Closing TIF district will increase city revenue
A financial adviser told the Hudson City Council in a special meeting Feb. 20 that closing Tax Increment District No. 4 would allow the city to both lower the property tax rate and use some of the money to finance capital projects.
That was one of three options that Sean Lentz of Ehlers & Associates laid out for council members.
The other options, he said, are using all of the added revenue to reduce the mill rate or maintaining the mill rate at its current level and using all of the added revenue to finance new capital projects.
The City Council is considering whether to close the TIF district by May 15 in order capture property taxes from it for the 2009 budget.
TID No. 4 encompasses St. Croix Business Park and some residential and commercial property along Carmichael Road south of Interstate 94.
Tax increment financing districts are a creation of the state government. They allow local governments to use the tax revenue generated from new construction in the districts to pay for the land and infrastructure.
According to Lentz, Hudson's TID has grown by $190 million in property value since it was formed in 1995.
The tax revenue from that increment will be close to $2.9 million in 2008, he reported.
The city's share of the revenue, should the district be dissolved, would be 27.6 percent, or roughly $796,000. The school district would receive the biggest chunk of the revenue, with other shares going to the city, county, technical college district and state.
The tax levy limits imposed on local governments by the state would likely prevent the city of Hudson from using all of the new TIF revenue for operations.
Lentz said that the most recent state budget bill modified the levy limit statute to allow municipalities to capture half of the final increment value in the year following closure of a Tax Increment District.
That would allow Hudson to increase its levy by roughly 8 percent for 2009 (6 percent due to the closing of the TID, plus the minimum 2 percent increase otherwise allowed by the state).
Lentz said that would translate into a $350,000 increase in the city's budget for 2009. City Finance Officer Betty Caruso estimated that only $250,000 of that amount would be available for operations.
There isn't a limit on municipal debt levies, Lentz noted, so the city could issue bonds for a new public safety building or other capital needs and use the added revenue from the former TID to make payments on the debt.
Lentz also pointed out that the city needs to close its existing TID before it forms a new one to promote economic development in the downtown.
The developers proposing a large new hotel, retail and residential complex on the site of the River City Center have asked the city to form a new TID to finance part of the project costs.
Mayor Jack Breault said that the prospect of having added revenue from TID No. 4 to work with would be a blessing in comparison to the tight levy limits the city has operated under in recent years.
He suggested that the council and candidates for the council in the April 1 election meet to develop a strategy on using the revenue from the potentially dissolved tax increment district.