Ding Dong the TID is dead
In May 2025, the Wisconsin assembly passed AB140, a bill to grant Beaver Dam and Port Washington exemption from the TID 12% Rule, by a vote of 91-6 (https://docs.legis.wisconsin.gov/2025/proposals/ab140).
In June 2025, the Wisconsin senate passed that bill 29-3.
You read those vote tallies right. Our legislature doesn't agree on anything, except apparently letting two communities do something really dumb.
July 2025, Gov Evers signed it into law (https://biztimes.com/evers-signs-bill-supporting-wisconsin-data-center-development-projects/). The two communities promptly signed large deals with Meta and Vantage to build hyperscale data centers, and they helped finance those deals with tax abatement available to them with their TIDs. Beaver Dam gave Meta $110M. Port Washington gave Vantage $455M. Both of those numbers are many multiples of those city's annual budgets.
“This bill will help these two communities compete for new data centers, bolster our local communities, and build upon our work to build a 21st-century workforce and economy,” said Evers.
None of them apparently asked why the 12% Rule existed in the first place. The legislature, the governor, the local elected officials, the local municipal government staff, the economic development experts, the best lawyers, the best municipal finance advisors ALL SAID PROCEED. Or maybe Hold My Beer.
When "randos on the Internet" and "misinformed outside agitators" started looking at the deals, TID statutes, and tax levy statutes, cracks emerged, problems were revealed, and outrage ensued. Yes, every one of those supposed experts was horribly, horribly wrong. Summarizing the embarrassing problem:
If you want tax levy benefit out of the TID, you will have to raise taxes by a lot on current residents for 20 years.
If you do not raise taxes on current residents, you lose the opportunity to get tax levy benefit.
No matter which path you take, you have also made it far harder to grow that levy organically thanks to the data center valuation on your books.
The list of oopsies is longer than that, but those are the biggies. Both communities, by the way, claimed they were doing the project for the tax levy benefit. Hundreds and hundreds of acres of land, construction burden on residents, hundreds of millions in property tax abatement, and the only benefit to residents is a 20-year deferred tax reduction of a few hundred dollars per year.
Honestly, every entity that took a fee for those deals should return it. Every elected official who voted yes should resign. And each entity involved should be doing a post-mortem on how they went so badly astray in their supposed area of expertise.
The randos kept talking about it, writing about it, and speaking at city council meetings about it. One community official admitted "we're going to have to take some [tax increase]." Another said "we are hoping the legislature changes law to allow us to get value." That's probably the best we'll do in terms of self-reflection. Humans don't like admitting failure.
Then...
In January of 2026, Microsoft announced they would no longer seek property tax abatement with their data center deals. In Wisconsin, that means no TID necessary.
In May of 2026, Cloverleaf said they weren't pursuing property tax abatement for the deal in Wrightstown. So no TID necessary.
I'll go out on a limb and say the use of TID with hyperscale data centers in Wisconsin is dead. If anyone tries, they'll get embarrassed quickly. Randos 1, Experts 0.
But does that end the financial argument?
No, but the argument gets much more complicated. I will do my best to simplify the problem.
First, though, I will say this: With TID, there was no reasonable path to tax levy benefit. It is guaranteed failure. Exactly 0% of people in the state support data center construction in their community if it increases their property taxes, and that's what TIDs and data centers do if your elected officials use the TID to raise the levy.
Without using a TID, there is now a path for a small community to get levy benefit from a hyperscale data center project. It is complicated, difficult, requires considerable fiscal discipline, and like all big rewards comes with big risks.
Let's try to walk through it chronologically. It all starts pre-deal with a forecasted revenue number. I'm going to use Wrightstown as an example.
Background data on Wrightstown
Current general fund property tax revenue: $2.8M
Current property tax mill rate: $6.73
Current equalized value (total of all properties in village): $570M
8-yr average new construction: $26M/yr
8-yr avg construction dollars as % of current equalized value: 4.5%
Recent median home sale price: $400K
Assumptions about deal
Cloverleaf has said the deal is similar to Phase 1 of Port Washington. That deal has $568M in new valuation in year 1 and $568M again in year 2.
No tax increment financing.
Forecasted new valuation for the village is $1.136B
Current mill rate is $6.73
Expected tax revenue at current mill rate = forecasted valuation / 1000 * current mill rate = $7.6M per year
Seems great, right? $7.6M per year, right away after construction, lasting for quite a long time, in a town whose current property tax levy is $2.8M. Well, it isn't quite that easy. Let's look further. I created this spreadsheet - https://tinyurl.com/wrightstownxls - to help walk through the decisions and see their impact.
Your first decision
When the first round of construction is completed, the village will have $568M in new valuation against a current total equalized value of $570M. The state levy calculation will allow the village to raise the general fund tax levy by 100%. Remember above, the normal increase available to Wrightstown is 4.5%. The median increase across the state is 1%. 100% is an off the charts, once in a lifetime, win-the-lottery increase. And since we're not using a TID, the increase in the levy will not be borne by existing taxpayers. In fact, if we take any amount less than the allowable percentage, existing taxpayers will see their tax bills decline. (That last sentence requires some math to explain. You can trust me, or you can scroll to the bottom for an explanation.)
