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Saving the TID

Village makes plea to state

October 06, 2010 | 08:47 AM
Fontana — A sudden change in how the Department of Revenue values tax increment districts has left village officials baffled.

And, depending on real estate growth, it also could place the TIF district in debt until 2020. However, the TID should close with a positive balance.

Village officials are protesting the DOR's decision to change how it values TIF districts. The change dropped the value of Fontana's district by $26 million overnight.

During Monday night's Village Board meeting, the board approved sending letters to State Sen. Neal Kedzie and DOR official Allen Land protesting the change and asking for assistance for communities that have been affected.

In the letter, the village is proposing a solution to the state.

Instead of instantly revising the valuation method, the village asks that state changes the method over the next five years. "This will reduce the impact," according to the letter sent by the village.

In 2011, the village is asking that communities affected by the change be offered a 20-year, no-interest State of Wisconsin Trust Fund loan.

"Communities eligible would be those whose TIF districts that had a positive cash flow prior to the valuation procedure change based on proven increment, and who now have a negative cash flow as a result of the change, not counting new projects," according to the letter.

So far, the CDA has spent about $16 million in TIF. TIF is a tool used to make capital improvements within a designated area. Fontana's TIF district includes the village's lakefront, Duck Pond Recreation Center, The Abbey Resort and Highway 67.

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What happened to the TID?

Since the TID was created in 2002 the DOR has valued it using one formula. The DOR reviewed the assessor's report on the TIF district, calculated the equalized value, added new construction and applied an economic growth factor. It then deducted the base value to determine an increment amount, according to the village's letter.

That changed this year when the state matched the value of the TID with the assessor's report.

In 2009, the DOR certified value of the TIF district was $92.8 million. The assessor valued the district at $71.6 million.

In 2010, the assessor valued the TID at $66 million and that is the value the DOR certified the TIF district.

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"Through 2009, the village had seen a significant growth in equalized value within the district," the letter states. "However, in 2010, the DOR changed the valuation procedure for TIF district with no advanced notice. This action has had a profound economic impact on our Village, and there must be some redress of this matter."

The long-term impact of the change will vary depending on the rate of real estate growth.

"In other words the TIF is not upside down, it will have a positive balance in the end," Turner said. "We, as the CDA, won't be able to under take any projects for a significant period of time."

The village has projected that at a 1-percent growth rate for real estate, which is considered a conservative estimate, the TID will close in 2029 with a positive balance of $2.5 million.

However, the revenues collected from the district will not be able to cover the debt the CDA has already incurred for the next nine years. That debt will total $2.4 million.

"Just for the current tax year, we will have to levy taxpayers an additional $286,091 just to cover the shortfall created by the changed procedures," according to the village's letter.

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