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Village appeals TID change

October 20, 2010 | 08:42 AM
Fontana — Formally the village has appealed the change in how the state values its Tax Increment District, which has created financial pains for the TIF district.

Earlier this year, the Department of Revenue changed how it values the TIF district. In previous years, the DOR valued the TIF district using a formula. Now the state uses the assessor's value, which dropped the value of Fontana's district by $26 million overnight.

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

On Monday, village officials met with State Sen. Neal Kedzie to discuss the change.

"All I can say is that I meet with them and listened to their concerns," Kedzie said. "It is going through a legal type of appeal.

Kedzie said the village is appealing the change.

"Maybe that will end up settling the matter for them," Kedzie said.

Village President Arvid "Pete" Petersen said the village appealed the process Friday, but he wasn't optimistic that anything would change this year.

"Are we likely to get relief? I don't know," he said.

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Although Petersen doesn't expect any change this year he said there may be a possibility for relief in the future.

"We are doing what needs to be done to protect the TID," he said.

Kedzie didn't yet have an opinion on whether the change is fair.

"Without knowing all the intricacies, I'm not in a position to evaluate the process," Kedzie said.

Village fighting change

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In a letter to the DOR and Kedzie, the village proposed 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 the TIF district. 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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Prior to the change in the funding formula, Petersen said the village was following the rules that were in place. He said he was disturbed by the change.

"The DOR, or someone at the DOR, with a stroke a pen changed the rules midstream, and now we have a problem," Petersen said.

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. Then it 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.

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

In one project, the village has a 1-percent growth rate for real estate, which is considered a conservative estimate. In that case, 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.

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