IN MY OPINION: Thanks to TIF, Port data centers could result in increased city and school taxes

Tax incremental financing law is astoundingly complex. A Jan. 22 article in the Press stated: “In a TIF district, the properties within the district continue to increase in value and are charged property taxes commensurate with that increase, but taxing entities such as cities, counties and school districts only receive the same amount of taxes they did when the district was created.” The second part of that sentence is not correct.

A TIF district freezes the property value that can be taxed by the overlaying city, county, school district and technical school district as of the date of the creation of the district. But the amount of taxes that property will generate will change based on how much the tax rate changes. Rather than the amount of property taxes being fixed, it is the property value being taxed that is fixed.

This distinction matters because it artificially shifts the costs of providing ordinary government services onto other property owners. The ordinary increase in property values over time in the TIF district is captured for TIF projects and is unable to help pay for schools, fire, police, roads, etc. The rest of us pay more with every TIF created.

This problem is exacerbated by the combination of levy limits and how equalized value is calculated. Levy limits increase proportionately with new construction. That includes new construction in a TIF district. But the taxes collected from the increased value within a TIF district don’t count toward the levy limit (because those funds are used for TIF projects, not ordinary government operations).  So everybody else has to pay more to collect the full levy.

To use an extreme example of what we could experience here in Port Washington, if a TIF district increment is twice the value of the existing equalized value in the city, the levy limit for the city will double. But the taxes Vantage Data Centers will pay on its new construction do not help pay for the levy, meaning that every other property owner will pay twice as much in taxes to make up the difference.

That calculation assumes the city taxes to the max and uses its entire levy limit, which it may not do (although historically municipalities love getting every penny they can squeeze out of us). But if the city uses any portion of that increase in levy limit coming from the Vantage project, property owners outside of the TIF district pay all of it. Whatever increase occurs would be twice as much as it would be if the new construction occurred outside a TIF district.

The same thing happens with school taxes. School district levy limits are based primarily on a per pupil calculation.  If enrollment and school levy limits increase, once again the property increases inside of a TIF district fall disproportionately on everybody else. If a district raises its levy by $5 million, that $5 million has to come only from property owners outside the TIF district. That means that property owners in the Port Washington-Saukville School District, even those in the Village of Saukville and the surrounding towns, can wind up paying higher taxes because of a TIF district that the City of Port created.