10 standards proposed for new TIF districts
By Kevin O’Brien
With an estimated $5.7 million in property tax revenue currently tied up in tax-incremental financing (TIF), Marathon County supervisors are being asked to adopt a list of 10 standards for the county to consider before voting in favor of any new TIF districts.
Peter Weinschenk, former editor of The Record-Review, presented his proposed standards in the form of a resolution he drafted for the Dec. 5 joint meeting of the Education, Extension and Economic Development Committee (EEDC) and Human Resources, Finance and Capital (HRFC), which each have oversight of areas impacted by TIF districts, also called TIDs.
TIDs are designated areas within cities and villages where the taxes collected on any new developments are used to pay for infrastructure improvements and development incentives instead of being shared with local school districts, technical colleges and the county. Marathon County’s municipalities currently have 40 active TIDs, encompassing over $1.4 billion in property value that would normally generate taxes for the county and other government entities.
Instead, all of the taxes are retained by the municipalities that host the TIDs and are used to either pay off debt for streets, utilities and other infrastructure used to serve new private developments or as upfront incentives to companies looking to relocate or expand. As a result, Weinschenk pointed out that all of the other taxpayers in the county pay more for public schools, police and fire protection and other services to make up for the revenue forfeited to TIDs.
Last year, due to concerns over the longterm impacts of TIDs on the county’s finances, a task force was formed consisting of county supervisors, a Wausau City Council member, a township representative and a private sector rep. Over the course of several meetings from September of 2023 to March of this year, the task force discussed the benefits and drawbacks of TIDs and brainstormed ideas for the county to improve its evaluation of new TID proposals.
Ultimately, according to Weinschenk’s resolution, the task force found that that “TIF continues to be a valuable economic development tool but that, in general, county TIDs underperform and their lifespans are too long, harming both the county government and property taxpayers.”
As one of the taxing jurisdictions that is asked to forgo additional tax revenue for the lifespan of a TID – usually 20 to 30 years – the county gets to have a representative on what’s called a Joint Review Board (JRB). Before a city or village can create a new TID, a JRB must be convened with representatives from the county, school district, technical college and a citizen. JRB’s must approve the formation, expansion or extension of any TID. The county has always designated its finance director, a position recently filled by Sam Fenzke after the retirement of Kristi Palmer, as its representative on all JRBs within the county. Fenzke and each of the JRB members get a chance to review TID project plans prepared by the host municipality before voting whether to approve the formation of a new district.
The recommendations
Weinschenk asked supervisors to reform the TID system, in part by having the county representative consider the following 10 standards, which he also framed as yes-orno questions, whenever they are asked to vote in favor of a new district: 1. The proposed TID development would not occur without the use of TIF.
2. The TID development’s economic benefits measured by increased employment, business and personal income and property value will compensate local governments for the cost of the improvements.
3. The economic benefits of the TID development will outweigh the taxes residents of overlying districts are expected to pay.
4. The proposed TID development will fit into the municipality’s comprehensive plan and overall economic picture.
5. The proposed TID development will repay taxpayers for their TIF investment.
6. The proposed TID will make highest and best use of property and best use of the municipality’s limited TIF capacity.
7. Citizens of the municipality support the proposed TID development.
8. The municipality will be able to afford the long-term impacts of the development when it comes to roads, police protection, emergency medical services, water, sewer, administrative services, increased student population, demand for training and housing.
9. A cash grant, incentive or forgivable loan must be documented in a written developer’s agreement and justified by the needs of the developer.
10. The developer must guarantee in a developer’s agreement that a minimal level of development will occur as anticipated and that the property value of the development will increase as expected.
Weinschenk said a fundamental flaw of many TIDs is that they grow too slowly, which prevents municipalities from getting the tax revenue they depend on from new developments and deprives taxpayers of the tax relief they are promised when a new TID is formed.
The former Wausau Center Mall is a classic example of TID project gone wrong, he said. Built in 1981 with the help of TIF expenditures, he said the mall required the demolition of 67 downtown storefronts and apartments in exchange for national chain stores coming in to sell brand-name merchandise.
Weinschenk said the developers who built the mall specifically promised that the development would result in county taxpayers paying less in taxes, and that the mall would eventually reach a taxable value of $636 million. In reality, he said the value peaked at a much lower $84 million and dropped to just $9 million before being demolished in 2021.
“The project never repaid taxpayers for the years these citizens paid extra for government services because the mall paid nothing,” he said.
Based on his own calculations, Weinschenk said he himself paid $110 more in taxes on his home in Edgar to subsidize the mall, and supervisor Gary Gisselman, a Wausau resident, ended up paying a $603 net subsidy for the mall. The economic performance of TIDs across the county has been “lackluster,” he said, noting that 13 of the districts have had to be extended because the promised developments have not materialized.
At the same time, he said county taxpayers spent $28 million last year to subsidize TID expenditures for businesses, employment and housing – with no guarantee of payback.
“No banker would stay in business with this track record,” he said.
A couple of the supervisors in attendance pushed back on Weinschenk’s generally negative assessment of TIF districts.
Supervisor Ann Lemmer said the Wausau mall generated a lot of retail tourism and sales tax revenue over its lifetime, and it also provided her and others with jobs.
“I’d love to see an equation that really shows all of those costs and the benefits,” she said.
Supervisor Randy Fifrick, the city of Wausau’s economic development manager, said he has participated in a lot of JRB meetings and he agrees with some of what Weinschenk said, but he questioned some of the conclusions he came to.
“TIF is often used on projects that can’t be fully funded by the private sector, and the public sector needs to get involved,” he said. “In a lot of cases, there’s a community value to that.”
Fifrick said the most problematic TIDs are those created as the result of poor planning and overpromising by developers that don’t fulfill their commitments to cities and villages.
Weinschenk agreed with Fifrick about the need for better planning when TIDs are first being proposed, but he also said there’s a “long, interesting” conversation to be had about whether projects like the Wausau Center Mall could be completed without TID subsidies.
“The point here is not to get rid of TID,” he said. “It’s just to make it more successful and to think about the taxpayer.”
Supervisor Stacey Morache, chair of the EEEDC, called Weinschenk’s proposal a “great framework” for future discussions and said her committee would continue the conversation in January.
Peter Weinschenk
