How does a TIF work?

Every year when we pay our property tax bills, several different taxing entities receive a portion of this revenue. The jurisdictions include the City, Hillsboro School District, Vernon County, Technical College, and the State of Wisconsin. Although the City collects the full property tax payment from you, we only retain a portion of the total for our operations and finances. And while the City is the only entity involved in investing in the growth of the tax base, the other taxing jurisdictions also benefit from that growth.

When new development occurs within a TID, 100% of the new tax revenue is retained to pay off project costs. Projects could be new roads, water, sewer, blight elimination/razing of buildings, development incentives, and other project costs permitted by state law. General city property taxpayers do not pay for these costs – they are paid for by developments that occur within the TID itself.

It is important to note that revenue from the original, pre-TID property values continues to go to the taxing entities, like the school district, to ensure they are not losing revenue. One of the common misconceptions about a TIF is that properties within a district do not pay taxes. That is not true. Each property owner within the district is charged property taxes based on the value of their property, and at the same rate as everyone else in the community.

Essentially, the other taxing entities are foregoing new tax revenue for a period of years until the TID closes. When the TID closes, all of the taxing entities benefit from the increased tax revenues within the TID. The local city or village is the agent that invests in economic development, but from which all other entities benefit financially.

Prior to the creation of any TID, a Joint Review Board must approve it. This Joint Review Board, required by state law, has a voting representative from each of the affected taxing entities, as well as a citizen representative. Further, the Joint Review Board must be assured the TID is financially able to pay itself off so general taxpayers do not have to pay for costs associated with TID projects.


So with that:

A Tax Increment District (TID) works by selecting a specific part of a town for special attention and improvements. When the TID is set up, it decides on the starting value of the properties in that area. Any increase in property taxes from developments in this area, called the "increment," is used to fund projects in the TID instead of being spread out among different parts of the town. This extra money is then used to upgrade things like roads or attract businesses to the area. As the area improves, property values go up, and more taxes are collected. After a certain period, the TID ends, and all the property taxes go back to being shared across the town. The goal is that by then, the area has improved a lot and can keep growing on its own.