By Harry Allen, Associate Municipal Advisor

Wisconsin TID Creation & Levy Limit Referendum Requirements for 2024

Based on legislative changes introduced in Wisconsin Act 12 (see our December 2023 Act 12 “What Wisconsin Communities Need to Know” article),  counties and municipalities will see reduced levy limit benefits for Tax Increment Districts created on or after October 1, 2024.

In the same vein, the constraints of Wisconsin levy limits are now pushing more communities to pursue a referendum to raise funds to support existing or add new services.

There is still time for you to pursue either (or both) of these important funding tools for 2024, but it’s the final countdown relative to compliance with state statutes.  Read on to learn what you can do to help your community achieve its goals.

Tax Increment Districts (TIDs)

For a TID creation to secure a base date of January 1, 2024, and take advantage of the more generous benefits of pre-Act 12 legislation, your municipality’s governing body must act on it by September 30, 2024. However, there are several other actions and approvals that must take place prior to governing body action and the entire process can take 45 or more days to complete.  Consider developing a timeline of key tasks and approvals now to ensure projects stay on track and within the parameters of the law. Below is a general flow of TID creation/amendment milestones, presented with the understanding that there may be additional requirements depending on the type of TID involved:

What this means is if you’re seeking to create a TID by September 30, 2024, you want to get the ball rolling no later than August 1^st.  By doing so, you’ll be able to fulfill the timeline above and have about a week to spare.  If you can start earlier, by all means do so!

TID now or TID later?

The answer, of course, is it depends. Generally speaking, for districts where increased value is expected as a result of construction that will occur in 2024, it may be beneficial for governing bodies to act by September 30^th, so the new value is captured as increment. However, if there hasn’t been any substantial improvement and it’s expected there won’t be any additional improvements prior to January 1, 2025, it may be advantageous to wait. Because statute dictates that tax increment districts are restricted to either a 20- or 27-year life, delaying TID creation until October 1, 2024, or later effectively gains you one more year of meaningful collections at the back end of the district. Negotiations on development agreements or the timing of any up-front borrowing or project cost expenditures can also impact the date on which the governing body should act on TID creation.

Developing a cashflow for a proposed district will help you better understand what flexibility you have to create it with a 2024 or 2025 base. If the cashflow requires most or all of the statutory life of the district and no development is expected to occur prior to January 1, 2025, then it likely makes sense to delay creation until October 1, 2024, or after, despite the diminished levy limit benefits. However, if the cashflow shows the district could close early or development is expected to occur prior to January 1, 2025, there is a strong case to create by September 30, 2024, and take advantage of the current levy limit rules.

Levy Limit Referendums

If your municipality is considering a levy limit referendum to increase funding for existing and planned new services in 2024, it’s important to start those conversations now so you can effectively communicate with constituents, gain governing body approval, and meet the statutory requirements for public notice. Carefully weigh the following questions:

What levy limit flexibility does your municipality have before going to referendum?

There are a variety of levy limit worksheet adjustments that may be claimed which can decrease the total referendum need or eliminate it entirely. Understanding all the levers you can pull using the levy limit worksheet is critical before going to voters with a request. Ehlers will host both in-person and virtual levy limit workshops in mid-September, so keep an eye out for your invitation.

Is the levy increase required on a permanent basis or will it be for a defined period of time?

Typically, if you are seeking a referendum for operating costs, you will want the authority to claim that adjustment on an ongoing basis. However. you may also ask for a one-time increase for finite expenditures such as major capital projects or replenishing fund balance.

What is the amount of the increase you plan to request?

It’s important to compare the needs of the municipality against taxpayer impact. It may be beneficial to run multiple referendum-to-benefit scenarios to find a scenario that is likely to win support at the ballot box.

What is the driving reason for the referendum and how will you explain the need to voters?

Ultimately, a municipality needs to make a case to voters that the levy increase is both necessary and beneficial to the community. Is the levy to maintain current operations; are you adding additional positions; are you converting volunteer positions to paid, etc.? Answering these questions and translating them so voters can clearly understand the need is critical.

Once there is clarity and consensus around the specific reason for the referendum, consider engaging a professional communications firm to develop a strong  public relations campaign for educating voters.

At which election will you make the request?

Once you choose your election date, work backwards from it to build a timeline for developing the question, seeking resolution approval, building a public relations campaign, and publishing required notices.

It’s important to remember that the numbers used to calculate the levy impact for the ballot question will change depending on the selected election date as they must be based on the most current information available (prior year levy, equalized values, etc.).

Below is a sample timeline for a November 2024 referendum:

What if the referendum doesn’t pass?

If you plan to go to voters with a November question, consider preparing two versions of the 2025 budget as your timeframe to finalize it post-election day will be short.

If you need assistance with either TID creation or a levy limit referendum, please don’t hesitate to contact Ehlers’ team of Wisconsin Municipal Advisors.

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