Amendment SSA1-AB437

LRBs0354/2

MES:cjs:jf

2003 - 2004 LEGISLATURE

SENATE SUBSTITUTE AMENDMENT 1, TO 2003 ASSEMBLY BILL 437

March 4, 2004 - Offered by Senator Kedzie.

AB437-SSA1,1,3 An Act to amend 20.566 (1) (go); to create 60.85 of the statutes; and to affect Laws of 1975, chapter 105, section 1 (1) and (2); relating to: granting towns limited authority to create tax incremental financing districts.

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.

Also under current law, once a TID has been created, the Department of Revenue (DOR) calculates the "tax increment base value" of the TID, which is the equalized value of all taxable property within the TID at the time of its creation. If the 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 be used only to pay back the project costs of the TID. The 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, generally, 23 years, or 27 years in certain cases, after the TID is created, whichever is sooner. TIDs are required to terminate, under current law and 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 than 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 substitute amendment authorizes towns to use tax incremental financing (TIF) for limited purposes. The town TIF authority that is created in this substitute amendment is based on current TIF law that applies to cities and villages, but is more limited in several respects, and imposes additional requirements on towns.

Under the substitute amendment, a town may use the town TIF law to expend money or incur monetary obligations, other than tax incremental bonds and notes, for a limited number of projects related to tourism, agriculture, manufacturing, or forestry. The allowable projects, and project costs, are limited to projects based on industrial classifications specified in the North American Industry Classification System published by the U.S. Office of Management and Budget. A town may also use the TIF law for residential projects, but only to the extent that the residential project has a necessary and incidental relationship to tourism, agriculture, manufacturing, or forestry. Under the bill, towns may also use the TIF law for retail projects to the extent that the retail development is related to the retail sale of a product that is produced due to an agriculture, manufacturing, or forestry project.

The town TIF law is more limited than the city and village TIF law and contains a number of other differences from current TIF law, including the following:

1. The expenditure period is 5 years, and the maximum life of a town TID is 16 years.

2. A project plan may be amended only once during the TID's first 5 years of existence. Such an amendment may extend the expenditure period for an additional 2 years, but the amendment does not extend the maximum life of a town TID.

3. A town TIF proposal must contain findings that at least 75 percent of the real property within the district is to be used for one of the specified allowable projects.

4. DOR may impose on the town a $1,000 fee to determine, or redetermine, a TID's tax incremental base.

5. A town TID is subject to additional reporting requirements when the TID is terminated and must also report to DOR on annual expenditures.

6. Certain owners of taxable property located within or near a town that has created a TID, as well as cities and villages that border the town, and overlaying taxing districts, may request that DOR review whether the TID is expending money or incurring debt for an allowable project. If DOR grants the request for a review, the secretary of revenue, or the secretary's designee, must hold a hearing and make a determination as to whether the town is in compliance with the law or has made expenditures or incurred debts that are not allowed. If the secretary determines that the town has acted improperly, the secretary may order that all ineligible costs be paid back or that the TID be terminated.

7. If a city or village annexes town territory that includes a TID, the city or village must pay the town the eligible costs that are attributable to the annexed territory.

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

AB437-SSA1, s. 1 Section 1. 20.566 (1) (go) of the statutes, as created by 2003 Wisconsin Act 127, is amended to read:

AB437-SSA1,3,6 20.566 (1) (go) Administration of tax incremental financing program. All moneys received from the fees imposed under s. ss. 60.85 (5) (a) and 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. ss. 60.85 and 66.1105.

AB437-SSA1, s. 2 Section 2. 60.85 of the statutes is created to read:

AB437-SSA1,3,9 60.85 Town tax increment law. (1) Definitions. In this section, unless a different intent clearly appears from the context:

AB437-SSA1,3,12 (a) "Agricultural project" means agricultural activities classified in the North American Industry Classification System, 1997 edition, published by the U.S. office of management and budget, under the following industry numbers:

AB437-SSA1,3,13 1. 111 - Crop production

AB437-SSA1,3,14 2. 112 - Animal production

AB437-SSA1,3,15 3. 1151 - Support activities for agriculture.

