COVER FEATURE
by B.C. Kowalski
TIF considerations
Marathon County is tied with Washington County for the most distressed TIF districts in the state. This is what is going on with them. There are about as many opinions on Tax Increment Finance districts (otherwise known as TIF Districts or TIDs) as there are people. But one thing that should alarm everyone: Marathon County is leading the way in distressed districts. First, a primer: TIF Districts are districts created to help ease blight. The point of them is to help provide incentives to developers to develop projects in places they might not otherwise touch. Municipal leaders will tell you they’re one of the few tools available to help redevelop these troubled areas. In fact, that’s exactly what they’re supposed to be used for. A project in a TIF District needs to pass the “but for” test; in other words “But for this extra money, the project would not happen.” Or put less in lawyer speak, without the money from TIF, no way the project would or could happen. But what does that actually mean? Talk to ten people and you’ll get ten interpretations. You’ll see signs in empty tracts of land advertising that tax incentives are available. Shouldn’t that be exactly what developers want? Talk to them long enough, and you learn they love bare land. Already existing buildings are challenging and more limiting. The mall site is being cleared before a project is declared for it, for exactly that reason. (What developers call “pad ready.”) It can be more than an old, dilapidated building on the site. Environmental remediation can qualify. That cleanup can get expensive. TIF is a mechanism that can pay for itself. (Kind of, as we will see later.) The idea is that you form this district, and money over the set amount the date the district was created goes to the district to pay off its debt instead of the municipality, the school district, etc. The fancy new project brings up all the property values, increasing revenue from taxes, the district gets paid off, it closes, and kaboom: it’s a win-win-win, as Pete Weinschenck put it in a recent story. What happens when that doesn’t work out? It’s not working out in six distressed districts in Marathon County, according to the State Department of Revenue, which tracks TIF districts. That’s tied for the most of any county in the state. The other is Washington County; five of its distressed TIFs are in West Bend. What happens when a district is declared distressed? Districts can be extended. That gives more time to develop increment and pay off the debt. But after that? Taxpayers will foot the bill. Are taxpayers in municipalities with these six districts in danger of that?
The worst TIF choice
Before we get to those six districts, let’s highlight one of the most dangerous gambles with TIF in recent years in the area. Stevens Point used TIF financing to help pay for the demolition and redevelopment of the CenterPoint MarketPlace mall. In its place, a technical college. Now that we know how TIF districts work, can you see a problem with this already? Technical schools don’t pay taxes. And generating new property tax revenue is the key to paying back a TIF. Having a non-profit as a very expensive centerpiece project is a major gamble. The municipality is counting on the land value increases from existing
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properties plus new development in the district to help pay the costs back. Considering it cost almost $9 million when all said and done, well, that’s a tall order. And remember, that’s only the new increment. In other words, if a property is worth $10 at the time a district opens, and it goes up to $11, you get the tax revenue from the $1. Finance people at the time told me they thought it was crazy. They were right. Another district was designated as a donor district to help fund the otherwise underwater (ie, losing money) district. And that means the donor district also can’t close. It means any gains from those properties in that district are going to the TIF, and not to city coffers to provide taxpayers some relief. Not to mention the school district, technical college, county and state.
Kronenwetter
Since Kronenwetter has two of them, let’s start with them. The village’s community development director, Randy Fifrick, told me when the village incorporated in 20022003, the main reason was so that the city could develop TIFs, since at the time towns couldn’t. The village created four TIFs with the idea they would spark economic development. There were some projects, and some like Woods Equipment Manufacturing Company and M&J Marine are doing well, but overall not nearly enough development has happened in TIF 1 and 4, which have been labeled distressed by the state. That qualifies them for an extension. Neither of them right now is close to payback by that extended date. What happened? They paid for expensive projects such as the Kowalski Road renovation. And neither of them had an extensive enough project attached to them that would generate the increment to pay back the borrowing on the TIF. It’s a similar gamble to what Stevens Point did with its mall. Because the central project resulting from the TIF borrowing was a technical college that, by its nature, doesn’t pay taxes, they had to hope development pops up to cover it. One thing different with Kronenwetter, however, is that at least Stevens Point had city-owned land it could market to developers. Fifrick says the land inside the TIF is all privately owned. That gives the village little control over what happens on those parcels. Both districts have pretty stark debts compared to their fund balances: District one is in the hole $7,846,208.00; TIF 4 is a little better at $1,735,099. To be fair, TIF 4 has until 2044 to recover (TIFs always start out in the hole) and TIF 4 has until 2034. But neither as it stands, neither are on track to break even.
Schofield
Schofield’s distressed TIF, TIF No. 3, predates Clerk/Treasurer Lisa Quinn. Quinn says that TIF 3 was, to the best of her knowledge, created to address water sewer issues on Grand Avenue. The district will not close underwater, but that’s because TIF District No. 2 will serve as a donor district to help pay it back.\
Marathon County distressed districts Athens 1
Date started: 9/25/1995 Supposed to close: 9/22/2022 Extended close: 9/25/2032
Kronenwetter 4
Edgar 3
Maine 1
Date started: 10/11/2004 Supposed to close: 10/11/2024 Extended date: 10/11/2034
Kronenwetter 1
Date started: 11/3/2004 Supposed to end: 11/3/2024 Extended date:11/3/2044
Date started: 11/3/2004 Supposed to end: 11/3/2024 Extended date: 11/3/2034 Date started: 9/29/1997 Supposed to end: 9/29/2020 Extended date: 9/29/2030
Schofield 3
Date started: 9/22/1997 Supposed to end: 9/22/2024 Extended to: 9/22/2034
Maine (or, Brokaw?)
There’s a very good reason Maine became a village, even if there was a little bit of backlash against the plan. Had it not, the village of Brokaw, nestled between the towns of Maine and Texas, would have dissolved. That would have saddled Maine and Texas with its debts, which was substantial. So in absorbing Brokaw into the new village, Maine took on its TIF District, which is distressed. It was started in 1997 as a way to develop the area west of the Wisconsin River, says Maine Administrator Keith Rusch. Rusch says the district will close in 2034 (the DOR’s report says 2030) and will not be underwater when it closes. District 1 is Maine’s only district, and the village has no intention to form any others. Rusch says the combination of the mill closing (the whole reason Brokaw collapsed) and Brokaw overborrowing on the district, by much more than they should have been allowed, led to the financial troubles with the district. Analyzing mill rate data is a little more challenging with Brokaw/Maine because of the unusual situation having a town become a village and absorbing another village. Rusch says Brokaw residents were paying $45 per $1,000 in total mill rate (including all the taxing entities) versus now when, as Maine residents, they’re paying $21 per $1,000. Maine’s taxes have decreased in the few years it has been a village.
Athens
Athens Clerk/Treasurer Lisa Czech says that Athen’s District 1 was created in 1995 when the village created its industrial park. The district fell behind because infrastructure ended up costing more than expected. The district is currently in a deficit, but Czech says village leaders are hopeful the district will break even by the time it closes at the extended date of 2032.
Edgar
Edgar’s District No. 3 was formed to clean up the former whey plant and other blight in that area, according to Village Administrator Jennifer Lopez. Demands for the kind of property in that district, including industrial, commercial and residential; along
