The La Crosse Common Council will vote Thursday on a plan to create three new Tax Increment Districts (TIDs) that would pay an estimated $6.5 million in incentives for developers.
A strong majority of the council appears to be in support of the creation of the TIDs, which have already passed through several committees unscathed. But one council member is urging the council to proceed with much greater caution.
“I’m very, very concerned. It’s like watching a train wreck in slow motion,” said council member Jessica Olson. “The potential people who would benefit from the establishment of these TIDs is a very short list, and it’s already written.”
Two of the TIDs the council will vote on creating are on riverfront areas on the northside of the city, and one of those is connected to the proposed River Point District. The third proposed TID is on the site of the former Kmart on State Road.
One of Olson’s concerns with the plan is that the council is being asked to vote on the creation of the TIDs without first seeing draft agreements with developers that would offer some detail on who would benefit and what kind of projects are planned. She said that was highly unusual.
“It’s almost a blank check because you don’t know how much increment you’re going to have,” Olson said.
In a TID (often called TIF districts), the value of the assessed property in the district is frozen when the district is created. Then, as the value of property in the district increases as it’s developed, tax revenue from the “increment” above the frozen value is used to pay for incentives and service debt created to pay for infrastructure projects.
A key component of TIDs is the so-called “but for” test. The idea is that “but for” the creation of the TID, the proposed development in the district would not be viable. For Olson, in this instance, the “but for” test is difficult to assess without seeing draft development agreements that would show the kind of projects being considered for the TIDs.
However, other council members have few concerns about the creation of the new TIDs or the incentives that may be offered to developers. Council member Roger Christians told the La Crosse Independent that he trusted city officials based on their track record on TID projects in the past. Christians pointed to Three Rivers Plaza on Copeland Avenue as a successful example of a TID project in La Crosse. The Three Rivers Plaza development brought millions of dollars of investments to a blighted area through a mixed development of retail, office and residential units that’s anchored by a Festival Foods grocery store.
In addition to TIDs helping to lure developers to a site through incentives, they are also used to pay for public infrastructure, like water, sewer and street improvements that lay the foundation for development.
There has long been criticism of TIDs as a taxpayer-subsidized tool to attract development. Many see the tool as a giveaway to developers that doesn’t always have broad benefits for communities and one that has been overused by municipalities.
City of La Crosse Director of Planning Jason Gilman, at a city committee meeting last week, said it was true that the TID process was sometimes misused. But he said the city of La Crosse required developers to commit to high standards and provisions for the common good, such as “inclusive housing” in districts with a residential component. Christians said one of the reasons he had faith in the process was because Gilman had overseen plans for the new TIDs. Gilman, however, recently announced he was resigning from his position, in the wake of steep cutbacks in city spending.
Another criticism of TIDs is that once the value of the property in a district is frozen, all of the increment above that amount goes to the TID, meaning other taxing bodies, like the school district, miss out on the benefits of any new development until the TID expires, as do the various departments. The TIDs the council will vote on this week have an expected lifetime of 21 to 23 years. In Wisconsin, the maximum allowed life of a TID is 27 years, with the possibility of a three-year extension.
A joint review board, which includes representatives from the school district and the county, gives the different taxing bodies input on the development of new TIDs, but it usually backs their creation.
Although the city is estimating it will spend $6.5 million on incentives for developers in the proposed three new TIDs, it expects the value of development created will be many times higher, producing significant economic benefits. However, the development incentives are only part of the cost of the TIDs. The overall cost of the three proposed new TIDs to the city is an estimated $34.6 million, including the incentives, infrastructure costs, property acquisition and other expenses. In theory, tax revenue from new development should cover those costs.
One of Olson’s concerns is that once a TID is created without the council at least seeing a draft agreement with developers, a future council could be pressured into supporting less than ideal projects or incentives as the clock winds down on a TID.
“I don’t oppose anybody developing in the city,” she said. “But we have to have a level playing field with transparency and accountability to the public – that’s the bottom line.”
In addition to voting on the creation of new TIDs this week, the council will also vote to amend seven existing TIDs, which includes a boundary change to one TID and allowing the other TIDs to share revenue with other districts. The council meeting is 6 p.m., Thursday. More details here.
By Eric Timmons. Email questions to firstname.lastname@example.org.