City-County Building

Gov. Tony Evers proposed budget would boost revenues for local governments but impost new constraints on the use of tax incremental financing (TIF).

After years of tight levy limits, Gov. Tony Evers’ 2019-21 budget proposes to provide more revenue to counties and municipalities and let local governments raise more money.

The governor, however, would constrain local government use of tax incremental financing (TIF) for private development projects.

To enhance local control, Evers is proposing to let municipalities and counties raise levies by up to 2 percent regardless of growth. Currently, the law limits increases in the levy to only net new construction, which is the value of new buildings, additions and remodeling minus the value of demolished properties.

The formula works for growing communities with lots of new construction, Evers said. But others have seen little growth but must deal with rising costs. Of 1,852 municipalities in the 2018-19 tax year, 1,026 saw less than 1 percent growth and 1,583 had less than 2 percent, he said.

The budget also would increase state municipal aids by 2 percent starting in 2020.

To encourage cooperation among local governments, Evers would also allow expenses for shared emergency dispatch centers to be exempt from levy limits.

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Also exempt would be spending on new or expanded transit services that cross municipal or county boundaries. The exclusion couldn’t be used for existing services and any amounts claimed would require an intergovernmental cooperation agreement and approval by referendum.

The proposal could mean a boost for Madison and neighboring communities looking to expand bus service.

The budget proposes to limit the percentage of a TIF district’s project costs that can go toward cash grants for developers to 20 percent. Currently, many communities deliver developers a much higher percentage of project costs. The change would move TIF back to its original purpose, which is for needed public infrastructure improvements that facilitate local economic activity, the proposed budget says.

The governor recommends requiring TIF project plans contain “stress tests” for financial projections so local governments better understand the risks of TIF use if projects fail to materialize as promised.

The budget also recommends adopting bipartisan legislation that would close the “dark store” loophole in property tax amendments, which currently pushes more of the tax burden to homeowners and small businesses. The legislation would ensure that leased commercial property is assessed not against abandoned or vacant properties but against truly comparable properties.

With the changes, “the governor’s budget will keep property tax growth for the median value home under the projected rate of inflation for both years of the biennium, the document says.

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