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1351, 13 Nov 15

Who Pays for the Failed TIF?

Here’s an interesting public policy debate happening in Kewaskum.

KEWASKUM — Charlie Serwe owns 3.7 undeveloped acres of land in the village’s tax incremental financing district on which he pays $6,000 in property tax. But after action taken by the Kewaskum Village Board during a special meeting Thursday afternoon, he may have to pay an additional tax of $28,000.


“The village borrowed $8 million to pay for the significant public improvements that were needed in the TIF, such as roads, water, sewer and storm water management,” Fenner said.

The economy then went into a slump and developmentcame to a standstill, but the village still had to pay back on the borrowing. Since the TIF was not generating the expected funds through development, a budget shortfall was created, Fenner said.

“The money had to come out of the village’s general fund, which means everyone in the community ends up paying it,” Fenner said.

Establishing the utility district, Fenner said, is the mechanism that will allow the village to place the tax only on those properties in the TIF that are not developed.


Joel Fleischmann, who owns a home in the TIF that is now a part of the utility district, said while he would not be impacted by any special tax assessment, he is concerned that the developers may either sell their parcels cheap to get out of having the burden of the tax, or they may begin to build inexpensive housing simply to get the land developed.

TIF districts can be a valuable tool for development. But if it doesn’t work out, who should pay? The Village created the TIF and knew that there was a risk that the development wouldn’t work out. Shouldn’t the taxpayers for the Village be responsible for the risks that their representatives take? On the other hand, the developers got a lot of free improvements made to their properties. Even if they just sold them now, the property is worth more than it was before the Village installed the infrastructure. Shouldn’t the developers hold the bag for failing to deliver on their end of the TIF bargain?

This just shows that folks need to put a lot more thought into the risks before using tools like TIF districts to encourage development.


1351, 13 November 2015


  1. Randy

    A TIF with residential development as part of the increment is tough to begin with, generating enough development to gain that increment usually means large dollar construction. The part I always disliked about TIF’s is they are based on speculation and predictions, may as well give each resident $100 and let them go to Potowotomi. In WB those shortfalls are usually covered in a developers agreement whereby they cover the shortfall until sufficient development takes place, in other cases it falls into the general budget where every taxpayer is responsible for a decision made by the city. I fail to see how this district encourages high dollar investment or how it fairly treats one area or property owners.

  2. Kevin Scheunemann

    One of the things article did not cover well is:

    Village created the Utility district effective 1/1/2016. Kewaskum Village board has not taxed anything under the utility district…yet.

    I would have liked to make the Utility district effective for this budget cycle. Under that plan, we were targeting a 2 cent mill rate drop in general levy. Now, with the utility district delayed one year, the General fund needs to cover the TIF shortfall 100%. That means an 8% mill rate increase now for Monday night Public budget hearing. That will be a tough sell, and I’m not certain I will vote for that.

    I understand the builder/developer concerns. However, this utility tax is entirely avoidable.

    1.) Vacant TIF landowner can develop vacant TIF parcel, which generates tax increment, releasing utility tax and thereby lessoning TIF shortfall.

    2.) Vacant TIF landowner can negotiate a development commitment with the community on a mutual agreed on goal date and we can consider refunding the utility tax for hitting the development goal. This also reduces TIF shortfall.

    3.) Vacant TIF landowner can sell to someoone who will develop.

    4.) Vacant TIF landowner can sit on it and pay the utility tax.

    That is far more choices than the general fund levy taxpayer has.

    If TIF is allowed to continue, without utility tax, without develpment, the mill rate will have to be increased 40% in 5 years just to cover TIF shortfalls! That is unacceptable.

    We have also implemented a moratorium on impact fees until July 2016. This waives impact fees to tune of $6000 per new developed home. I’ve made it no secret the I want to wipe out impact fees, or extend impact fee moratorium to developers who make a development commitment to the Village.

    We were victimized by “zombie bank foreclosure” in this TIF district for 5 years. It was a situation where bank foreclosed but refused to get it to Sherriff sale. When we started talking about this Utility district in summer of 2014, and had a public hearing, and passed preliminary resolution in Fall of 2014, this got foreclosing bank out of picture by summer 2015. Some builders agree this issue helped to get the zombie foreclosure moving. So the utility district is a great success just on that point alone.

    This was completely my idea. I’ve researched many ideas to deal with TIF shortfalls. This was the best idea to produce a win-win situation all the way around.

    It was not an easy sell to the Village Board. If TIF development starts to move at a reasonably fast pace, the Village board may not even exercise this optional utility district in the Fall 2016 budget cycle.

    It gives us the option. That’s all.

  3. Kevin Scheunemann

    Kewaskum did, originally have a developers agreement on this TIF and developer defaulted on the penalties and was foreclosed on, which produced the situation where we are today.

  4. John Foust

    Kevin, don’t you think a proper conservative wouldn’t play these games with public dollars, attempting to pick winners and losers? Isn’t that what Owen is saying here?

