Colfax’s TIF Districts are working well
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By LeAnn R. Ralph
COLFAX — Colfax’s three Tax Increment Finance (TIF) Districts have a positive balance, according to a report from Josh Lowe of Ehlers, the village’s municipal financial advisor.
The Joint Review Board for the village’s TIF districts met just prior to the December 12 Colfax Village Board meeting to receive the report on TIF finances, Lowe noted at the beginning of his presentation to the village board.
The Joint Review Board includes representatives for the taxing authorities in the TIF districts, which include Dunn County, the Colfax school district, the Chippewa Valley Technical College District and the village.
TIF District 3 is a “blighted” district and includes the downtown area and some streets on either side of Main Street, Lowe said.
TID3 was created in 2002 and is a 28-year district that will close out in 2030, he said.
The end of the expenditure period for TID3 will be in September of 2024, so Colfax has until September of 2024 for adding new projects for TID3, Lowe said.
After 2022, the value in TID3 will be $4.2 million, with a tax increment of $97,000, he said, adding that TID4 shares revenue with TID3.
In a Tax Increment Finance District, after the district is formed, any property taxes on new development in the district goes into a special fund to pay for improvements in the district such as streets and sewer and water.
The property taxes on the base value in the district when it is formed still go the various taxing authorities, but the property taxes on the new development stay with the TID until it is closed out.
Money that remains in the TID fund when the district is closed out is distributed to the taxing authorities according to the percentage they would normally receive on property taxes.
Positive balance
TID3 has been able to pay its bills on time, has had an annual positive tax balance, and has several hundred thousand dollars in the fund balance, Lowe said.
A positive fund balance in 2030 is important so that the village does not have to take on the debt obligations that might remain in the district, he said.
Gary Stene, village trustee, noted that there is $1.3 million in debt on TID3 with an annual payment of around $27,000.
In 2023, after the payments are made for TID3 debt, there will be a $200,000 cumulative net balance, Lowe said.
At the end of 2023, TID3 will have more in cumulative balance than there is debt remaining on the TIF District, he said.
After the debt is paid off, several options are available for Colfax. The village can either close the district out early, or the village can add more projects to the district, Lowe said.
When a TID is closed early, the value goes back to the tax base (village, county, CVTC, school district), he said.
At the end of 2023, TID3 will have a positive fund balance of $750,000. The village’s portion of that could go into the general fund to help spread general expenses out over a larger tax base, at which point the mill rate will decrease, and there will be some tax relief for village residents, Lowe said.
Balance
Is it better to have a balance or no balance when the TID is closed? Stene asked.
Whatever amount remains goes back to the taxing authorities, and Colfax’s share would be about 30 percent of the total, Lowe said.
“You would be foolish not to maximize the money for your village,” Stene said, referring to the possibility of adding projects to TID3.
From the Joint Review Board meeting prior to the village board meeting, the members of the Joint Review Board would be “on board” with adding more projects, he said.
Having a good relationship with the Joint Review Board members is always a good idea, Lowe said.
If the new projects are already part of the project plan, the Colfax Village Board does not need to do anything else. If the new projects are not in the project plan, then Colfax will have to do a project plan amendment. Projects that are a half mile outside of the district can be included in the project plan, he said.
Amending the project plan requires a few extra meetings, but Ehlers can easily help with setting up the plan amendment, Lowe said.
Affordable housing
State statute also allows a one-year extension for affordable housing when a TID is about to close out, Lowe said.
The procedure is to pay off the expenses for the TID, adopt a resolution to collect one more year of the tax increment and then apply the tax increment collected to affordable housing, he said.
Cedar Street or another project within a half mile would extend TID3 to 2031, and Colfax would collect another $98,000 in tax increment for affordable housing, he said.
In response to a question from Margaret Burcham, village trustee, Lowe said the village could close out the expenses in TID3 in 2023 after the expenses are paid and then do the affordable housing extension.
The strategies can be “layered,” and 75 percent of the increment must be spent for affordable housing he said.
The affordable housing can be anywhere in the community, does not have to be in TID3, and the village does not have to ask for Joint Review Board approval, Lowe said.
Colfax is facing a problem that many communities have: how to build housing for the people who live here, he said.
Lowe said he was “planting a seed” with the village board about the project plan amendments and affordable housing extension and that village board would not have to make any decisions yet.
Any Tax Increment District that closes can be extended for affordable housing, he noted.
Could revenue from TID4 still also be shared with TID3? asked Jody Albricht, village president.
Revenue is allowed to be shared from TID4 to TID3, Lowe said.
If the village shares as much revenue with TID3 as possible from TID4, another $380,000 could be added to the balance of $700,000, and then the village could do a $1 million project, he said.
TID4
The expenditure period has already ended for TID4.
When TID5 was created last year, the new TIF District overlays TID4, so expenses in TID4 can be credited to TID5. The Dunn Street expenses have been applied to TID5, Lowe said.
