Sparta officials closer to creating block grant program
After last week's finance committee meeting, the City of Sparta was one step closer to creating its own community block grant program to help low-to-moderate-income areas using funds from two retiring Tax Incremental Districts (TID).
The city creates TIDs as economic incentives to draw business to the community. The two set to terminate include the Eastside Business Park and the Century Foods International building on Hwy. 16.
Taxes on improvements collected from business within the TIDs go toward paying off the infrastructure within the districts. When they close, those taxes will be divided up among all taxing jurisdictions, which, besides the city, include the Sparta School District, Western Technical College and Monroe County, and reduce the tax burden on their residents.
However, the city has an opportunity to take advantage of an affordable-housing extension on the districts, potentially netting it over $1 million for projects aimed at low-to-moderate income residences and areas.
Jeff Thelen, a community development specialist for MSA, told the finance committee TID 3, the Eastside Business Park, is scheduled to terminate on Sept. 22, while TID 5, Century Foods, could stay open until 2023. However, he said the expenditure period for TID 3 ended last year, meaning the city can no longer spend new funds on new projects within the TID.
Thelen said the projects in TID 5 are paid off, so it would make sense to close it out a few years early and open up more TID capacity within the city.
Under the affordable housing extension, the city closes out the TIDs, distributing any excess revenue from those districts to the various taxing jurisdictions. With a 12-month extension, any revenue collected in the TIDs in 2020, could be used to create an affordable housing fund.
According to Thelen, TID 3 would generate another $113,000 in 2020, while TID 5 is forecast to produce an additional $926,000.
Co-City Administrator Todd Fahning said the city has been exploring starting its own program similar to what is being done on Chester Street, where street reconstruction is being funded partially by a community development block grant for low-income neighborhoods.
Mark Sund, the city's other co-administrator, said half the TID funds would go toward that program, while the other half would go toward the city's own community development block program, providing 0-interest, home-repair loans to low-income residents.
The city previously had a community block grant program but, according to Sund, the state took it over, adding a lot of bureaucratic red tape and depleting the funds. Under the city program, the council would set up its own rules.
Thelen said Madison, Milwaukee and Fitchburg have taken advantage of the affordable housing extension, and all are having success with it.
Sund said the council will likely vote on extending the TIDs at the September meeting.
How does a TID work?
A Tax Incremental District (TID) is the land area in a municipality in which development and redevelopment projects are being done.
A city or other municipality funds improvements in a TID through Tax Incremental Financing (TIF), which uses tax money generated in the TID exclusively for planned improvements.
The land's value before the TID was created is considered the tax base. The land's value above the base, after the property is improved, is the increment.
The taxing jurisdictions (county, school district, WTC, etc.) continued to receive tax revenue form TID properties at the rate they received before the TID was created. The TID uses the extra tax revenue generated from higher assessed value on improvement to the properties to install infrastructure such as roads, sewer and water, streets, etc., in the TID.
For example, if a $100,000 property within a newly created TID becomes worth $1 million after it is improved, taxing jurisdictions would be paid as if it was still valued at $100,000. The remaining tax revenue is used for paying off improvements.
Property owners within TIDs receive no special treatment, paying the exact same tax rate as everybody else in the city.
Once the TID is closed, all future annual tax revenue received from properties is distributed to all taxing jurisdictions.