GENOA CITY — The long-awaited closure of the Tax Increment District (TID) will immediately decrease the village’s property tax rate, according to financial projections that were shared with village officials last week.
The TID has such a large impact on the tax rate that it will drop regardless of whether the board decides to build a new village hall.
On Sept. 24, Philip Cosson, of Ehlers, presented a report that showed the financial impact of the TID closure. Although Cosson, a municipal financial planner, was working with preliminary numbers, he estimated that the village’s tax rate would drop by $3.44 per $1,000 of assessed value because of the TID closure.
Cosson also presented three possible scenarios in which the village borrows money to repair Main Street and completes the village hall project. In each scenario the tax rate decreases by $2.54 per $1,000 of assessed value.
“I’m happy that the TID is closing. I think it is going to help the village,” Village President Bill Antti said. “The village portion is probably going to drop about 25 percent for the average taxpayer. That is a significant drop.”
The village is only one portion of the final tax bill, which also includes the schools, Gateway Technical College, the state and Walworth County.
In 1997, the village created the TID. When a TID, is created a base value is established and the regular taxing bodies continue to collect money from that base value. However, as growth occurs and values increase, tax dollars collected above the base value are put toward the TID fund.
In Genoa City, Tax Increment Financing (TIF) was used to pay for water, sewer and road construction projects. The money collected in the TID was used to pay off the debt for those projects.
This year the TID collected enough money to pay off all its debt. On paper, some of the outstanding obligations will still exist because the village isn’t allowed to pay off some of its debt early. However, that money will be set aside in a separate account — at least that’s what Cosson is recommending.
Since its creation in 1997, the base value of the TID has grown by about $76 million. In 2013, before the TID closed, the village’s tax levy was covered by about $90 million in equalized value. In 2014, the tax levy — which is expected to increase by about $205,000 — will be spread over $167 million in equalized value.
Last year the village’s tax rate was $10.18 per $1,000 of assessed value. After the TID closes — according to Cosson’s preliminary numbers and with no new borrowing — the tax rate would drop to about $6.74 per $1,000 of assessed value.
Whirlwind of money
The drop in the tax rate wasn’t the only financial good news that the village received from Cosson. The village’s TID actually collected about $2 million more than it had in outstanding debt. That extra money will be dispersed through each of the taxing bodies in the TID, and the village is expecting to see about $762,000.
“There were some suggestions made at the meeting on Tuesday about how that money could be spent,” Trustee Karen Bullock said. “I would expect that money will be discussed more as we move into the budget process.”
Bullock, who chairs the village hall subcommittee, isn’t sure whether the extra money should be put toward the village hall project.
“Some of the citizens suggested that the village save for a project. However, financing philosophies for a village are different than for handling one’s personal finances. This was explained by one of the other trustees at a recent meeting,” Bullock said. “If money is borrowed to fund a project, it is being paid for by the taxes of the people who are living in the village and gaining the benefit of that project/improvement. Most capital improvement projects are funded by borrowing. That said, I don’t know whether a portion of the money should be put toward the project. Since I just learned about how much will be coming back on Tuesday and we are entering into budget season, those are things that the board will need to discuss.”
Antti said the board hasn’t discussed how to use the funds, and the Sept. 24 meeting was the first time the board learned it would get those funds back.
The village board’s Finance Committee will discuss what to do with the extra funds. Antti said the money could be spent on the village hall, street repairs or creating a reserve for maintenance projects.
Cosson also presented three borrowing options for the village. All three options included repairing main street and an improvement to the village hall. The three village hall options that were presented were repairing the current building, expanding it or building a new one.
“Those were probably the three most expensive options and he was giving us demonstrations on how it could be financed,” Antti said. “We haven’t discussed it as a board in which direction to go. Those were three options (the architect) gave us.”
Antti said he hopes the board can make a decision on the village hall project by the October board meeting. Bullock agrees.
“As discussed a number of times — including at the meeting the other night, the timing of this project was to come at a time where the TID is being paid off and the taxes will go down. If a project is pushed down the road, the taxes will go down now, then have to go up again later to fund a project,” she said. “In order to avoid that, the board needs to make a decision in October.”
By closing the TID the village is also able to increase its tax levy by $205,000. The increase will help pay for the structural deficit that the village has been operating under for the last several years.
However, Antti said he doesn’t think it will correct the entire structural deficit.
Antti said the structural deficit, in part, can be blamed on the economy and the decline of property values.