— Tax incremental financing has become a prevalent development tool
in the area, though how often and how the special tax districts are
used is not always the same.
A TIF district
is a designated area within a municipality that the city or village
uses taxes to invest in, to encourage development. At the time the
district is created, a base value is determined for taxes; the taxes
paid on that amount continue to go to whatever taxing jurisdictions
have authority, such as village or city, school district, technical
school or county.
district is created, the municipality may borrow money for
development infrastructure, which is then paid off by additional
taxes from the TIF after private development increases its value,
and therefore taxes.
property in the TIF district pays the same amount in taxes as they
would without the district, but taxes from new development go back
into the district’s development rather than to the normal taxing
“Why, as a
developer, wouldn’t you take that deal?” wondered Grafton Town
chairman Lester Bartel, who was speaking during a brief discussion
about TIF districts and annexation at this month’s Town Board
The village of
Grafton and the cities of Cedarburg and Mequon all have TIF
districts currently in use. Grafton has four TIF districts active;
Mequon has four as well; and Cedarburg has one active, another that
has been approved but not yet filed –
the Amcast property – and a
potential third scheduled for discussion later this month.
the Wisconsin Department of Revenue TIF Manual, “Wisconsin
adopted legislation in
1975 in response to the challenges of eliminating blighted areas in
depressed urban areas.” The manual explains that blighted areas have
additional costs for demolition, rehabilitation and environmental
remediation which make it difficult to develop for either
municipality or private firm alone.
The chart shows the tax
growth and distribution over time within a tax incremental
financing district. The base value and taxes are determined
at the time a TIF is formed and remain the same, with each
tax jurisdiction receiving that amount for the duration of
the TIF. The value and tax growth from development within
the district funds the district until it is closed, after
which the property's new value is added to the tax roll,
increasing tax values for the community.
courtesy of the Wisconsin Department of Revenue
further explains that TIF law has been changed and expanded over
the 43 years since its passage, allowing for TIF districting in
a wider array of situations.
“It is pretty
much the only thing we have to incentivize construction in the city.
This is one option that’s available,” Cedarburg City Administrator
Christy Mertes said.
Cedarburg’s Amcast TIF district and the already active district
downtown, where there was previously a Chevy dealership, are
attached to environmental blight issues. The properties in question
for both uses of tax incremental financing require rehabilitation
and remediation to be developed again. The costs of such development
would be both a burden to the city without development, and a
deterrent for developers without municipal aid.
state TIF law, a municipality creating a TIF district requires the
development considered pass the “but for” test: the development
would not occur “but for” the existence of tax incremental being
TIF district in Cedarburg would be on the south end of downtown, at
the site of the former St. Francis Borgia school. The developer for
the Arrabelle project, which was downsized significantly against
community opposition, has now approached the city for financial
Duey Stroebel, R-Cedarburg, agreed with the original purpose of TIF
districting for blighted properties. Properties that had legitimate
and significant problems could remain vacant for decades, because no
developer wanted to shoulder the costs of remediation and of
development. The TIF law was implemented to help get those
properties in use again, so 20 or 27 years later, depending on the
TIF, the property could return to the tax roll as an addition to
they’ve (TIFs) morphed well beyond that, and now we’re seeing a lot
of abuse of TIF law,” Stroebel said.
Stroebel said he
has nothing against the Arrabelle project itself, and thinks it is a
fine development in a prime location in Cedarburg.
“What I do see a
problem with is the taxpayers being asked to subsidize it to the
tune of $2 million,” Stroebel said.
“If you have to
have a TIF to develop in a great place like Cedarburg, in a
fantastic location, where don’t you need a TIF?” Stroebel added.
In Mequon, TIF
districts are used somewhat differently. Two of the city’s four
active TIFs involved taxpayer funded improvements, one district
supporting an industrial park and another where the Towne Center is.
Mequon Finance Director Tom Watson said the Towne Center TIF was
created in 2007, in part because the site did have remediation
needs, and also to help kickstart new development and incentivize
businesses to grow in Mequon at a time when the economy was
beginning to fall. That had a municipal election investment of
approximately $6.95 million.
The other two
TIF districts, however, were funded differently.
“The two TIFs on
the Port Washington (Road) corridor are pay-as-you-go … they city
doesn’t have any financial investment,” Watson said.
Mequon did not invest in infrastructure or construction for the two
TIF districts on Port Washington Road. Rather, the developers in
those districts can obtain tax incentives as development is built;
if the developers do not add value to the properties, they receive
no financial benefit.
