Wisconsin’s TIF policy needs changes
A couple years back, I authored a report for the Public Policy Forum about tax incremental financing (TIF), and warned that communities can use TIF too much, or too little.
Now we learn – from solid reporting by Tom Daykin – that several communities with TIF districts are seeking a special “distressed” designation because the district can’t cover its debt. Approval of the distressed designation allows the community to extend the TIF district’s timeline and pay off its debt.
Is this the right thing to do? Yes and no.
But why is the “distressed” designation for TIFs so distressing? I’m reminded of a quote from historian/writer Lewis Mumford, who said, “Adding lanes to relieve traffic congestion is like loosening your belt to cure obesity.” Same principle applies here.
Allowing communities to take on risky TIF deals with greater ease is wrong, especially those smaller communities with fewer resources to correct bad deals. It hurts them, and it hurts Wisconsin’s biggest cities.
Protecting communities from these deals before they’re adopted should be as high a priority as it is in easing the fiscal stress of bad TIF deals.
So how do we protect communities from bad TIF deals? Well, it’s important to note that the “Great Recession” isn’t the only cause of distressed TIF districts; it’s also bad TIF policy.
Here are some brief recommendations from my report about how best to change Wisconsin’s out-of-date TIF policy (the first two being the most important):
- Lower the maximum rate with which communities can use TIF
- Properly define when communities can use TIF (i.e. concretely define “blight”)
- Prioritize central city development
- Improve regional oversight
- Emphasize greater fiscal scrutiny by municipal governments
A quick highlight. TIF is supposed to be used for redeveloping “blighted” property. But Wisconsin’s statutory “blight” definition is so loose that communities are using TIF to develop prairies and other perfectly usable properties. In contrast, Minnesota’s TIF law clearly defines blight, and thus limits the risk associated with TIF.
Overall, it’s important to remember that while TIF can be extremely useful in redeveloping “blighted” properties, like all good things, it can also be used to excess.
Guest post by: John Kovari
John Kovari is a Ph.D. candidate in political science at the University of Wisconsin-Milwaukee and the 2008-2009 Norman N. Gill Fellow at the Public Policy Forum. Additionally, he has served as a legislative assistant to city of Milwaukee Alderman Michael Murphy.