The elimination of state revenue-sharing with municipalities, a possibility raised by Gov. Scott McCallum in his biennial budget proposal, would make it harder for some municipalities to engage in tax incremental finance (TIF) development.
In a discussion with SBT, Mayor John Norquist advocated eliminating TIF as a development tool statewide.
"I think that for municipalities throughout the state, elimination of shared revenue would severely undermine TIF, particularly in low-value communities, which is whom TIF was originally intended for," Norquist said. "But TIF is now being used by wealthier communities as well. The definition of ‘blighted areas’ now includes Chenequa, River Hills."
Without shared revenue, municipalities with high property values will be at an advantage in attracting development, while communities legitimately in need of development would suffer, according to Norquist.
"TIFs will disappear from places like Milwaukee, Racine, Kenosha and Superior," Norquist said. "TIF will basically be the reverse of what it was originally intended for. It will lead to fast growth of wealth in high-value communities."
Administrator in Kenosha weighs in
City of Kenosha Mayor Nick Arnold agreed with Norquist that TIFs could wind up being the tool exclusively of higher-value communities, but stopped short of advocating for an end to TIF financing should McCallum’s budget be approved.
"That appears to be a little more extreme than what I am willing to say at the moment," Arnold said "The other side of that coin is that communities like River Hills would not likely encourage industrial development in the first place. But obviously if the governor’s proposal goes through, there is going to be a reshuffling of the economic development playing deck in ways that we are going to regret in the very near future."
One reason Arnold feels TIF would continue to be a viable tool for more urban municipalities lies in a loophole in the governor’s proposal.
"As I understand the proposal, it eliminates debt service from any levy limits," Arnold said. "The state made that mistake once in the past, and it stopped municipalities all over the state from repairing roads and building anything."
Until the budget matter is resolved, both officials said their municipalities would avoid taking on new projects and new debt.
"We will not be issuing municipal bonds until this budget issue is resolved one way or the other," Norquist said. "The TIFs we have in place would continue, but we would not start any new ones."
"It is very definitely going to impact municipalities," Arnold said. "It puts on them the entire burden of servicing that debt because the state would no longer return dollars to the communities from whence they came. That will impact cities’ bond ratings and that will increase the costs of debt. It will impact road maintenance, which is what many municipalities borrow funds to do."
March 15, 2002 Small Business Times, Milwaukee