And that leads to your first decision: how much of this win-the-lottery increase do you want to use toward increasing the levy and how much do you want to let decrease taxpayer bills? Let's model a few options and see what benefits and/or trouble they create.
The first stressor for village officials worth noting is that the decision has to get made the year after the construction hits the tax rolls. And it is irrevocable. Like the TID scenario, if you bypass some or all of the increase, you lose the opportunity forever. If you regret that decision in 15 years, there's no going back except through referendum. "Can we raise the taxes that you are now used to paying because we messed up 15 years ago?" probably doesn't sell well as referendum text. You can always lower taxes later, but you can't raise them later from the data center construction.
Model scenario #1 -- 75% of new construction towards levy increase, 25% toward tax bill reduction
After the first year of new valuation from the data center, your mill rate drops from $6.73 to $5.05. A home valued at $400,000 will see its village tax drop from $2692 to $2022.
When the 2nd year of construction hits, the $568M is now 48% of village valuation thanks to the first big chunk being in the denominator. Applying the same 75/25 split, the mill rate drops again to $4.44. The $400K home village property tax drops again to $1775. So after data center construction the $400K home owner is saving $917 per year...
...but the data center owner also gets to save money. Remember the big sales pitch: these new buildings will produce $7.6M per year in tax revenue? Well, that was calculated at the current mill rate and your first decision caused the mill rate to drop. The data center owner will now pay $5M per year. That's still a lot of money considering your village has been operating on $2.8M in annual general fund property tax revenue, but it isn't $7.6M as originally marketed.
In this model, your levy rises from $2.8M to $7M, a whopping $4.2M per year increase. That'll be the next big decision, but we'll get there in a bit. Next, let's look at flipping this model around.
Model scenario #2 -- 25% of new construction towards levy increase, 75% toward tax bill reduction
With 25% of new construction used for levy increase, your mill rate drops like a rock -- $1.70 after year 1, $1.08 after year 2. I'm pretty sure that would be the lowest mill rate in the state by a very wide margin.
The average $400K home sees their tax bill drop from $2692 to $432, a huge savings of $2260 per year.
The data center owner also gets a massive windfall. Instead of the projected $7.6M, they will be paying only $1.2M per year.
Let's say that again in bold italics: the marketing spin said you were getting $7.6M per year in new tax revenue and when you made your first decision that seemed prudent and taxpayer friendly, you accidentally cut the data center developer's tax revenue contribution to $1.2M per year.
Your tax levy rises from $2.8M to $4.1M, still a decent increase, but as you will see with this analysis, every number has a dark side. Nothing is easy.
Growth rate impact
Before you make your decision on the split between levy increase and tax bill reduction, you should know what the new valuation does to your future growth rate.
Prior to the data center valuation, Wrightstown was adding an average of $26M in valuation every year. With total equalized value of $560M, that is about 4.5%, quite a healthy growth rate that more than allows the village to increase the levy to offset inflation. Once you add $1.1B in new valuation from the data centers, though, that organic growth of $26M is now only 1.5% of equalized value. Inflation is now slowly eating away at your levy's purchasing power. At some point, too, that $26M becomes unsustainable as an annual growth dollar amount as Wrightstown fills up its available space.
Another interesting comparison regarding growth rate is comparing the get-rich-quick data center forecast with an inflation-rate-only forecast. In model scenario #1, the inflation-rate-only growth takes 63 years to surpass the levy growth of the data center model. In model scenario #2, inflation-rate-only growth surpasses the data center model after 30 years.
Open TID impact
If you have open TIDs when the data center valuation hits the books, they will suffer from the drop in the mill rate. All TIDs have expenses that are paid off by tax revenue in the TID. That tax revenue in the TID is forecasted based on the current mill rate. If the mill rate drops a lot, the future TID tax revenue also drops a lot. The expenses, however, remain unchanged.
Simple analogy: if your salary gets cut in half, you might struggle to make your mortgage payment.
Thinking about your decision
New construction is use it or lose with the levy calculation. Should we maximize taking it? We can always reduce the levy. We can't always increase it.
The less construction we take into the levy calculation, the more individual tax bills will fall, but that includes the data center. If the data center marketing pitch today was "you'll get $1.2M per year from us, instead of $7.6M, for all those buildings on all that property" would we still do the deal?
Since we are constraining our future growth with data center valuation, maybe we should maximize levy increase.
The residents need to get something out of this deal. Should it be tax reduction or increased levy, or a bit of both? What do they want?
If we raise the levy, what will we spend the money on? And will that spending create new operating expense?
After construction, no matter what you do with the levy increase, the data center will be 70% of your tax base. That is a financial concentration risk that requires its own unique attention.
What if the AI bubble bursts? What might happen to the project if still underway? What might happen to the valuation? Are we positioned well for that?
