TAX INCREMENTAL FINANCING

Tax Incremental Financing in Wisconsin: A Powerful Tool for Real Estate Developers

Tax Incremental Financing (TIF) is a powerful tool used by cities and towns in Wisconsin to encourage economic development in specific areas. TIF enables municipalities to finance redevelopment and other public improvements using the anticipated increase in property tax revenue that results from new development in a designated TIF district. Real estate developers can take advantage of TIF to help fund their projects and offset the costs associated with land acquisition, construction, and other development-related expenses.

What is Tax Incremental Financing (TIF)?

Tax Incremental Financing is a financing mechanism used by municipalities to finance public infrastructure improvements in a designated area known as a TIF district. The TIF district is created by the municipality and can include a single property or an entire neighborhood. The municipality then issues bonds to finance the public improvements, which are repaid through the property tax revenue generated by the new development in the TIF district.

When a TIF district is established, the municipality sets a base value for the property in the district, which is the total assessed value of the property at the time the TIF district is created. Any increase in the assessed value of the property due to new development or redevelopment is known as the "increment." The increment is then used to repay the bonds issued to finance the public improvements in the TIF district.

How Can TIF Benefit Real Estate Developers?

Real estate developers can benefit from TIF in several ways. First, TIF can help offset the costs associated with land acquisition, construction, and other development-related expenses. By financing public improvements in the TIF district, the municipality can help create an environment that is more conducive to development and can help increase the value of the property.

Second, TIF can help mitigate the risk associated with development. The public improvements financed by the TIF can help reduce the risks associated with developing in a particular area, such as infrastructure deficiencies, lack of amenities, or other barriers to development. This can help make the project more attractive to potential tenants or buyers.

Finally, TIF can help increase the profitability of a real estate project. By reducing the costs associated with development and mitigating risks, TIF can help increase the potential return on investment for the developer.

Relevant Wisconsin Statutes

The use of TIF is governed by Wisconsin Statutes Chapter 66, which provides detailed guidance on the establishment and operation of TIF districts. Some of the key provisions of Chapter 66 include:

• Requirements for creating a TIF district, including the designation of a "base value" for the property in the district.
• The process for issuing bonds to finance public improvements in the TIF district, including the requirement for a public hearing before the bonds are issued.
• The requirement for an annual report on the financial status of the TIF district, which must be made available to the public.

Conclusion

Tax Incremental Financing is a powerful tool that can help real estate developers offset costs, mitigate risk, and increase profitability. By financing public improvements in a designated TIF district, municipalities can help create an environment that is more conducive to development and can help increase the value of the property. Real estate developers should work closely with their municipal partners to understand the requirements and benefits of TIF and to explore how it can be used to their advantage.