By STEVE OSTERMANN
Ozaukee Press staff
Posted 7-2-09
There’s been no shortage of redevelopment in downtown Grafton during the past few years, including the construction of a bank building, business centers, restaurants and housing complexes.
But the revitalization of a once-struggling downtown, spearheaded by the creation of a tax incremental financing district, has also come with a price.
Village officials find themselves grappling with ways to offset a projected revenue shortfall in the district, which they learned is struggling financially.
Todd Taves, a financial adviser with Ehlers & Associates, told the Community Development Authority last month that the district is in poor financial health. He cited the slumping economy, lower-than-expected increases in property values and a declining village tax rate as reasons.
If the district does not receive additional development projects or funding, it is expected to fall $7.4 million short of meeting a payback goal over the life of the TIF plan, Taves said.
Through tax incremental financing, municipalities use taxes from private redevelopment in a district to pay for public improvements such as road upgrades, sidewalks, lighting and landscaping. The revenue can be used for improvements for as long as 23 years or until the debt is paid.
The upgrades and other developer incentives are designed to spark commercial and residential growth in the district.
“Redevelopment does come at a cost,” Village Administrator Darrell Hofland said. “The downtown TIF district has already exceeded its original planned value, but unfortunately other factors have resulted in projected deficits.”
Hofland said the village has had to pay more than expected for street work and other improvements. Since the creation of the downtown TIF district in 1999, the village tax rate has dropped from $21.80 to $17.22 per $1,000 of equalized value, he said.
In addition, the original projection of a 4% increase in property valuation is now estimated at only 1% for the rest of the district’s life, Hofland noted.
“With more conservative assumptions used, the shortfall will continue to increase significantly,” he said.
To offset the anticipated loss in revenue, Taves said, the village will need additional downtown redevelopment and funding. He suggested the latter could include using funds from another TIF district, an option CDA members agreed should be explored.
The downtown TIF district — bounded by the Milwaukee River on the east, North Street on the north and Canadian National Railroad tracks on the west and south — is one of four such districts in the village. The others are the Grafton Business Park, south commercial district and Grafton Commons, which is anchored by the Costco store.
Taves said the other village TIF districts are in better financial shape than the downtown. The Grafton Business Park district, he said, could be closed with a balance of $650,000, and would be a good candidate to donate funds.
If the downtown district fails, the debt from public improvements will have to be paid by taxpayers, Taves said.
Borrowing from one district to keep another financially viable will require creating a new project plan, Hofland said. The plan will have to be approved by the Joint Review Board as well as the Plan Commission, Village Board and Community Development Authority.
Revisions would also have to be approved each year as part of the budget process.
In the interim, Hofland said, the village will continue to explore downtown redevelopment options, including one for the former lumberyard site off Wisconsin Avenue. The site includes a 5.35-acre parcel and adjoining land that has been proposed for business offices and other uses.
“The village is currently developing a master plan for that site,” he said. “Any new development there and at other sites would be used to help offset the shortfall.”
Two other major downtown projects that have been discussed but remain undeveloped are the Grafton Hotel building and the former brewery site on 12th Avenue.
The village recently dropped plans to acquire the hotel through eminent domain and sell the property, choosing instead to allow owner Rob Ruvin more time to complete a redevelopment project.
Condominiums have been discussed for the brewery site, but Hofland said that option appears unlikely in the near future.
“Part of the challenge during the current economic state is that many projects include condo units, but there just isn’t a market right now,” he said.
“It’s an especially difficult time for new development.”
