Port policy aims to take controversy out of TIF funding

Document approved by Common Council intended to ensure tax incremental financing is used fairly
By 
KrISTYN HALBIG ZIEHM
Ozaukee Press staff

A policy governing the use of tax incremental financing — a controversial development tool used by the City of Port Washington to help in downtown development — was adopted by the Common Council Tuesday.

The policy aims to provide clear guidelines regarding the use of TIF, ensuring it is used fairly and transparently, City Administrator Tony Brown said.

“It’s trying to create a common standard and guideline for something that hasn’t always been clear in the past,” he said. “I think there are misconceptions about how the city has used TIF in the past.”

TIF has long been a source of consternation as the city’s downtown and lakefront have developed, particularly since the city has offered incentives to a number of projects to ensure they are viable.

Some people have objected to its use for lakefront developments, saying these projects are valuable enough that public support shouldn’t be necessary, while others have protested development incentives provided to developers.   

“The things I’ve heard are TIF is bad, it’s corporate welfare, the city shouldn’t be using it,” Brown said.

“I don’t think that the city has used TIF in any underhanded way.”

Ald. Dan Benning said the policy will help officials explain the use of TIF to constituents, set standards to measure a developer’s performance and hold them accountable to the promises they make.

“I’m glad we’ve got some of this spelled out,” he said.

But Ald. Mike Gasper said he would like the city to add a provision that before a TIF project is approved the city would conduct a cost-benefit analysis comparing the potential development without TIF.

Because the city doesn’t reap the benefits of the added taxes on property within a TIF district until it closes, typically decades later, “We could have a $20 million development in TIF that’s not worth as much as a $10 million development without TIF,” he said.

Gasper also questioned the fact that the policy emphasizes job creation as a reason for providing TIF assistance, saying it doesn’t directly help the city the way increased property taxes would.

“Employment can be a secondary benefit,” he said, but shouldn’t be considered the primary one.

But Ald. Pat Tearney said the policy lays out a philosophy that “wasn’t there before.”

“It gives us more meat we can dig into (in considering TIF),” he said. “It’s a vast improvement on what we had, which was just ‘this is how we do TIF.’”

But Ald. Deb Postl said that while the policy is a good guideline, she wanted to see more requirements for developers to provide information on the need to TIF funding.

“If I want to buy a house or car, my income is scrutinized,” she said. “Can the city look at developer’s income to see if they can afford (development) on their own?”

Mayor Ted Neitzke, noting that TIF is one of the few tools communities have to attract development, said it’s important not to get too restrictive so the city can be competitive when vying with other municipalities in trying to attract business.

But, he added, TIF for residential developments should be scrutinized more than for business development.

The new policy explains TIF funding and expressed the city’s intent to provide the minimum amount of aid needed to make a project viable.

“It’s not to increase the developer’s profit margin,” Brown said.

The amount is generally to be capped at 15% of the increased values of the tax base due to the project, he said.

The developer must demonstrate a substantial public benefit in return for the assistance, the policy states, adding that preference will be given to redevelopment projects instead of new development projects.

  In some cases, the city will consider TIF assistance for job creation or retention.

Each project will be analyzed by an independent party, and developers will pay the city’s costs in assessing these projects, including not just the consultant’s time but staff time as well, the policy states.

Projects will only be considered after they meet the but-for test — but for TIF funding, the project would not be feasible.

The city prefers pay-as-you-go TIFs, where the developer carries much of the risk rather than the city, and may require increased design standards for TIF projects, the policy states.

Developers should make an effort to work with local contractors.

Projects to be considered include public infrastructure, demolition of existing structures, soil remediation, structured parking, extraordinary costs related to affordable housing development, site specific public art projects, renewable energy work and green and blue roofs that help minimize runoff.

Items not eligible for TIF funding include land costs exceeding market value, ordinary development costs, energy efficiency improvements, city fees and infrastructure normally paid through special assessments.

A 13-step application and approval process is outlined, and it includes a development agreement spelling out guarantees of increased value and tax payments, a guarantee to pay any deficiency in the city’s debt service payments related to the project, security, a guarantee of increased jobs and a sunset date for the developer to access any TIF funding.

TIF is a valuable tool in development, Brown said, noting communities have only two real ways to help developers — TIF and the revolving loan fund.

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