Budget force in Wisconsin feeds tax exemptions

Daily Reporter (Milwaukee), May 15, 2008 by Paul Snyder

Developers use it, small communities fear it, and officials from Wisconsin cities generally agree that, like it or not, tax exemptions for low-income housing shouldn't be tied to fixing the state's $527 million budget shortfall.

The budget-repair bill essentially calls for tax-exempt status for low-income housing projects owned by nonprofit groups and financed by the Wisconsin Housing and Economic Development Authority.

As the budget-repair bill worked its way through the Assembly on Wednesday, some around the state fretted over its passage and what Jim Doyle, governor, might take his veto pen to, especially in regard to the tax exemptions.

While some argue the tax exemptions generate more development, others wonder how it could help the state save money, considering the property can't be taxed.

"It has nothing to do with fixing the shortfall," said Mike Birkley, legislative director of Wisconsin Property Taxpayers Inc. "It doesn't belong in there, and it ought to have been taken up as a standalone measure in the next session."

The repair bill's tax-exempt housing is similar to a Senate bill SB 403 introduced earlier this year that passed the Senate but didn't make it out of the Assembly before the end of session.

Opponents say the Senate bill never passed because the Wisconsin Department of Revenue couldn't accurately estimate how much property would be exempt. So smaller communities, like Superior, with a large percentage of housing financed by the U.S. Department of Housing and Urban Development could stand to take a substantial hit to their tax bases.

Dave Ross, mayor of Superior, called putting the provision in the budget-repair bill an unfair way to run government.

Birkley said he suspects it was added to snag a few votes to get the bill passed.

But Carrie Lynch, spokeswoman for Senate Majority Leader Russ Decker, D-Weston, blasted their skepticism, saying the provision only deals with existing housing, and the initiative could have a $3 million positive fiscal effect on the state.

"It is an appropriate forum," she said. "A lot of the misunderstanding about this is based on some erroneous information that went out a few days ago, and the reality is that the scope of this is very narrow. It's not like every apartment built will become tax-exempt."

But Birkley said he is concerned where Doyle's veto pen could leave the provision. Doyle said Monday he won't discuss his plans until a budget reaches his desk. He said there are no veto assurances one way or the other.

Ross said he knows developers will try to use this to their advantage because they already have.

"It happened in Superior," he said. "It gives (developers) the right to go to court and demand tax-exempt status. One group was prepared to fight us, and they said, 'We'll just wait until SB 403 passes.'"

Not every municipality shares that sentiment. Both Milwaukee and Madison support the provision, said Rich Eggleston, communications and community outreach coordinator for the Wisconsin Alliance of Cities.

Those cities argue developers need the ability to shift money from project to project.

"Every kind of project is different," said Mary Reavey, Milwaukee's city assessor. "I don't know that smaller cities have as many low-income projects going on as Milwaukee."

Ross said he understands larger cities don't want to discourage developers from putting low-income projects in their communities, but they don't stand to lose what smaller communities do.

The discrepancies between its own members led the Wisconsin Alliance of Cities to back off the issue entirely even though it came out in opposition Tuesday.

"We said we supported SB 403 and got angry calls, and then we said we opposed this and got angry calls," Eggleston said. "We never achieved unanimity, and it's not a 'this too shall pass' kind of thing. It's very difficult."

Reavey said while Milwaukee is comfortable with the provision, she still thinks it shouldn't be in the budget-repair bill.

"I don't think it's an appropriate place for it," she said. "It needed a fair hearing and debate, and this has a feeling of it getting passed just because it needed to."

Lynch said the Senate bill had fair hearings in the Senate and Assembly.

"Yeah, and it still didn't go anywhere," Birkley said. "It's too problematic. Assessors all over the state are adamant about this."