By Shereen Siewert
A Wisconsin lawmaker, after learning Wausau City Council members were unaware of a plan to create a new tax increment financing district, is pulling back on legislation that would relax state rules to form its creation.
Wausau Pilot & Review on Feb. 25 broke the story after being alerted to the proposal by Dist. 3 Alderman Tom Kilian, who said he was surprised and dismayed to learn the plan was not shared with council members and was kept secret from the public. City Council President Becky McElhaney said she, too, was unaware that a new TIF district was in the works to help fund development at the former mall property now owned by Wausau Opportunity Zone, Inc.
State documents show City Finance Director Maryanne Groat approached lawmakers as early as Dec. 7 on the proposed legislative exemption. Mayor Katie Rosenberg, who was copied on the request, was also aware of the plan, public documents show.
“Yes, the mayor was included in the discussions and decision to seek the exception, Groat said, in an email.
The public was not.
Wisconsin Reps. Patrick Snyder (R-Schofield) and John Spiros (R-Marshfield) co-sponsored the bill, which passed the state Assembly last week. Wisconsin Sen. Jerry Petrowski (R-Marathon) was also a co-sponsor of the bill, which was next headed for the state Senate. The bill sought to add a new TID that encompasses the former mall property, land that is now privately owned, and asked for an exception to state rules that require the equalized value of taxable property of a new or amended TID not to exceed 12 percent of the total equalized value of taxable property in the city.
Groat explained the rationale in her December letter to lawmakers by saying that part of the mall redevelopment plan “has been to bring the mall property into TID 13 once the demolition of the property was complete.” But today, no TID 13 exists.
Snyder, in a Tweet, confirmed Petrowaki will no longer support the bill.
Until November 2020, Groat played a dual role with the city and as a voting member of the WOZ governing board. Then-Economic Development Director Chris Schock made the non-standard request that resulted in her appointment. Groat then resigned as a voting member of the governing board of WOZ.
Sen. Petrowski released this statement to Wausau Pilot on Monday: “This bill was intended to give the city an option to help with the redevelopment of the old mall property, but at this late date I don’t see a route for the bill to become law.”
Good Jobs First: TIF agreements bad for schools
Good Jobs First calls TIF agreements “worse than ever for schools,” noting that revenues are then diverted from local school districts and their students. Good Jobs First is a national policy resource center for grassroots groups and public officials, promoting corporate and government accountability in economic development.
Will Jason of the Lincoln Institute for Land Policy said the over-capture of revenue via such funding “diverts resources away from public services citywide.”
Tax increment financing, or TIF, subsidizes companies by refunding or diverting a portion of their taxes to help finance development in an area or on a project site. Many proponents of TIF argue that improvements made under the program “pay for themselves.”
“That is, cities and towns assume that TIF will spur new development, increase property values, and create new tax revenue that would not have existed otherwise, which will be used to pay off the costs of the development,” according to Good Jobs First. But that, critics say, is a risky wager because it assumes that “but for” the TIF, no development would have occurred in the TIF district and property values would have remained unchanged.
“In reality, it is impossible to know whether a project will successfully generate the anticipated tax increases,” a Good Jobs First description on the funding tool reads. “It is also difficult to determine whether property value increases that do occur in TIF districts were exclusively the result of the TIF.”
During the time that TIF projects are active, overlapping jurisdictions receive property tax revenues on base property values only. They do not receive tax increment dollars, yet they must spend more to cover local service costs because of redevelopment projects in the TIF jurisdiction, and while they might benefit from TIF ultimately, these benefits tend to be many years into the future, a Brookings Institute study reports.
Former mall redevelopment costs mount
Wausau taxpayers have already paid more than $6.3 million to fund the redevelopment.
The Wausau City Council in October 2019 approved a proposal by WOZ to purchase the Wausau Center with $1.6 million in taxpayer-funded incentives that included a $1 million forgivable loan and transfer of city-owned assets to the LLC for $1. Those assets include the former Sears building, which the city purchased in 2017 for roughly $650,000.
Then in November 2020, the Wausau City Council approved a proposal to spend an additional $4.7 million to help fund demolition and redevelopment of the mall space. The city this year applied for a $10.5 million Neighborhood Investment Grant, money earmarked to assist COVID-affected Census tract areas, to fund a pedestrian bridge envisioned by WOZ as part of the mall redevelopment project
Also in November 2020, Wausau Pilot & Review reported that Wausau intended to reimburse property taxes to WOZ, a practice prohibited under state law. The newspaper relied on numerous public records for the report.
Early on in the process, term sheets between WOZ and the city regarding the purchase contain phrasing about reimbursing WOZ for “property taxes.” But later, that phrasing was struck out and changed to “cover anticipating operating costs shortfalls,” a change that could be the result of communication advising such action would be illegal.
But shortly after, the city pivoted, providing WOZ a grant for $327,000 – roughly the same amount as the 2018 tax bill for the property, according to city documents.
In a Sept. 20, 2019 email string obtained by Wausau Pilot & Review under a public records request, city officials were advised by Quarles & Brady attorney Isaac Roang that the 2018 tax bills for the property were “approximately $327,000.” In the same email string, the attorney provided a link to the specific League of Wisconsin Municipality’s pagethat states a municipality can’t “offer to waive or reimburse payment of property taxes, as an incentive to businesses or other property owners to locate in the community” – and also advised that “the City is still thinking of ways to restructure the payment.”
On Sept. 1, WOZ received a Tax Increment Financing grant of $327,000.
Rosenberg, in an email to Wausau Pilot, acknowledged she knew of the plan and said she was “skeptical” the Senate would take up the issue.
“I knew the team was talking to Sen. Petrowski and Rep. Snyder about this but haven’t been involved in those discussions,” she said. “I did ask that no matter what happened, to make sure that the council would have an opportunity to vote on anything coming out of this and if this were to pass. And the team ensured that would be the case. The council would have to decide if they wanted to use this option. They could decide to do nothing or they could go a different direction. I look at part of my job as gathering the options for council so they can decide the course of action they want to follow.”
Groat, in an email said In considering the next steps for mall redevelopment the 12% threshold became a compliance requirement that needed consideration.
“If you review the State Statutes the Village of Weston and several other communities have received similar exemptions,” she said. “This does not preempt or circumvent the TID approval process outlined in the State Statutes.”
