TIF deal worth $4.25 million is a new high for Port

When the Port Washington Common Council approved tax incremental financing for Ansay Development’s Newport Shores project, it was approving the largest incentive plan for a developer in its history.

If the project is valued at the $20 million projected by Ansay, the developer would receive more than $4.25 million — $304,000 annually for 14 years — from the TIF while the city would reap $224,000 — $16,000 annually.

The developer incentives received by other projects in the district pale in comparison, the largest being $1.75 million provided to the Harbour Lights residential and retail project at the corner of Main and Franklin streets.

The other projects that have received incentives are the Lakepointe condo project, $365,000, and Ansay’s Lake Harbor Lofts condo project, $330,000, both on Washington Street. The city has also committed $1 million in incentives for the proposed Blues Factory.

“It’s a big project, a $20 million project,” City Administrator Mark Grams said of the Ansay incentive.

It’s difficult to compare the Newport Shores TIF incentive to others approved by the city, he added, because it’s structured differently.

The other incentives provided by the city have been direct payments, loans taken out by the city and paid to developers as work is completed. The loan is then repaid with the increased taxes realized from the project.

But the Newport Shores project involves a pay-as-you-go TIF, in which the developer takes out the loan and repays it using the increased taxes from the project, Grams said.

“To me, that’s the big difference,” Grams said. “We’re not fronting the money. We’re not going to the bank and borrowing $4.2 million.”

If the project is valued at less than the projected $20 million, the developer still has to make the loan payments even though the taxes will be less, Grams said — transferring the risk involved from the city’s lap to the developer.

If it’s valued at more, the developer will receive more in the tax payments, he said. However, he said, the city may seek to cap the amount Ansay can receive as it negotiates a developer’s agreement for the project.

The fact that the city isn’t taking on added risk with the project is just one of the benefits, Grams said. The city is receiving ancillary benefits, such as additional development and traffic in downtown that will support other businesses.

“It’s promoting the other businesses around the district,” he said. “There will be people coming into the community to live here, to visit. That’s what people don’t seem to realize, we’re opening the market here.”

And, because it’s a redevelopment project, the city isn’t adding additional services, Grams said.

The Newport Shores project will also allow the city to close the downtown TIF district in 2035, three years earlier than originally projected, Grams said.

And in the end, he said, the city will have a $20 million project bringing in an estimated $320,000 in additional property taxes each year. Currently, the property generates $13,600 in taxes annually.

But Ald. Mike Gasper said he is concerned about the role TIF and the development incentives are playing. 

“Developer incentives leave a bad taste in my mouth,” he said, adding he would prefer that the city help with site issues and infrastructure rather than directly subsidize developers.

Gasper said that when analyzing incentives, the city should consider more than just whether the increased taxes will pay off the loan. It should also compare how much it would receive if the project or a smaller one without incentives was created outside the TIF district vs. the value to the community when the TIF ends — and how many years it might take for the two values to offset one another.

“What if it’s outside the TIF and we don’t give them the money,” Gasper said. The city would then receive increased taxes for as long as 27 years — the maximum life of the TIF district. “What’s more valuable to the city — waiting 20 years before collecting more of the base taxes or collecting a smaller amount today and throughout the life of the TIF?”

Gasper said the city too quickly accepts developer’s statements that they would not proceed without incentives.

But Mayor Marty Becker said the incentives are needed. In the case of Newport Shores, for example, he’s talked to owner John Weinrich through the years and come to realize the incentive is essential to the project.

“There’s no alternative plan for the site,” he said. “If they don’t get the TIF, that land’s only going to be worth about $700,000 vs. $20 million with it.

“Are we giving them $4 million, yes, but eventually we’re going to get more money back.”

The fact that additional jobs will be created and the city will receive an annual payment throughout the life of the TIF are also benefits, Becker said.

“That’s a lot of money over the course of the TIF,” he said.

The city is also looking at TIF districts for other projects. It’s approved a TIF to accommodate the proposed Cedar Vineyard subdivision on the city’s southeast side, although Grams said TIF funding there is expected to pay for infrastructure, not incentives, and is expected to consider a north-side TIF in the next year or two.

Pay-as-you-go TIFs are also envisioned for a senior housing project on the site of a former trailer park on South Spring Street and for the conversion of St. Mary’s School to housing.

Becker and Grams noted TIF is one of  the only economic development tools the city has.

“It’s the only thing we have,” Becker said. “As long as we have it, we should use it. It’s a viable way to build your city.”

Grams noted that TIF has allowed Grafton to develop its east side commercial district and Mequon and Cedarburg to expand their commercial and residential offerings.

“We’re not the only ones using it. Look at the Titletown development in Green Bay, the Fiserv Forum in Milwaukee — that’s all TIF financing with incentives,” he said. “That’s the real world in Wisconsin.”