Grafton has four
active TIF districts, according to the village website. The oldest
is the TIF used to develop the Grafton business park already built,
where Kapco and the Village Hall are located on Badger Circle.
three TIFs are in the downtown area, the south commercial district
along the west side of Wisconsin Avenue from First Avenue north to
the Interurban bike trail, according to a village TIF map, and the
Grafton Commons development, off of Interstate 43 on the east end of
Downtown and the
south commercial district were areas the village targeted for
infrastructure improvements in the hopes of encouraging
redevelopment and improvements, according to village TIF documents
and plans. Documents from the Grafton Commons TIF state the site had
blight in need of removal, which TIF districting helped complete,
along with encouraging development of Costco and other retail
The village of
Grafton also plans to discuss a new TIF for another business park
off Ulao Road and Highway C. The land in question would have to be
annexed from the town of Grafton into the village.
Administrator Jesse Thyes said discussing a TIF for that project was
expected during Monday’s board meeting, after the News Graphic
deadline, though how it would turn out is not yet certain. ”Based
upon what value MLG (the developer) intends to bring in … we (the
village) have to determine if a TIF district is feasible,” Thyes
Cedarburg’s mayoral candidates weigh in
Local municipalities establish TID districts and offer TIF funding
as a means to encourage development, but this tool is not without
On Jan. 25,
Cedarburg’s Joint Review Board and Community Development Authority
will discuss the proposed tax incremental financing district No. 5,
which would be created as a redevelopment tool for the former St.
Francis Borgia School site in downtown Cedarburg. That has been
approved for development as the Arrabelle multi-family development
by HSI Properties.
funding is necessary to bring a project of this importance to
Cedarburg into an acceptable size and scale for the area and to
allow the developer to design the project in a manner much more
representative of Cedarburg, in
an area so close to our historic downtown,” said mayoral candidate
Mike O’Keefe, who currently serves as an alderman for Cedarburg’s
“A TIF for the
Arrabelle project would represent $2 million-plus in welfare for
luxury apartment developers offered at the eventual expense of our
school systems and other city services that would otherwise benefit
from the anticipated tax revenues this prime real estate would
afford,” said mayoral candidate William Bujanovich. “In a Common
Council meeting just last year, Alderman O’Keefe indicated that, ‘if
we the city did not approve the HSI project, our taxes were sure to
go up.’” The Arrabelle Apartment project consists of 60 high-end
apartment buildings, a building with nine townhome-style units and a
single-family home site.
The TIF proposal
asks the city to spend a total of $1.981 million on the district,
$1.925 million in developer incentive payments and $56,500 in
administrative expenses. In return, the investment will create $8.4
million in land value and improvements for the city.
questions what should happen if the project move forward with TIF
funding. “Where do we go for the lost revenue? This project was sold
by HSI touting the tax benefits to the community and now the same
says the project is not viable because of these anticipated
expenses,” added Bujanovich.
“The city will
not need to borrow any money; the funding is from the additional
taxes which will not exist without the creation of this project,
from a property owned by a non-profit from which we have not seen
any tax revenue at all for decades,” said O’Keefe.
stated that he felt that neither the Spring Street residential lot
or Hamilton Street parking lot, which are part of the proposed
Arrabelle footprint, needed TIF funding for redevelopment.
valuable development sites that don’t need taxpayer aid,” he said.
“The proposed Washington Avenue apartment building is to be sited on
currently vacant land. It doesn’t need taxpayer funds or special
As for the
school site, Bujanovich did not think the property was “in distress
or a blighted property.”
“If at all, this
property suffers from lack of maintenance and if becomes derelict,
the owner should be cited for abandonment,” he said. “This property
is extremely well built and was done so as to stand the test to
time. A developers lack of mathematics and understanding of such a
cost to demolish it does not make the property blighted. Cash flow
or investor portfolio changes making a project less viable do not
qualify it for the establishment of a TIF District.”
the project for the impact it will have on citizens seeking housing
as well as the economic impact they will have on downtown Cedarburg.
provide a Cedarburg alternative for citizens who have lived their
lives here and are looking to downsize, other “empty-nesters” and
those not ready to commit to full home ownership … These individuals
will greatly benefit the health and vitality of our downtown
district, a key to the continued growth and success of the city,”
said O’Keefe. “The alternative is likely years of the blighted
condition of the abandoned school and rectory at the gateway to our