) (d).

SB305, s. 9 Section 9. 66.1105 (4) (gm) 4. a. of the statutes is amended to read:

SB305,9,10 66.1105 (4) (gm) 4. a. Not less than 50%, by area, of the real property within the district is at least one of the following: a blighted area; in need of rehabilitation or conservation work, as defined in s. 66.1337 (2m) (b); or suitable for industrial sites within the meaning of s. 66.1101 and has been zoned for industrial use; or suitable for mixed-use development; and

SB305, s. 10 Section 10. 66.1105 (4) (gm) 4. c. of the statutes is amended to read:

SB305,9,22 66.1105 (4) (gm) 4. c. Either the The equalized value of taxable property of the district plus the value increment of all existing districts does not exceed 7% 12 percent of the total equalized value of taxable property within the city or the equalized value of taxable property of the district plus the value increment of all existing districts within the city does not exceed 5% of the total equalized value of taxable property within the city, except if a city subtracts territory from a district under par. (h) 2., the 12 percent limit does not apply to that finding. In determining the equalized value of taxable property under this subd. 4. c., the department of revenue shall base its calculations on the most recent equalized value of taxable property of the district that is reported under s. 70.57 (1m) before the date on which the resolution under this paragraph is adopted.

SB305, s. 11 Section 11. 66.1105 (4) (gm) 6. of the statutes is created to read:

SB305,9,25 66.1105 (4) (gm) 6. Declares that the district is a blighted area district, a rehabilitation or conservation district, an industrial district, or a mixed-use district based on the identification and classification of the property included within the district under par. (c) and subd. 4. a. If the district is not exclusively blighted, rehabilitation or conservation, industrial, or mixed use, the declaration under this subdivision shall be based on which classification is predominant with regard to the area described in subd. 4. a.

SB305, s. 12 Section 12. 66.1105 (4) (h) 1. of the statutes, as affected by 2003 Wisconsin Act 34, is amended to read:

SB305,10,23 66.1105 (4) (h) 1. Subject to subds. 2., 3. 4., and 5., the planning commission may, by resolution, adopt an amendment to a project plan. The amendment is subject to approval by the local legislative body and approval requires the same findings as provided in par. pars. (g) and (gm) 4. c. Any amendment to a project plan is also subject to review by a joint review board, acting under sub. (4m). Adoption of an amendment to a project plan shall be preceded by a public hearing held by the plan commission at which interested parties shall be afforded a reasonable opportunity to express their views on the amendment. Notice of the hearing shall be published as a class 2 notice, under ch. 985. The notice shall include a statement of the purpose and cost of the amendment and shall advise that a copy of the amendment 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, this notice shall be sent to the county board chairperson.

SB305, s. 13 Section 13. 66.1105 (4) (h) 2. of the statutes, as affected by 2003 Wisconsin Act 34, is amended to read:

SB305,11,11 66.1105 (4) (h) 2. Except as provided in subds. 3., 4., and 5., not more than once during the 7 years after the tax incremental district is created, the planning commission may adopt an amendment to a project plan under subd. 1. to modify the district's boundaries, not more than 4 times during the district's existence, by subtracting territory from the district in a way that does not remove contiguity from the district or by adding territory to the district that is contiguous to the district and that is served by public works or improvements that were created as part of the district's project plan. Expenditures for project costs that are incurred because of an amendment to a project plan to which this subdivision applies may be made for not more than 3 years after the date on which the local legislative body adopts a resolution amending the project plan.

SB305, s. 14 Section 14. 66.1105 (4) (h) 3. of the statutes is repealed.