Under the current tax incremental financing program, a city or village may
create a tax incremental district (TID) in part of its territory to foster development
if at least 50 percent of the area to be included in the TID is blighted, in need of
rehabilitation or conservation, suitable for industrial sites, or suitable for mixed-use
development. Currently, towns also have a limited ability to create a TID under
certain circumstances. Before a city or village may create a TID, several steps and
plans are required. These steps and plans include public hearings on the proposed
TID within specified time frames, preparation and adoption by the local planning
commission of a proposed project plan for the TID, approval of the proposed project
plan by the common council or village board, approval of the city's or village's
proposed TID by a joint review board that consists of members who represent the
overlying taxation districts, and adoption of a resolution by the common council or
village board that creates the TID as of a date provided in the resolution.

Also under current law, once a TID has been created, the Department of
Revenue (DOR) calculates the "tax incremental base" value of the TID, which is the

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equalized value of all taxable property within the TID at the time of its creation. If
the development in the TID increases the value of the property in the TID above the
base value, a "value increment" is created. That portion of taxes collected on the
value increment in excess of the base value is called a "tax increment." The tax
increment is placed in a special fund that may be used only to pay back the project
costs of the TID. DOR authorizes the allocation of the tax increments until the TID
terminates or, generally, 20 years, 23 years, or 27 years after the TID is created,
depending on the type of TID and the year in which it was created. Under certain
circumstances, the life of the TID and the allocation period may be extended. The
costs of a TID, which are initially incurred by the creating city or village, include
public works such as sewers, streets, and lighting systems; financing costs; site
preparation costs; and professional service costs. Generally, project expenditures
may not be made later than five years prior to the termination date of the TID.

Under current law, a specific provision allows TID Number 6 in the city of
Sheboygan, which was created on January 1, 1992, to make expenditures up to 15
years after the TID was created, or through December 31, 2006. DOR is also
authorized by a specific provision to allocate tax increments to this TID for 16 years
after the last expenditure identified in the project plan is made.

Under this bill, the expenditure period for TID Number 6 in the city of
Sheboygan is extended to 26 years after the TID was created, or through December
31, 2017. The bill also allows DOR to allocate tax increments to this TID for 31 years
after the TID was created, which is the same as current law.

Currently, before a TID may be created, the city or village's application must
contain findings that at least 50 percent of the area to be included in the TID is
blighted, in need of rehabilitation or conservation, suitable for industrial sites, or
suitable for mixed-use development. The findings, in effect, determine the type of
TID that is being created.

With regard to TID Number 18, which the city of Waukesha created, or
attempted to create on January 1, 2008, based on action taken by the common council
on July 16, 2008, this bill requires that DOR proceed as if the TID was created on
January 1, 2008, notwithstanding the fact that the city's findings did not specify the
type of TID that was being created. Also under the bill, DOR may not certify a value
increment before 2010.