Milton funds will cover TIF error

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Friday, October 30, 2009
— The city of Milton will use money from its fund balance to help steady its tax rate and reduce a huge overpayment to a tax incremental financing district.

An accounting error that happened between the city's contracted appraiser and the Wisconsin Department of Revenue will allow one of the city's TIF districts to collect more money than it should. The council wants the money set aside in a special fund.

The city council on Thursday unanimously voted to apply a projected $237,500 from its fund balance to reduce the city tax levy in 2010.

The error is a $31.6 million overvaluation of TIF District No. 8. Because the state already has approved the valuation, it can't be immediately corrected on paper, said Todd Taves, a consultant with Ehlers & Associates.

State statutes allow for such a mistake to be corrected over two years through tax collection, he said.

The TIF district could collect $757,000 next year when it should have collected about $62,000.

Using money from the fund balance should keep the tax rate close to what city officials expected it to be if the mistake hadn't been made.

Using estimates from affected municipalities—none of which have finalized next year's budgets—Taves had to use estimated numbers to calculate how to correct the problem.

If the city uses some of its fund balance, Taves estimates a tax rate of $21.55 for city property owners next year. That's an increase from $20.67 this year, according to data Taves shared with council members.

If the city didn't use money from its fund balance, the rate could have been $22.35.

City Administrator Todd Schmidt said things could be made right if the money was used within the TIF district for projects that specifically benefit the city and school district. Those are the taxing entities most affected by the error.

It's too soon to decide how that will work, Schmidt said.

Taves recommended waiting at least a year before doing anything with the money collected in the TIF. Because this is a unique error, unanticipated shortages could pop up, Taves said.

The fund balance is healthy enough to withstand being spent on the problem, Taves said. The money will be paid back to the fund balance, Schmidt said.

So what happened?

Lee DeGroot with Accurate Appraisals tried Thursday night to explain the situation. He also apologized to the city council, but he did not say the error was his company's fault.

TIF No. 8's value was placed in a column marked as "gains," DeGroot said. DeGroot said a Wisconsin Department of Revenue worker told an Accurate Appraisals employee to do it that way. The company has filed tax assessments for nine other Wisconsin municipalities using the same formula with no problems, DeGroot said.

The department regularly calls Accurate Appraisals when numbers don't match, even when the errors are in the thousands of dollars, DeGroot said.

Not this time.

Schmidt defined the problem as a possible miscommunication between state staff and the local appraiser's office.

Putting the number in the wrong column caused the value of the property in the TIF district to skyrocket by more than 2,000 percent, and equalized values outside the TIF district to drop 12 percent.

It made it look like the TIF district annexed a large amount of property, DeGroot said.

DeGroot and Schmidt said they were surprised department of revenue software let the problem go through.

"You would think there would be red flags popping up or alarms going off," Schmidt said.

Last updated: 11:37 am Thursday, December 13, 2012

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