$175M TIF district to help finance data center

The City of Port Washington will create a tax incremental financing district to fund as much as $175 million in infrastructure improvements for a proposed data center campus, according to a developer’s agreement that the Common Council will consider next week.

Aldermen, who were presented with the agreement last week, are expected to vote on it when they meet at 6:30 p.m. Tuesday, Aug. 19.

The agreement covers plans by Denver-based Vantage Data Centers to develop a data center campus on the south half of the roughly 1,900 acres the company is in the process of buying and annexing from the Town of Port Washington into the city.

The northern portion of the land may be developed in smaller phases, the agreement states, but it also allows the city to buy the property for the amount Vantage paid for it if no development occurs by Jan. 1, 2038.

Plans for the southern portion of the land, which were reviewed Tuesday by the city’s Design Review Board, show four data center buildings and supporting structures, as well as a warehouse and operations center on 672 acres on the new north side of the city. The campus is bordered by Highland Drive on the south, I-43 on the east, the Ozaukee Interurban Trail on the west and an area about 800 feet south of Lake Drive on the north.

A key part of the developer’s agreement is the proposed TIF district, which would be used to pay for everything from extending sewer and water service to the site and into Knellsville to paying the city’s expenses for the project.

It would also be used to repair any roads damaged by the project and to compensate the Town of Port for its lost tax revenue for five years. 

If development of the northern half of the land occurs, it could also pay for potential expansion of the water and wastewater plants and stabilizing the bluff. 

Vantage will not take water from Lake Michigan directly, Neitzke said. Instead it will use as much as 1.2 million gallons of water a day from the City of Port, an amount the city’s utility is capable of handling.

“They won’t be using that every day,” he said, noting the water will be reclaimed and treated at the wastewater plant. “That’s only on the hottest days of the year.”

The agreement calls for water to be extended to its site by Jan. 1, 2026, and into the Knellsville portion of the Town of Port by Dec. 31, 2027.

The company has already received bids for that work, he said.

“They’re ready to run,” Neitzke said.

There should be no impact on the city’s water rates, he added, since Vantage is paying for the project. 

Neitzke said the city has taken steps to ensure that even with a TIF district, which uses additional taxes realized as a result of improvements to the property to pay for infrastructure, taxpayers will see a financial benefit from the data center immediately.

Vantage has agreed not to seek TIF funding until next year, allowing the assessed value of its land — an estimated $120 million — to be placed on the tax rolls, he said.

That will provide approximately $650,000 in tax revenue for the city in 2027, he said, and result in a reduction of $170 in taxes for a house valued at $350,000.

The Port-Saukville School District, Ozaukee County and Milwaukee Area Technical College would also receive tax relief, he said.

That was an important component of the agreement, Neitzke said.

“The community had to have an immediate financial benefit,” he said. “It would be really hard to say, ‘When I’m 75 you get property tax relief.’”

Attorney Chris Smith of von Briesen and Roper, the city’s counsel for the data center project, said, “Port Washington needs financial help in the short term. We believe this agreement has answered that.” 

The increased tax base will help reduce the burden on residential property owners, Neitzke said. In 2025, he said 80% of the city’s tax burden falls on homeowners. With the data campus development, it’s estimated only 25% of the burden will be on residents by 2035.

Of the $175 million in TIF district projects, it’s estimated that $50 million will be needed for the first phase of the project, with the remaining $126,000 needed for the second phase.

Unlike traditional TIF districts, which are financed by municipalities, this would be funded by Vantage. 

In a TIF district, the properties within the district continue to increase in value and pay property taxes commensurate with that increase, but taxing entities such as the village, county and school district only receive the same amount of taxes they did when the district was created.

Any taxes generated by the development, called increment, would be used to repay the developer for infrastructure and similar amenities within the district.  Once the costs are repaid, the TIF district is dissolved and the entire value of the property is put on the tax rolls.

The agreement states that it could take as long as 20 years to repay Vantage for its costs, but Neitzke said he believes it would take far less time for that to occur — in part because he believes the cost of the infrastructure projects will likely be less than $175 million.

Neitzke said the TIF district will be reassessed annually to ensure the full increment is realized and the district is paid off as quickly as possible.

If the tax revenue from the improvements isn’t enough to reimburse Vantage’s costs, Smith said, “then they won’t get reimbursed. They city is not the one holding the bag.”

The agreement does not specify the investment Vantage will make in its site, Neitzke said, but it will be included in the final document to be voted on next week.

“They’re still crunching the numbers,” he said.

While many people have said that Vantage should pay for the improvements out of pocket, Neitzke said, that isn’t practical.

With other communities willing to offer incentives to companies, this would take Port — and Wisconsin — out of the running for development, he said.

“Expecting a company to pay up to $175 million in public infrastructure improvements is just not going to happen,” Smith said.

Some people have also suggested that Vantage should be required to pay for the city’s new public safety buildings, Neitzke said, but that’s not allowed by law.

Instead of a TIF district, Neitzke said, the city looked at funding the infrastructure work itself but that would result in massive tax increases — $72 in the first year, another $614 the next year and another $104 the third year.

“That was pretty quickly eliminated once we ran the numbers,” Neitzke said.

  The improvements Vantage will make, such as extending sewer and water to its property, will also benefit other developers who have been waiting to begin their projects until utilities came their way, he added.

Vantage will also be required to pay permit and impact fees, Smith noted.

“We estimate these fees are going to be in the millions,” he said.

That money will go toward paying off the public safety building, Neitzke said, reducing the cost for existing property owners. 

Ald. Dan Benning said he believes the project is a good one for the city.

“I think this is going to be a phenomenal development,” he said. “We’re going to have a good project here.

“The agreement ... protects our residents from financial risk and lays out the robust benefits our community will receive from this project.”

Neitzke called it a “once in a generation economic opportunity for Port Washington.”

“The top priority for the city is protecting our residents from bearing any costs for the project, and this agreement accomplishes that. This project will not disrupt the great things we love about our city and puts us on a path toward a strong and stable future.”