There was a 10-year plan for financing to shift the cost to TID5, but the bill was paid on time, he said.
The TID value went from $2.2 million to $4.4 million in 2023, Lowe said.
Lowe said he believes that the large increase in value was due to an assessor coding error or an error on the county level so that the value went to TID4 but should have been included in TID5.
Lowe told the village board he is currently working the village’s assessor to see if there was an error. It would make sense for TID5 to have a higher balance because TID5 is “future oriented” and could include more development for Colfax’s east side.
If there was no error and the value must stay in TID4, “that’s okay,” he said, adding that the revenue could still be used with TID3.
Either way, it will “be a positive” because the value will either go to TID5 or to TID3, Lowe said.
“There is no downside,” Stene said.
Lowe agreed there was no downside because the money can be put to good use in either case.
Affordable housing should always be a consideration when any Tax Increment Finance District is closing, he said.
TID5
TID5 is a brand new district and currently has a negative fund balance, Lowe said.
The expenses for Dunn Street have been applied to TID5. The district is projected to take in a $10,000 tax increment per year for 20 years, he said.
If no other development takes place in TID5, that would not create a financial problem, Lowe said.
TID5 is “a blank slate right now” and will turn positive later because there is no debt outstanding, he said.
If there is debt outstanding and no development in a Tax Increment Finance District, “then that’s a danger zone,” Lowe said.
The village is anticipating that three more homes will be built in TID5 in 2023, said Lynn Niggemann, village administrator-clerk-treasurer.
If the village board does a TIF District plan amendment, is it wise to amend the plan to include all of the possible projects? Albricht asked.
“You can throw in the kitchen sink,” Lowe said.
What happens if you include projects in the TID plan but then those projects cannot be completed? Albricht asked.
Lowe said he would recommend amending the TID project plan to say “street improvements for $2 million” and not name the specific streets.
“It never hurts to go bigger rather smaller,” he said.
The village board should always remember to “play nice” with the Joint Review Board and to be as transparent with village residents as possible, Lowe said.
The village board does not want village residents to think of the TIF District funds as “slush funds” that accumulate money but that none of the projects are ever completed, he said.
Cedar Street
Cedar Street has already been surveyed as a street project, Niggemann said, adding that she would be meeting with Gareth Shambeau of Ayres Associates on the Thursday after the village board meeting to talk about the timeline for Cedar Street.
The TIF District plan must be amended before you can spend the money, she said.
The village can pay for engineering and planning with TIF District funds, but as soon as “shovels go in the ground” then the project must be part of TID plan so that the expenses can stay within the project plan, Lowe said.
The village board should consider a special meeting to approve moving forward with a plan amendment, Burcham said.
The Colfax Village Board has already approved not having a second meeting in December, so if the village board wanted to take any action, there would have to be another meeting in December, Niggemann said.
Ayres Associates would probably plan to advertise for bids in January for Cedar Street with the bids being returned in February or March and construction to start in May, she said.
Six weeks
The process to write the plan amendment and hold all of the necessary meetings would be about six weeks, Lowe said.
The village board would have to hold another meeting in December to approve moving forward with a plan amendment, Niggemann said.
Lowe said he believed it was possible the village board does not have to approve moving forward but would only have to approve the specific project plan amendment.
A project plan amendment would require another Joint Review Board meeting with a plan commission meeting on the same date, and there must be a notice published in the newspaper, Lowe said.
The village board would have to hold a meeting a week later to approve the plan amendment, he said.
One important consideration is to make sure there will be a quorum for any of the meetings, and practically speaking, it would take two weeks to get the notice into the newspaper, Niggemann said.
Stene noted that William C. Yingst Jr., Colfax school district administrator, was having surgery and probably would not be able to meet for the Joint Review Board.
A virtual meeting could always be a possibility, Lowe said, noting that the village may also need to approve Cedar Street as part of a capital improvement plan.
The village board has already approved Cedar Street as part of the capital improvement plan, Niggemann said.
Other business
In other business, the Colfax Village Board:
• Approved a bartender operator’s license for Mariah Smith (The Blind Tiger) from December 12, 2022, to June 30, 2023.
• Approved a bartender operator’s license for Bryce Smetana (Viking Bowl) from December 12, 2022, to June 30, 2023.
• Approved a street use permit for Timber Technologies LLC for January 1, 2023, to December 31, 2023.
• Approved a secondhand jewelry permit for Twice Blessed Treasurers, Nancy Odom Mouledoux, from January 1 to December 31, 2023.
• Approved a mobile home park license for Pleasant Valley Properties LLC from January 1 to December 31, 2023.
• Approved a depository pledge agreement with Bremer Bank, which approves as signers for the village Jody Albricht, village president; Anne Jenson, village trustee; Lynn Niggemann, village administrator-clerk-trea