The path to financial benefit
Municipal government should be hyper-conservative. Interestingly, it would be against state law to invest idle cash in the stock of the tech company building the data centers in your community. Somehow, it isn't illegal to risk 70% of your future tax revenue on that same company. Whether a personal investment portfolio or a municipal government, if you're going to take on that kind of financial concentration, I would think you'd want to over-manage that one asset and make sure you were covered against change in its value. If 1% of your retirement portfolio loses half its value, you don't notice. If 70% does, you retire much later than planned. The same is true of a municipal government, though instead of working more years, you have to take the loss out of your current taxpaying residents. That's probably not where you want to be.
So is there a path that allows these large data centers in small towns but that is financially beneficial? Is it possible to manage the risk? Here's the only path I see that covers you against the various bad scenarios:
Take as much levy benefit as possible as the construction happens. Why? Your future growth will be stunted by the massive data center valuation on your books. You are essentially getting 20 years of levy growth with 1 short-term project. You have to take it all, or almost all. Tax benefit to residents will be limited to none, but you will be holding taxes constant for a very long time and stockpiling cash.
Pay off all debt. Your debt levels will dictate how much this lowers your residents' tax bills. (State law requires local government has to lower the tax levy if debt service payments decline. They don't get to use the money for other spending.)
Hold spending nearly flat despite the extra cash.
Build a large rainy day fund. It will need to account for everything from the worst case of property abandonment to the more probable case of building valuation change. The worst case means you need enough money to cover the missing tax payment and/or to tear down the buildings if there is no obvious reuse for them.
If the data center valuation is lowered, reduce the levy to avoid impact to current residents. If you haven't been spending the entire levy, lowering it shouldn't be a problem. You will not, however, be able to re-raise it except via organic growth.
There are some legitimate criticisms and risks with this path:
What if state law changes? This strategy is trying to navigate current state law around levy calculations, creating some risk if that law changes.
The financial defensiveness of maximizing the levy increase and then sitting on the money reduces the positive impact to the residents, at least in the short term until a large enough financial buffer exists to justify starting to tap into it.
Managing large assets is not generally an area of expertise with municipal governments. State law dictates extremely conservative investment, which does simplify the task, but don't underestimate the effort and expertise needed to manage a large amount of money.
If the village is sitting on a large pile of cash for a future low odds, high impact event such as building abandonment, will the residents, staff, and board have the discipline to sit on it? Or will there be pressure to provide tax relief or project funding that provides immediate benefit?
It is, of course, possible that nothing bad ever happens and if you have maximized your levy early then you might be sitting on a huge pile of cash in 20 years. The pile might even grow large enough to generate interest that itself pays many of the bills for the village.
My final .02
The only path to financial benefit:
Minimizes benefit to the residents over the next 15 years at least
Requires the risky mentality of overtaxing you for a long time
Requires years of financial management and discipline across boards, staff, and residents
Produces a big pile of cash and decisions about what to do with it that might tear your community apart -- yes, it can be a good problem to have, but it can also be a bad problem
Municipal government should be hyper-conservative, not speculative and aggressive. It shouldn't need to make complex financial decisions over long periods of time. It should tax what it needs now with a small buffer for safety and leave the rest in the pockets of taxpayers. There is no historical example of a municipality, large or small, having faced this problem, at least that I can find. You are on your own trying to predict what can go wrong and how to protect yourselves. Your decisions in year 1 and 2 will be with you for decades.
You can decide to do this, and at least now you have a path to financial benefit even in a small town, but know the risks that come with the reward. And then choose wisely.
Risk and reward always travel in pairs.
Explanation of the higher levy and lower tax bills scenario
Assume a village collects $2000 from 10 taxpayers each of whom has a home value of $400K.
$2000 tax bill * 10 homes = $20000 tax levy
Tax rate = $2000 / $400000 home value = 0.5%
Last year, the village added a new taxpayer who built an $800K home.
State law allows the village to raise the levy by the amount of new construction ($800K) divided by last year's total property value (10 homes * $400K, or $4M). That calculation comes to an allowable increase of $4000. If they do, every one of the $400K homeowners still pays $2000, and the new homeowner pays $4000. Total tax collected (the levy) is $24000.
If the village only raises the levy $1000 because they are good stewards of your money and don't need more than that, then the total levy will be $21000. And here's where your taxes go down even though the levy went up. When you distribute the $21000 levy across the 11 homes according to their percentage of the village's total valuation, each homeowner pays less than they did the prior year.
Total valuation = (10 homes * $400k) + (1 home * $800k) = $4.8M
The $400K homeowner pays $400K / $4.8M = 8.3% of the levy
The $800K homeowner pays $800K / $4.8M = 16.7% of the levy
8.3% of $21000 = $1743 (vs last year's $2000)
New tax rate = $1743 / $400000 home value = 0.44% (vs last year's 0.5%)
Now you do the math with a one billion dollar data center hitting the tax rolls. It's a wild scenario.