Many local taxing units may see less state aid than they should if a new bi-partisan bill relating to personal property aid is not revived in a future session of the State Legislature. In 2017, the Legislature repealed a large section of the personal property tax. The personal property tax is levied by local governments and, at the time, amounted to approximately $300 million annually across the state.
To aid local governments following the repeal, the State of Wisconsin agreed to backfill the loss with a new form of state aid. To implement the law, the Department of Revenue came up with a formula that it thought would approximate what local governments were collecting in tax revenue prior to the repeal. However, several local governments soon discovered that the formula failed to accurately account for how tax incremental finance districts (TIDs) collected tax revenue, resulting in significant losses for many local governments.
Anderson O’Brien, in co-counsel with another Central Wisconsin firm, brought the first and only lawsuits in Wisconsin on behalf of several local governments challenging the formula. In June 2019, the Marathon County Circuit Court issued a statewide injunction prohibiting use of the formula and requiring the Department of Revenue to calculate actual tax levies in distributing aid. The state did not appeal and proceeded to comply with the injunction by recalculating aids going forward.
After the lawsuit, several local governments discovered yet another error in the 2017 law. When TIDs close, the law failed to account for all pre-2017 personal property development. This gap in the law would effectively eliminate the aid for this development when the TIDs close and deprive cities, villages, counties, local school districts and technical colleges from receiving the benefits from the TIDs as they normally would.
Recognizing the gap, a bi-partisan group of legislators offered Assembly Bill 620 to correct the aid distributions upon the TID closure. At the request of the Wisconsin League of Municipalities, Attorney Jacobson, lead counsel from the original lawsuit, testified before the Assembly Ways and Means Committee in December 2019. During his testimony, Attorney Jacobson explained how dozens of local governments would be impacted in just the next several years and that even smaller communities could stand to lose tens of thousands of dollars. He also offered suggestions on revisions to the bill to offer clarity in hopes of avoiding the need for further litigation.
AB620 easily passed the Assembly in February 2020 on a voice vote. Unfortunately, the bill was not taken up by the Senate before it adjourned in March. With state revenues now threatened by the economic impacts of COVID-19, there is understandably uncertainty as to whether this source of aid will be corrected.