Two Local Economic Development Bills To Be Considered By Legislature
By Tom Larson
To provide local communities with additional tools to promote local economic development, NAIOP-WI is pursuing two separate pieces of legislation dealing with special assessment b-bonds and tax increment financing.
Special assessment b-bonds. The first piece of legislation would make changes to the way special assessment b-bonds can be paid off. Special assessment b-bonds are used to finance local economic development projects. However, they are rarely used because current law requires each installment payment to reduce the principal owed by an equal amount. As a result, special assessment installment payments are generally higher in the early years of a project and lower during the later years. Because the early years of an economic development project generally produce the lowest cash flow due to higher start up and marketing costs, higher payments at the beginning of a project are not financially feasible for most projects.
NAIOP-WI is working with the League of Wisconsin Municipalities and other economic development groups to change the way special assessment payments can be made. Specifically, we are seeking changes to allow local communities more flexibility to use either “tailored” principal payments for special assessments or equal total payments (principal and interest) to pay off the special assessment. (Note – this would be similar to the way home mortgage payments are structured whereby the mortgage payment amount is equal during the loan period with the mortgage payments consisting of greater interest and lower principal at the beginning of the loan term and lower interest and higher principal at the end of the loan term.)
By providing local communities with greater flexibility to structure special assessment payments, special assessment b-bonds would be a more effective tool for financing economic development.
Redevelopment TIF/Base Value Reduction – The second piece of legislation would provide local units of government the authority to lower the base value of an existing TIF district when a property within the district has been vacant for an extended period of time, is damaged by natural disaster, or where the property’s redevelopment progress has been stalled by difficult economic and market conditions.
When an industrial or commercial property experiences long-term vacancy, sustains damage from a natural disaster, or has been demolished (in part or in whole), the base value of the property remains the same, even though the actual value may seriously decline. In these cases, the discrepancy between the TIF base value and the actual market value hurts the economic viability of the TIF district and the financial health of the community, and presents a serious impediment to both redevelopment and new economic development within the TIF.
Allowing changes to the TIF’s base value will accelerate the generation of new taxable value, facilitate redevelopment efforts, and generate a stream of positive tax benefits to impacted taxing jurisdictions more quickly. To ensure that these changes would occur only under the special circumstances identified above, any changes to the base value would require approval by the Department of Revenue, the local unit of government, and the Joint Review Board which is made up of representatives of all the affected taxing jurisdictions.
Legislature Suspend Electrical Contractor License Rules
On March 13, 2013, Governor Walker signed into law 2013 Wis. Act 4, which will delay the effective date of new electrical contractor licensing rules by 12 months. The new could have created maintenance headaches for commercial building owners as they would have required all property management companies to be licensed as an electrical contractor to repair, replace or maintain most electrical existing items including ballasts, outlets and switches. Because most property management companies are not licensed as electrical contractors, commercial property owners would have had to hire separate electrical contractors to perform routine electrical maintenance activities, which would have likely added costs and delays to these activities.
During the next several months, organizations representing property management companies and commercial building owners will be working with lawmakers to address these concerns before the rules go into effect. The goal is to specifically exempt maintenance and repair of existing outlets, switches and lighting from the list of activities which would require and electrical contractor license.
NAIOP-WI’s Public Affairs Committee has not yet taken a position on this proposal, but will likely be discussing it at it’s next meeting.