By Keene Winters
Happy birthday TID #3! On Sept. 1, the city’s largest active Tax Incremental District (TID) turned 25 years old. TID #3, sometimes referred to as the “downtown TID,” was opened in 1994. Today, it contains some of Wausau’s most iconic buildings and has made substantial strides in cleaning up the riverfront. However, questions linger about whether the district has been a well-managed and effective use of public funds or whether it has any lessons to teach us.
TID #3 contains the United Healthcare building, the Dudley Tower, the Wisconsin Eye Clinic, The 400 Block and Pick-N-Save. But it is also the home to more controversial structures like Wausau on the Water, the park under Bridge Street and the ongoing Wausau Riverlife development. It even funded the city’s purchase of the Sears building, one of the former anchor stores at Wausau Center mall. There is no question that the TID has transformed portions of the downtown landscape, but was it worth the price?
City documents show for the year ending December 31, 2018, Wausau directed the investment of $139.3 million in public funds into the district since its inception. No information is available on how many private dollars have been invested in TID #3, but it is certainly tens of millions more. Yet, for all of that, the property tax valuations in the district have risen just $137 million over the same period. So, assuming total public and private investment comes in around $200 million, then we are only getting about 68 cents in new tax base for every dollar invested. If you or I spent $200,000 constructing a new house and the property was only worth $137,000 when it got done, we would want to have serious talk with the builder.
Public investment in development is usually justified as a catalyst for private investment. Development professionals often look for each public dollar invested to be matched by three or four private dollars and for all of those dollars to be reflected in new tax base. Clearly, TID #3 is far from having numbers like that.
Say TID #3 had performed on the low end of those benchmarks. Imagine that each public dollar had attracted just $2 in private investment and that all three were reflected in the tax base of the district. Then, instead of increasing valuations by $137 million, the city would have garnered $417.9 million in new taxable property.
What would that mean? The aggregate property value of the entire City of Wausau would now be around 10 percent higher. TID #3 would have already generated enough cash to have retired its debt and to return to the tax rolls. City taxes could be 10 percent lower. Also, county and school district taxes could be lower, too. The economic outlook for Wausau would be significantly different if TID #3 had achieved even a modest degree of financial success.
As it stands, TID #3 is not going to close and return to the general tax roll any time soon. TID # 3 has been declared a “distressed TID,” extending its maximum statutory life from 27 to 37 years. As of the start of this year, it still had $30.1 million in outstanding debt, and it was projected to take until 2031 to retire it. Even with the extension, TID #3 will never generate a positive cash flow before it closes without the infusion of tens of millions of dollars from other city TIDs.
Could we have done better? The last three years of machinations over the Riverlife Project have revealed some clear deficits in the city’s ability to manage development projects. What is unfortunate is that Wausau has chosen to act as its own developer in all of TID # 3, building the infrastructure and amenities itself and selecting “sub-developers” for individual projects to fill in the area. The city has bought the land and prefers leasing it rather than selling it. The stated objective all along has been for the city to retain maximum control over the area’s development.
In the name of controlling the development for the public good, Wausau has essentially had a giant downtown development run for 25 years by government committee. The predictable results have been high costs and low returns to the taxpayers as well as slow progress in completing the work. At very least, the policy of creating such large and sweeping tax incremental districts like TID #3, #6 and #8 should be reconsidered in favor of smaller TIDs with a more narrowly defined set of projects.
As an alternative, the city could have offered the land for sale to a developer with a master plan and then used the sales contract, zoning powers, and development incentives to guide the development and insure public access to the riverfront. In this latter model, the land would have been returned to the tax rolls immediately, providing the city more revenue to retire its TID #3 debt. Also, one would expect to see developments finished sooner, since the private developer would need revenue to pay his or her property taxes and other costs.
Is help on the way? Recently, a coalition headed by the Judd S. Alexander Foundation and Dwight & Linda Davis Foundation have made a bid to take the redevelopment of the Wausau Center Mall out of the hands of city government.
The competent and successful redevelopment of the mall site would be a refreshing change. However, I cannot help having reservations over this 11th-hour intervention. First, it asks for a lot of public money to be turned over to a fairly opaque decision-making entity. Secondly, the rushed request is based on the same old dubious premise that “we” need to own the site to control it. Finally, it appears to be aimed at propping-up a failing system rather than fixing it. Even if successful, it is hard to see this as a blue print for managing the many remaining projects in TID #3 and its successor, TID #12.
There are lessons to be learned from TID #3. Spending money is not hard; translating that spending into new tax base takes a higher level of competence.
As for the help of the foundations, we probably should not look a gift-horse in the mouth. However, nor should we allow that proposal to be a distraction from the serious need to fix Wausau city government.
