TIF Bills Pass Both Houses, Move to Governor’s Desk
By Tom Larson, lobbyist for NAIOP-WI
On February 14, 2016, the state Assembly passed four tax increment finance (TIF) bills with unanimous support. The bills were previously approved by the state Senate and were originally part of an 8-bill TIF modernization package introduced by the Legislative Council’s study committee on TIF. The bills were signed into law by Governor Walker on March 1.
The following is a description of the four bills that were signed into law:
• SB 50 – Technical Changes. Makes the following technical changes to Wisconsin’s TIF Law:
o specifies that the requirement to maintain industrial zoning applies only to industrial tax increment districts (TIDs), and not to mixed -use TIDs;
o specifies that all TIDs, regardless of their creation date, would receive the same amount of tax increment collection cycles.
o standardizes and extends the deadline for all types of TIDs to 45 days from receipt of the resolution.
o changes from Class 2 to Class 1 the notice requirement for a public hearing before the Plan Commission on an amendment to an existing TID
o excludes the value of any TID increments from the levy limits upon closure of a TID.
• SB 51 – Creates greater transparency of TID performance by requiring a more detailed annual reporting process that will require the municipality to file the detailed report regarding the performance of each TID with the JRB and the DOR not later than July 31.
• SB 53 — Provides local communities with various options to address situations where a TID’s increment collections are reduced as a result of modifications to the TIF law made by the legislature. The available remedies include the ability to amend a TID’s boundaries at any time, request redetermination of a TID’s base value, and request an extension of a TID’s life.
• SB 54 — Current law prohibits inclusion of an area of vacant land comprising more than 25% of the total area of the TID land in a blight or rehab district. SB 54 eliminates both the 25% vacant land test and the need to have the local assessor assign a base value to tax exempt municipally owned property targeted for redevelopment.
The other four TIF modernization bills died, after not passing both houses. Three of the bills (SB 52, SB 56 and SB 57) passed the Senate and the Assembly Ways and Means Committee, but were not scheduled for the floor by Assembly leadership. The other bill, SB 55 was not scheduled for the floor in either house, but will likely be reintroduced next year due to the significant number of communities that have reached the 12% cap.
• SB 52 – Creates additional flexibility for municipalities to designate TIDs to donate/receive increments from other TIDs.
• SB 55 – Increases from 12% to 15% the limit on the amount of taxable property permitted to be within a TID or TIDs at the time a TID is created or territory is added.
• SB 56 — Extends the sunset date for declaring a TID distressed or severely distressed from October 1, 2015 until October 1, 2020.
• SB 57 – Provides municipalities with more flexibility for re- determining TID base values when the current value of the TID has fallen at least 10% below its base value.
On a related note, SB 263/AB 349, referred to as the “TIF best practices bill”, failed to pass in either house and, therefore, is also dead for the session. NAIOP-WI, League of Wisconsin Municipalities and other local economic development groups opposed the bill because it would have limited the flexibility and usefulness of TIF.
While disappointed that four TIF modernization bills did not pass this session, NAIOP-WI is already working on a new strategy for next session to better educate lawmakers about the importance of TIF to the state and local economies and how additional modifications to TIF law, like those contained in the four bills that did not pass, will help promote economic development in local communities.
Major Wetlands Reform Bill To Be Signed Into Law
To make wetland mitigation a more viable alternative for developers and property owners, Wisconsin lawmakers recently passed SB 459 which, among other things, limits the scope of the practicable alternatives analysis to on-site alternatives for smaller projects involving minimal wetland disturbances.
Background Before a property owner can disturb a wetland, current law requires the property owner to consider all options for avoiding the wetland disturbance. If no alternative exists other than disturbing the wetland, a property owner may disturb the wetland, but must minimize the impact on the wetland, and then mitigate any impact by recreating a larger wetland on site or a nearby, or purchase credits at a wetland mitigation bank.
(Note — Under Wisconsin’s mitigation program, a property owner will have to create a wetland onsite or nearby at a ratio of generally 1.5 acres for every 1 acre of wetland disturbed, or purchase credits from a wetland bank at a ratio of 1.2 to 1.95 acres for every 1 acre of wetland disturbed. Thus, any fill of a wetland will result in a net increase in the amount of wetlands.)
The Practicable Alternatives Analysis As indicated above, before the Wisconsin Department of Natural Resources (“DNR”) will authorize a wetland disturbance, a property owner must demonstrate that no “practicable alternative” (PA) to the wetland disturbance exists. Unfortunately, the DNR has interpreted the “PA” requirement very broadly to include doing the project on a different site (including sites not owned by the party) or not doing the project. In other words, to satisfy the PA requirement, a property owner must often show that the proposed project cannot be done on a different property, or that the proposed project must be done. Although doing a project on a different site or not doing the project is almost always a “PA” under DNR’s interpretation, it is rarely a realistic or economically feasible alternative for most property owners.
In 2012, Wisconsin lawmakers limited the scope of the PA analysis for certain commercial projects and projects that could demonstrate a greater public benefit. Under these changes, the PA analysis was limited to alternatives located on the same or adjacent site of the disturbance for expansions of existing industrial, commercial or agricultural facilities, or if the property owner could demonstrate that the proposed project would result in a public benefit. See Wis. Stat. § 281.36 (3n). While helpful to some projects, this definition of “PA” had limited benefit because it did not apply to residential, agricultural, or most small business projects.
New Law SB 459 makes the following three significant changes to the practicable alternatives analysis:
1. PAs limited to same site for small projects– Limits the PA analysis to alternatives located on the same site of the proposed project for activities related to the construction or expansion of a single-family home, construction or expansion of a barn or farm building, or expansion of a small business facility. Only smaller disturbances up to 2 acres in size are eligible for this limited PA analysis. To prevent people from “gaming the system” by buying up a property with a known wetland on it and then subdividing it into smaller lots so that each lot owner can take advantage of the limited PA analysis, the new law excludes from this limited PA review projects initiated after July 1, 2012.
(Note — This change to the PA analysis will make Wisconsin law consistent with federal law, as established by the U.S. Army Corps. of Engineers regulatory guidance. Hopefully, greater consistency between state and federal law will reduce confusion and frustration for property owners.)
2. PAs limited to same site or adjacent site for other projects – Modifies current law by clarifying that DNR can consider only PAs that are on the same site or adjacent site if the property owner can demonstrate any of the following:
a. That the proposed project causing the discharge will result in a demonstrable economic public benefit (defined as “an economic benefit to the community or region that is measurable, such as increased access to natural resources, local spending by the proposed project, employment, or community investment”),
b. That the proposed project is necessary for the expansion of an existing industrial, commercial, or agricultural facility that is in existence at the time the application is submitted, or
c. That the proposed project will occur in an industrial park that is in existence at the time the application is submitted.
3. Scope of PA analysis — Limits the PA analysis for all projects to only those PAs that are consistent with the overall purpose and scope of the project, and allows the DNR to only impose a level of scrutiny and require a property to provide an amount of information that is commensurate with the severity of the environmental impact of the project.
Limiting the scope of the PA analysis to alternatives existing on the same site or sites immediately adjacent to the project site was a top legislative priority of NAIOP-WI. We worked closely with Governor Walker’s administration and lawmakers in both houses to pass this legislation, which will likely be signed into law within the next couple of weeks.