AB437-SSA1,3,16 4. 1152 - Support activities for animal production.

AB437-SSA1,3,17 (b) "Environmental pollution" has the meaning given in s. 299.01 (4).

AB437-SSA1,4,3 (c) "Forestry project" means forestry activities classified in the North American Industry Classification System, 1997 edition, published by the U.S. office of management and budget, under the following industry numbers:

AB437-SSA1,4,4 1. 113 - Forestry and logging.

AB437-SSA1,4,5 2. 1153 - Support activities for forestry.

AB437-SSA1,4,6 (d) "Highway" has the meaning provided in s. 340.01 (22).

AB437-SSA1,4,9 (e) "Manufacturing project" means manufacturing activities classified in the North American Industry Classification System, 1997 edition, published by the U.S. office of management and budget, under the following industry numbers:

AB437-SSA1,4,10 1. 3116 - Animal slaughtering and processing.

AB437-SSA1,4,11 2. 321 - Wood product manufacturing

AB437-SSA1,4,12 3. 322 - Paper manufacturing.

AB437-SSA1,4,13 4. 325193 - Ethyl alcohol manufacturing.

AB437-SSA1,4,14 (f) "Personal property" has the meaning prescribed in s. 70.04.

AB437-SSA1,4,18 (g) "Planning commission" means a plan commission created under s. 62.23, if the town board exercises zoning authority under s. 60.62 or the town zoning committee under s. 60.61 (4) if the town board is not authorized to exercise village powers.

AB437-SSA1,5,5 (h) 1. "Project costs" means, subject to sub. (2) (b), any expenditures made or estimated to be made or monetary obligations incurred or estimated to be incurred by the town which are listed in a project plan as costs of public works or improvements within a tax incremental district or, to the extent provided in subd. 1. j., without the district, plus any incidental costs, diminished by any income, special assessments, or other revenues, including user fees or charges, other than tax increments, received or reasonably expected to be received by the town in connection with the implementation of the plan. Only a proportionate share of the costs permitted under this subdivision may be included as project costs to the extent that they benefit the tax incremental district. To the extent the costs benefit the town outside the tax incremental district, a proportionate share of the cost is not a project cost. "Project costs" include:

AB437-SSA1,5,12 a. Capital costs including, but not limited to, the actual costs of the construction of public works or improvements, new buildings, structures, and fixtures; the demolition, alteration, remodeling, repair or reconstruction of existing buildings, structures and fixtures other than the demolition of listed properties as defined in s. 44.31 (4); the acquisition of equipment to service the district; the removal or containment of, or the restoration of soil or groundwater affected by, environmental pollution; and the clearing and grading of land.

AB437-SSA1,5,16 b. Financing costs, including, but not limited to, all interest paid to holders of evidences of indebtedness issued to pay for project costs and any premium paid over the principal amount of the obligations because of the redemption of the obligations prior to maturity.

AB437-SSA1,5,19 c. Real property assembly costs, meaning any deficit incurred resulting from the sale or lease as lessor by the town of real or personal property within a tax incremental district for consideration which is less than its cost to the town.

AB437-SSA1,5,21 d. Professional service costs, including, but not limited to, those costs incurred for architectural, planning, engineering, and legal advice and services.

AB437-SSA1,5,24 e. Imputed administrative costs, including, but not limited to, reasonable charges for the time spent by town employees in connection with the implementation of a project plan.

AB437-SSA1,6,2 f. Relocation costs, including, but not limited to, those relocation payments made following condemnation under ss. 32.19 and 32.195.

AB437-SSA1,6,6 g. Organizational costs, including, but not limited to, the costs of conducting environmental impact and other studies and the costs of informing the public with respect to the creation of tax incremental districts and the implementation of project plans.