By Shereen Siewert

During a special meeting Tuesday, Wausau City Council members will discuss a joint resolution by the finance and economic development committees to approve a proposed $1 million contribution to a group of local philanthropists to purchase the troubled Wausau Center mall.

In addition to the city’s $1 million forgivable loan, the city will also relinquish about $229,000 per year in ground lease payments and parking revenue when the deal is finalized. The proposal also asks for the city to transfer the former Sears building, which Wausau purchased for about $650,000 in 2017, to the the Wausau Opportunity Fund, Inc., the LLC purchasing the mall.

WOZ was organized and funded by local philanthropic foundations for the sole purpose of acquiring Wausau Center and partnering with city officials to ensure the mall is used “in a manner that supports the quality of life, and long-term economic benefit of taxpayers of Wausau by maintaining an attractive, and vibrant downtown.,” city documents state.

Wausau Finance Director MaryAnne Groat said the Tax increment District, or TID, in which the mall is located does not have the financial capacity to fund the $1 million loan. Instead, Groat is recommending a project plan amendment for one of two nearby tax increment districts that do have funding capabilities to allow for developer incentives within a 1/2-mile boundary. Payments would then be allocated to either of the three districts, dependent upon their financial condition, to allocate financial resources and mitigate risk.

TIF: Does it work?

TIF funding is a popular economic tool created to boost economic development. Every state except one uses the tool which has been a go-to move for many cities trying to revive struggling neighborhoods. Funding is used to fix dilapidated roads clean up pollution, transform blighted property and foster job creation.

When a city designates an area as a TIF district, the property value of all the real estate within its boundaries at that time is designated as the “base value.” This is the amount that, for a set amount of years after the district is created, generates revenue through the city’s property tax process. Everything over and above that, through an increase in value of existing real estate and new development in that time frame, goes into a separate fund earmarked for economic development.

Municipalities can turn around and use this second pot of money to lure private investors with loans and subsidies for commercial projects, or to make public projects more appealing. Sometimes, private entities put money on a TIF district even before the revenue comes in, because they’re anticipating revenue from economic development. The overall idea behind TIF is: By creating these districts, cities can spark new private-public partnerships and new economic activity in a region that may not otherwise see it, and by doing that, widen its tax base.

David Merriman, a professor at the University of Illinois at Chicago, took a deep dive into the efficacy of TIF funding in a new report for the Lincoln Institute of Land Policy. After reviewing available research on the implementation and impacts of TIF, Merriman concludes that the mechanism represents economic development that, in a sense, pays for itself. But in practice, TIF doesn’t always play out that way, Merriman said.

Critics voice concerns that TIF funnels money out of the taxpayers’ pockets and into a special fund that works largely in a rather opaque manner. While some of that money funds essential public works, much has also gone towards erecting new hotels, high-end living spaces and the like — the type of projects, critics argue, should not require such incentives. And the evidence Merriman analyzes suggest that in most cases around the country, the tool did not fulfill its main goal of boosting economic development.

In addition, this is a tool with several drawbacks. According to Merriman, TIFs might “capture” some tax revenue above the capped “base value” that may have been generated anyway through natural appreciation in property values if the TIF hadn’t been created. This is money that taxpayers might have otherwise paid directly towards an overlapping school district, or for public services. And while TIF is not a direct tax increase, it may lead to higher rates or service cuts elsewhere, if the city plans on bringing in the same general property tax revenue as before TIF.

The tax revenue can be used for public infrastructure or to compensate private developers for their investments, but TIF is prone to several pitfalls: it often captures some revenues that would have been generated through normal appreciation in property values, it can be exploited by cities to obtain revenues that would otherwise go to overlying government entities such as school districts, and it can make cities’ financial decisions less transparent by separating them from the normal budget process, Merriman’s report states.

But TIF is good for sparking public-private partnerships that may help fund useful infrastructure that may not otherwise be appealing to investors.

Support from the business community

The mall proposal, though, has solid support from much of Wausau’s business community. City officials received an official letter of support this month from the Greater Wausau Chamber of Commerce, signed by members of the organization’s board of directors, lauding the effort by local foundations to ensure secure local ownership and control of the property. The petition of support also included dozens of signatures by individuals representing banks, nonprofit organizations, downtown businesses and major corporations.

The Mall is located within a so-called federal “opportunity zone,” part of the federal tax cuts and job acts of 2017. The program aims to drive long-term investment into designated, economically distressed areas across the country, while offering potentially lucrative tax incentives to real estate investors. Under the terms of the program, investors can defer capital gains on a previous investment if the money is reinvested into an “opportunity zone” asset.

Under the terms of the proposal, the city would be co-owner and involved as a partner in management of the property for an indefinite amount of time. WOZ does not have a specific redevelopment plan for the mall, but will work with the city to study and investigate possible redevelopment and re purposing all or a portion of the mall and associated redevelopment area.

The mall was listed for sale earlier this year by Miami-based Rialto Capital, which took possession of the property after former owner CBL & Associates surrendered the mall in 2016 in foreclosure action.

Joe Mella, a spokesman for the new nonprofit, Wausau Opportunity Zone Fund Inc., told city officials that the main local foundations involved are the Judd S. Alexander Foundation and the Dwight & Linda Davis Foundation. If the council approves the funding, the LLC will officially file paperwork with the state and move forward with the $3 million purchase.

The special council meeting, which will include a closed session to discuss the specifics of the deal, is set for 5:15 p.m. Tuesday, Oct. 1 at City Hall, 407 Grant St., Wausau.