When Madison closes three tax increment financing districts, it will create nearly $15 million in tax revenue for affordable housing.
The city kept the districts, one located downtown and two on the south side, open an extra year by using a 2009 state law that allows municipalities to extend the closing deadline if most of the tax revenues from growth are used for affordable housing.
“(Madison) is drawing on that resource to support its annual commitment of $4.5 million to invest in affordable housing projects through the Affordable Housing Fund,” Community Development Director Jim O’Keefe said.
Using funds from closing the districts would also relieve pressure on the city’s capital budget because these are resources the city would not need to borrow for a few years, O’Keefe said.
Mayor Paul Soglin and alders introduced resolutions Tuesday to close the districts.
TIF districts are a public financing method the city uses to provide funds to construct public infrastructure, promote development opportunities and expand the future tax base.
When TIF is used locally, taxing entities that include Madison, Dane County, Madison Metropolitan Schools District and Madison Area Technical College agree to freeze property values in a designated area. Tax revenues from growth are then invested in projects that stimulate economic growth.
The idea is that when the districts close, they will have higher property values that are returned to the tax rolls with the taxing entities receiving any surplus.
Once closed, the three TIF districts would create approximately $8 million that will be divided among the city, county, school district and technical college.
- The West Broadway district, TID No. 27, was created in 1997 and has grown in value from $4.5 million to $26.5 million. It will produce $538,965 for affordable housing projects and a $2.1 million surplus.
- The State Street district, TID No. 32, was created in 2003 and has grown from $409.4 million to $956.2 million. It will produce $13.5 million for affordable housing projects and $5.6 million in surplus.
- The Park/Drake district, TID No. 43, was created in 2013 and has grown from $25.9 million to $66.5 million. It will produce $999,515 for affordable housing projects and $287,000 in surplus.
Under the formula for dividing surpluses, Madison receives 37 percent, Dane County receives 12 percent, the school district gets 47 percent and MATC receives 4 percent.
The city’s 2018 budget assumes using the city’s share of the surpluses to put $600,000 toward the Bridge Lake Point Community Center and $1.65 million to the public market.