Port turns to TIF funding to fuel new era of development

inancing mechanism has spurred growth but also controversy over incentives like those for Blues Factory

The City of Port Washington used tax incremental financing to pay for sewer main work that cleared the way for the Lakepoint condo project being built on a former city-owned lot at the corner of Washington and Lake streets in the marina district. In the case of the proposed Blues Factory development across the street (inset), the city has agree to pay the developer $1 million in TIF incentives.
By 
KRISTYN HALBIG ZIEHM
Ozaukee Press Staff

Port Washington is in the midst of a flurry of development, and much of that development depends on one thing — tax incremental financing.

The city currently has two TIF districts, one that encompasses the downtown and the second stretching along the bluff on the city’s south side where the proposed Cedar Vineyard subdivision is to be built.

Three other TIF districts are under consideration. 

One is proposed for the city’s north side, where it would provide utilities for a business park as well as residential lands and bring sewer and water to the doorstep of the Town of Port.

The second would help fund the redevelopment of St. John XXIII Catholic School, St. Mary’s Campus, and the third would help finance an affordable senior housing development on a former trailer park property owned by the city along South Spring Street.

The value of these financing districts has come under fire since Port officials approved the proposed Blues Factory entertainment complex in the downtown TIF district — a controversial development that has split the city in ways not seen since the marina itself was approved in the 1970s.

“People don’t seem to understand TIFs are the economic development tool in Wisconsin,” City Administrator Mark Grams said. “There are no other tools available. In other states, they give developers tax rebates. Some companies don’t have to pay taxes on their land. We can’t do that here.

“In Wisconsin, we have TIFs.”

In a TIF district, the city delineates an area in need of revitalization or development and, in essence, freezes its property value, keeping the amount of taxes realized by the city, county, school district, vocational district and other taxing entities stable for the life of the district. 

It invests funds in the area for specific projects, such as infrastructure improvements, and uses the tax revenue from the increased value of the district to pay off those improvements.

When the improvements are paid off, the TIF is dissolved and the full value of the improvements go on the tax rolls. 

Port Washington’s first tax incremental financing district, which was in effect from 1993 to 2007, had a surplus of several hundred thousand dollars when it was retired years earlier than initially expected, and much of that money was used for tax relief.

While a traditional TIF district has the municipality paying for the improvements, a second type of TIF — the pay-as-you-go TIF — has been proposed recently in Port to help finance the St. Mary’s project and the senior housing project.

In those districts, the developer pays for the improvements upfront and is repaid for much of that cost through the increased taxes generated by the development.

These types of TIF districts minimize the risk to the community because the developer is paying all the costs upfront, Grams noted.

“To me it’s a no-brainer,” he said of the proposed TIF for St. Mary’s School. “It’s not on the tax rolls now. You’re not losing any tax money.” 

Mayor Marty Becker concurred, saying the school and trailer park projects are ideal.

“I have no problem with these,” he said. “The trailer park land has been on the market for 10 years, and there haven’t been any offers on it. It’s not blighted by definition, but it’s kind of useless land with the (high-tension) power lines (that cross the property).”

The school, too, would be difficult to redevelop without the TIF and is currently not paying any taxes, he noted.

“I’m not sure anybody would buy it for development otherwise,” Becker said. 

But Becker questioned the use of TIF financing for projects like the Blues Factory.

“I don’t know why you need TIF there. It’s prime land,” he said. “You should be able to develop it without TIF.”

The city has agreed to pay developer Gertjan van den Broek $1 million in incentives for the project, and it has paid the bulk of the cost of stabilizing the sheetwall in the area.

This isn’t the first time the city has used TIF funds for development incentives.The city also provided these funds for the Port Harbour Lights condominium project, which was also developed by van den Broek.

Ansay Development is also seeking incentive money for its Lake Harbor Loft project on the former Victor’s restaurant site, citing the need to remediate soils there.

While some people object to these types of payments, Grams said, “That’s just the way it is today.”

He pointed to communities such as Grafton and Mequon, where incentives have been used for numerous projects that have revitalized the communities, including the 1505 Apartments.

“Do they help the developer? Yeah,” Grams said. “The argument is the development would have happened even without this. But that’s not what the developers are telling us. They’re telling us TIF made the difference.”

Becker, however, disagreed, saying he’s “not fond of” development incentives. Developers, he said, should finance their own projects without depending on public money.

It’s not just the added value of the TIF district that benefits the community Grams said. Port officials believe the projects will attract new residents and tourists who will “visit, live there and shop there, supporting other businesses as well.”

“This is a way to bring new development in that will be valued at four, five times what you’ve got there now,” he said. “You may have to wait 20 years to get it, but hopefully those new people will help the viability of the downtown in the interim and add value to other properties that are here.”

Concerns that the new development won’t bring in the expected funds are allayed through the use of developer’s agreements, Grams said. The city has used these documents to require the new development bring in enough revenue to pay for the TIF projects or the developer must pay the difference.

The fact that Port is considering placing so much of its land in TIF districts has some people questioning whether they are being overused.

Grams said no, noting that the state doesn’t allow more than 12% of a community’s equalized valuation to be in TIF districts.

“We’re nowhere near that,” he said.

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Wisconsin’s largest paid circulation community weekly newspaper. Serving Port Washington, Saukville, Grafton, Fredonia, Belgium, as well as Ozaukee County government. Locally owned and printed in Port Washington, Wisconsin.

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