  5. Kevin Scheunemann


    Doing nothing and letting the TIF shortfall run it’s natural course would mean I’m picking the taxpayers of the community to lose.

    Do you have a better idea to fix this failing TIF?

    Everything, in terms of policy rewards development now. We suspended impact fees, which is double the amount of initial proposed annual utility fees for average residential lot. So on that suspension alone that would be 24 months of “leeway”. However, refer to my list above, utility tax is also avoidable with development commitment to community. If that happens, no one will see this utility tax, TIF shortfall heals and taxpayers win.

    So this path allows a chance for everyone to win.

    The only way to lose under this plan is Vacant TIF land owners who don’t develop, and refuse to negotiate a commitment to develop. That inaction costs the community through lack of TIF increment, we are just, appropriately transferring the true community cost of that choice to the vacant lot owner.

    So under this plan I am not choosing who loses, those that want to choose “do nothing” in the TIF will choose that for themselves, but they, not the community, will pay for the infrastructure improvement to their TIF lot for avoiding TIF development increment which is what is supposed to pay for their infrastructure.

    John, I’ve reviewed a ton of ideas to fix this TIF from debt re-structure, to using eminent domain to squeeze zombie bank foreclosure out, to village doing the development, to outright winner and loser direct incentives. This is the best solution and it has been a tremendous success so far getting zombie bank to move out of our TIF.

    Now it’s time to get to work.

  6. John Foust

    So you’re saying when your strong political principles and absolutism met the real world in the preexisting situation of politics in Village of Kewaskum, you set your principles aside and actively participated?

  7. Kevin Scheunemann


    I’ll bite, which conservative principle of being pro-growth, pro-prosperity, and concern for all taxpayers, and their tax burden, am I setting aside on this?

    I thought the liberal position is: let the deficits run and just raise taxes?

    That is what this utility district plan is trying to avoid.

  8. old baldy


    You confused your “liberals” with the R’s currently in charge in Madison. If you would take a look, walker et al have increased our state debt, yet cut taxes. A sure way to ruin.

  9. Kevin Scheunemann


    One of the base problems is the restrictions on public financing of bond debt. Municipalities have little ability to extend amortization of General Obligation bonds in situations like this. That would solve much of the cash flow problem.

    I’m hopeful, Republicans will fix this, or allow it in case of TID’s that are already declared distressed.

  10. Kevin Scheunemann

    John, Baldy,

    This was great discussion. If you have any other ideas to fix this TIF…. By all means, let’s hear it. I’m willing to look at any ideas, especially ideas from those I’ve been known to disagree with from time to time.

    Not saying I will embrace the idea, but would be willing to consider it as part of the solutions we have put in place in Kewaskum.

  11. old baldy


    If you don’t like the current restrictions placed on municipalities, get them changed. And while you are at it get the levy limits removed for counties and school districts. All the work of the current administration, the party of “small government” that wants to control every facet of your life.

    But seriously, wouldn’t extending the amortization period just be “kicking the can down the road”? Are all conservatives opposed to that practice? Sen. Darling just made a comment about doing just that this week. Or is it only a bad thing if it doesn’t suit your purposes?

    I don’t like TIF districts because it is like placing a bet with somebody elses money on a deal over which you have no control. Kewaskum placed the bet, now has to live with the consequences.

  12. Kevin scheunemann


    This district has been declared “distressed”, which I presented and spearheaded. This will allow us an extra 10 years of increment recoup after the primary bonds are paid off. Essentially, after primary TIF bonds are paid, village general levy taxpayers can pay themselves back with interest from TIF for the shortfalls they covered. I worry that down the road payback becomes a general levy “slush fund” for future politicians on that internal payback when primary TIF bonds are paid.

    If we extend amortization of bonds, that does not happen, and cures shortfall now and allows more time for TIF to develop. However, current state law prevents amortization extension of current bond. Amortization extension makes most conservative sense and eliminates the potential abuse on internal payback.

    If you knew anything about levy limits, you would realize the they do not apply to debt service.

    So why would I do something as dumb repeal of levy limits when it has absolutely no bearing on this TIF? It’s like asking the municipal budget to fund a mission to Mars, that would be just as irrelevant.

    I think levy limits , or similar limit, need to apply to water and sewer rates so liberal DNR realizes they can’t bully and abuse municipalities into an infinity of debt and destroy water affordability for the poor.

  13. old baldy


    You must have different levy limit rules down there. Up here the restrictions apply to any levy.

    My point about repealing the levy limits has to do with your selective use of big government control over the locals. For you it is OK to remove a restriction that will benefit you. But you are in favor of retaining restrictions that are detrimental to others. Once again, your hypocrisy is showing.

    And once again your ignorance of how water and sewer rates are drtermined is apparent. Just for your own curiosity, check into who approves local rates (hint: It isn’t DNR).

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