MADISON, Wis. (AP) — The state Supreme Court affirmed Wednesday that municipalities can extend cash grants to developers in a case that solidifies a key economic tool local officials have relied upon for years to boost projects like Wausau’s Riverlife Village development.
The case revolves around efforts to construct the $85 million Confluence Arts Center in downtown Eau Claire. The city created tax incremental financing districts to help fund the development.
Municipalities often create TIF districts to help revitalize blighted areas. The districts provide grants to developers and fund roads and other infrastructure. The money comes from property tax revenue generated within the districts. Eau Claire city officials have offered nearly $6 million in TIF grants to the Confluence’s owner-developer.
The Wisconsin Institute for Law and Liberty filed a lawsuit in 2015 on behalf of taxpayers challenging the Confluence districts’ creation and the cash grants. The firm argued the city didn’t justify the districts’ creation and the areas weren’t blighted. The cash grants amounted to a tax rebate, violating provisions in the state constitution that property taxes must be levied uniformly, the firm insisted.
The lawsuit raised doubts about the validity of TIF cash grants across Wisconsin.
Eau Claire County Circuit Judge Paul Lenz dismissed the case, finding that any harm resulting from the districts was highly speculative.
The Supreme Court upheld that decision in a 5-2 ruling Wednesday, finding that the taxpayers failed to show the grants were intended or used to pay the owner-developer’s property taxes. They also failed to state claims for which relief could be granted.
“Big win for the city of Eau Claire, a big win for economic development in the city of Eau Claire and statewide,” Eau Claire Assistant City Attorney Doug Hoffner said in a telephone interview. “(The grants are) an incredibly important economic development tool. This decision impacts billions of dollars of economic development statewide.”
The Supreme Court did grant the Wisconsin Institute for Law and Liberty’s request to order a lower court review of whether the city can show the site was truly blighted and development was impossible without creating the districts. However, the legal standard for review calls for presuming the city’s decisions were correct, which means the law firm faces an uphill battle.
“I don’t see a scenario where the court does anything more than dispose of what’s left of the case,” Hoffner said.
The League of Wisconsin Municipalities issued a statement that the Supreme Court reaffirmed that judges aren’t in a position to second-guess a community decision to use TIF districts and reviews of such decisions are limited to looking at whether the decision was unreasonable or arbitrary.
“This is an affirmation that local governments have the discretion they need to make important legislative decisions,” the statement said.
Wisconsin Institute for Law and Liberty President Rick Esenberg said he was disappointed with the decision. He said municipalities are abusing TIF districts and private developers are getting too much public money.
“They’ve been creating districts whenever they want to, for whatever reason they want,” he said. “It’s time for the Legislature to take a close look at these districts and see if they’ve gotten out hand.”