The use of Tax Increment Financing (TIF) has been an important and successful development tool for the City of Eau Claire over the past 25 years, adding over $312 million in property value across the 11 districts.
Speaking at the Chamber's May 18 Eggs & Issues breakfast, City Finance Director Jay Winzenz brought business and community leaders up to date on "TIFs and Other Fun Facts about Municipal Finance." During his talk, Winzenz explained how TIFs work, and described the districts Eau Claire has implemented since 1983.
One of the most prominent, the North Barstow Tax Increment District (TID #8), was created in 2002 to revitalize the blighted area than now includes the Royal Credit Union corporate center, market rate apartment buildings, and the recently-constructed Jamf building. The city's investments in the area included environmental remediation, streets and utilities, and Phoenix Park. Since it started, the value of the area has grown from $12 million to almost $77 million.
Winzenz described the City's use of TIFs for downtown revitalization a "classic example" of the use of the concept, taking blighted areas and "turning them into a show place."
How Tax Increment Financing works
The chart below illustrates the concept behind Tax Increment Financing. The boundaries of the Tax Increment District are created to define the area where the municipal investment will be made. A current base value is established, and each of the public recipients of property tax revenue (County, City, CVTC and the School District) continue to receive taxes on the base value. As the value of the property grows, the incremental additional value goes to the city to pay back the investments made. The TID is closed after the investments are recovered, then each jurisdiction benefits from higher tax revenues from the new increased value.
Three kinds of TIDs are allowable in Wisconsin: Industrial, Blight and Mixed-use. Eau Claire has used all three, the most recent being a Mixed-use TID in the Water Street area. The Confluence TID was an important part of the financing of the Public Private Partnership that has resulted in construction of Haymarket Landing and the soon-to-open Pablo Center at the Confluence.
Levy Limits, Tax Rates, Assessments and the City Budget
Winzenz introduced his presentation with explanations of how the City's annual tax levy is determined, how tax rates and set, and the upcoming city property revaluation.
State law limits the total dollars a city can collect in property taxes to the previous year's total, plus net construction growth. The tax rate is then simply a calculation of each property's share of the overall tax levy, based upon its proportionate value against all other property. The city periodically revalues properties to ensure fairness in assessment and collection of property taxes.
In Eau Claire, the City's 2018 total tax levy is about $41.7 million. Other property tax levies within the city: Eau Claire Schools, $46 million; Eau Claire County, $18.3 million, and CVTC $4.3 million. Residential properties account for 57.5% of the property taxes paid in the City, with 42.% paid by owners of commercial property.
The property tax revenue is the largest component (57%) of the city's revenue, so the tax levy has the most significant impact on what it has to work with in setting its annual budget. Since 1990, the percentage of City dollars coming from state shared revenues has fallen from over 53% of general fund revenue to 9.9% in 2018.
The City will adopt its 2019 budget in November, preceded by City Council discussions and a public hearing in October and November.
For more information, click here to see slides and data from the presentation.
Posted by: Scott Rogers, Governmental Affairs & Workforce Director