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COMMENTARY: Caledonia Needs To Know Who Is Coming To Their TIF District

At a time when every dollar counts, transparency is key.

Tax incremental financing (TIF) districts are funny things. They have a have a simple purpose and a complicated premise.

The voted 4 to 1 to move forward with a that could create a tax incremental finance (TIF) district to expand the Franksville Industrial Park by 390 acres on Tuesday.

Basically the tax revenue generated from a development pays for the infrastructure projects. One caveat is that the tax increment (the difference between the base tax and the created tax after the project is completed) is diverted away from paying for schools, the village and the county until the project is paid in full. So, while those entities won’t lose money, they won’t receive additional money.

Now the repayment of a TIF can happen in only a few years or it could mean 20 years. And these financing tools are to be used if they meet the test of the “but for” rule, which means that if the business didn’t have the incentives the development wouldn’t happen.

There are different ways communities have used this tool. I’ve seen some go really well and I’ve seen some projects go badly. For this reason, it’s really important that the Village Board examine the details on this TIF in a careful, thorough and transparent manner.

With that said, the businesses have requested that their identities not be made public until October. So the glaring problem I see is that the public won’t know all of the details about the businesses we’re expected to help finance until after the Village Board votes on the creation of the TIF.

Given this, I can’t help but remember what an acquaintance of mine said about the purpose of business – that businesses and governments do not to create jobs, demand for products or services create jobs. And given our economic position, it’s important to remember that while there are a number of good companies out there, we need to be realistic in our expectations. We also need to have a stronger understanding about our community’s demand for those goods and services if we plan to use a TIF district to finance infrastructure projects.

The reason being, I covered Pleasant Prairie when they created a TIF district to woo Abbott Labs across the border in 2008. The plan was approved, and “the table was set,” said officials with the Village. The state promised tax credits, the Village promised new roads and infrastructure improvements, nothing got built, and no one came to dinner. And I covered West Allis when their dinner plans got ruined when Pressed Steel Tank stiffed them with the check, and they ended up having to follow Pressed Steel into bankruptcy court to get their money back.

I’m not saying this is a good or bad dinner, or that this TIF isn’t worthwhile; I’m just saying we should know who is coming to dinner before the main course is served. And if we are diverting funds away from schools, the Village and the County, we should have more information to go with these promises because we can’t afford not to know.

San August 19, 2011 at 01:10 PM
i agree that we need to know before we as a community take on the risk, responsibility and potential costs of TIF financing. We should be able to evaluate the company that wants to come into the TIF, ensure that it is suitable (would we support for instance a nuclear waste dump?), that it is stable and willing to make the necessary longer term commitments that are expected when TIF financing is involved. TIF financing is a special case that clearly needs transparency and disclosure as one of the conditions of being granted as it is intervening the government into the free market by providing what amounts to government support using taxpayer-guaranteed funds in order to promote the welfare of certain private businesses. We clearly have the right, and our Village Board has the obligation to know what we are getting into before rubber-stamping this kind of agreement. I understand and appreciate that there are times when TIF financing is useful and beneficial in terms of building a community, but something done in the DARK without full disclosure is not the way these things should work. Thanks for raising this issue.
Denise Lockwood August 19, 2011 at 01:56 PM
Glad to help.
Brian Dey August 19, 2011 at 08:57 PM
I am usually skeptical of TIF's or TID's, but realize they are sometimes necessary. The last one in Caledonia was supposed to be a mixed-use TID called Twelve Oaks that went bankrupt before it even got off the ground. The question comes to mind is if these two businesses are relying on the 38 project as part of the infrastructure, or if it doesn't happen, will they opt out. A lot can be determined once one knows who or what types of businesses they are. I have always been a strong advocate of transparency no matter what the amount the taxpayer's will bear, but especially when it is an expensive, long term commitment that could go bust.

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