June 19, 2017Client Alert

New Case Explores the Limits of Challenges to Tax Incremental Financing

A recent Wisconsin Court of Appeals case undertook a thorough examination of the limits of challenges to Tax Incremental Financing (TIF) Districts, and the Development Agreements executed in connection with them.

Issued May 31, 2017, Voters with Facts, et. al vs City of Eau Claire and City of Eau Claire Joint Review Board (Appeal 2015AP1858) decided the appeal of a case in which Voters with Facts sought to declare two city resolutions, which amended and created Tax Increment Districts 8 and 10 in the City of Eau Claire, unlawful and void. 

The lengthy opinion examined the standing of taxpayers to seek a declaratory judgment that the city acted unlawfully in adopting and amending the TIF Districts, whether and when the “but for” determination of the Joint Review Board can be second-guessed, whether a court will substitute its judgment of whether the underlying development land was “blighted” or not, whether the ability of the developer to use any TIF grant monies to demolish historic structures made the TIF itself unlawful, and whether the TIF grant violated the Wisconsin Constitution’s Uniformity Clause as an illegal tax rebate or credit (among other issues).

The opinion determined which of these TIF decisions are within the legislative discretion of the local municipality, whether challenges like this can qualify as “taxpayers’ actions,” and determined that the common-law certiorari process may be an available remedy, and in fact the appropriate process, to properly resolve such TIF challenges. The case also emphasizes the importance of written Development Agreements to evidence the consideration paid for the TIF grants.

Any brief summary of the case would not do justice to the careful reasoning in the case, but it gives us substantial guidance in how the TIF law should be interpreted.

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