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State tax cut causing revenue problems for some municipalities

by

UNDATED (WSAU) -- A change in how the state handles property taxes for technical colleges is hurting the income from TIF districts across central Wisconsin.

State legislators and Governor Walker's office pushed through a massive property tax cut at the start of 2014 to offset a projected billion dollar tax surplus coming in 2014. Inside that bill was a modification on how technical colleges collected their funding, by cutting some of those funds from local taxes and paying it out of state grants instead.

That means that local tax rates are lower for residents, but it also means that tax valuation is down for many municipalities, which changes the calculations on tax incremental financing districts. Those are tools local governments can use to collect taxes on improvements in the tax rates in order to fund capital improvements and business investments in the area.

This has especially hit the village of Weston hard at a time when the village is already projecting several years of operating deficits. Weston finance director John Jacobs says the funding formula reduces resident taxes at the cost of the municipalities. "Since the bill will go down, that means the portion that municipalities collect for TIF districts will also go down. And it happens that for us for December 2014, we will have a reduction about 175-thousand dollars that we will lose." He's hoping they can convince lawmakers to give some of that money back to the communities. "There's nothing in this act that says that there will be a payment made to municipalities, so we're not kept whole in this whole situation."

Wausau will be seeing a similar hit but finance director Mary Ann Groat says they'll be able to weather the change more easily. "Based on the increments we received for the 2014 budget, it looks like a 164-thousand dollar reduction for next year."

Stevens Point Treasurer-Comptroller Corey Ladick says his staff aren't seeing much in the way of damage. "It's about $10,000 for us over all." He says that's due to the fact that the city's TIF districts aren't seeing much growth right now.

Some legislators, including Representative Bob Kulp of Stratford, are optimistic the shortfall will not affect the municipalities as much. He says preliminary figures from the Legislative Fiscal Bureau project property values to go up around 2 to 3 percent, meaning more tax dollars will be coming in.

Representative Mandy Wright says this is a very unintended consequence of the tax cuts. "It is something I voted against, because I did not think that we were making these cuts in a responsible manner." She says it shows that the state needs to do more to protect local funding to municipalities. "If we're truly talking about cutting past the bone, which is the case here as well as in public transit and public education, that's extremely problematic and the state is not meeting its fiscal obligations to local municipalities."

Senator Jerry Petrowski says he'll be talking to the Legislative Audit Bureau for more information. "I know that it is a real benefit for the property tax payers to have property taxes go down, but it makes it a little tighter on the municipalities. I think we have to look at a number of things to see how this will be affecting how many people and how many TIFs across the state."

Governor Walker's office was not available for comment on the story.

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