Committee of the Whole - Regular Meeting

Provide Direction on Potential Use of Funds from TID #4 for Affordable Housing

Tax Increment District #4 has reached the end of its life. The 2024 tax increment (collected in 2025) was sufficient to repay all outstanding TID project costs. State Statute permits Tax Increment Districts to be extended by one year and requires the increment revenue collected during this extended period to be used for Affordable Housing. Under this provision: - At least 75% of the final increment must benefit affordable housing in the municipality. The provision defines “affordable housing” as housing that costs a household no more than 30 percent of the household’s gross monthly income. The remaining portion of the final increment (25%) must be used to improve housing stock in the municipality. - Resolution must specify how the municipality will improve housing stock. TID 4 can use 2025 Tax collected in 2026 totaling $606,048 to support affordable housing in Oconomowoc. TID 4 would not remain open an additional year to utilize the affordable housing extension since funds collected in 2026 are not needed to pay project costs. The incremental value will return to the tax roll for the 2027 budget. This is only available at the end of a Tax Increment District’s lifespan or prior to closure if the District is terminating earlier than the end of its maximum life. Funds collected would be segregated and held in a separate fund. Funds could be used anywhere in the City and do not have a fixed timeframe in which they must be used. Additionally, TID 5 and 6 are nearing the end of their lives. TID 5 has an estimated ability to close in 2027. If extended into 2028 it would provide ~$900,000 to benefit affordable housing. TID 6 has an estimated ability to close in 2031. If extended into 2032 it would provide ~$500,000 to benefit affordable housing. The Wisconsin Department of Revenue provides a Frequently Asked Questions (FAQ) document the you may find helpful at: https://www.revenue.wi.gov/Pages/FAQS/slf-tif-extensions.aspx At the February 3, 2026 Committee of the Whole meeting, Ruekert & Mielke presented the Western Sanitary Sewer Study results. The report identified two areas within the City totaling approximately 1,180 acres within City limits that remain suitable for housing development. These areas are not currently connected to the City wastewater systems and would require a significant investment to connect to sewer services. City costs were estimated at $4.38MM for the Western (Reddelien) area with a per REC cost estimate of $20,960. City costs for the Southern area were estimated at $2.47MM with a per REC cost between $11,719 and $26,276. Affordable housing extension funds may help ensure these areas can be connected to the wastewater system affordably. A program would need to be developed to ensure affordable housing funding would produce a more affordable housing product, not a higher margin for the builder/developer.