Friday, June 8, 2007

Why would MPS care about TIF?

We seldom hear of the fiscal impact that tax increment financing (TIF) districts have on the budgets of governments other than municipal government. For example, how does the passage of a TIF district in the City of Milwaukee affect the budget of Milwaukee Public Schools (MPS)? Given the recent budget troubles at MPS, the use of TIF by the City of Milwaukee may become an increasingly important issue for the school board. In Kansas City, the fiscal impact of TIF usage on the local public school system currently is being scrutinized.

Why would MPS care about TIF? Tax base. After all, TIF captures tax base and sets it aside to pay for public improvements within a special district: Park East, Pabst Brewery, Third Ward, etc. Until the given TIF district has fully paid down its debt, the tax base growth in the district is not available for a governmental entity like MPS to tap. It takes an average of 13 years to pay down debt and close a TIF district in Wisconsin. That's a long time, but if the growth would not have otherwise occurred it's worth the wait.

If MPS can argue that the growth in a proposed district would occur without the TIF or that the proposed TIF is speculative and unlikely to be successful then it might be able to block a TIF. In Wisconsin, TIF projects only can only be approved if all affected governments agree to passage during a Joint Review Board (JRB) hearing.

The process in Milwaukee is as follows. First, the project receives a hearing before the JRB, which is made up of five (5) representatives – one each from the city, Milwaukee County, MPS, the Milwaukee Area Technical School (MATC), and a citizen representative. After an initial hearing, the Redevelopment Authority of the City of Milwaukee holds a public hearing and then votes on the project. Following that, the Milwaukee Common Council’s Zoning & Neighborhood Development (ZND) Committee holds a hearing. Once adopted by the ZND, the project is sent to the full Common Council for approval or rejection. If the council approves it, the JRB makes a final recommendation and it is then forwarded to the mayor for final approval.

As MPS and other governmental entities face structural deficits, TIF use (or non-use for that matter) in the City of Milwaukee may become a flash point of controversy.

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