By Peter Weinschenk
My wife, Susan, and I bought our house in Edgar in 1987 for $39,500. The home, built in 1917, was originally a farmhouse located on the outskirts of town which featured a small red wooden barn. The house suffered a top floor fire in the mid-1930s. People told us they could see the house fire flames all the way from downtown Edgar.
This meant that as I remodeled the house room-by-room over the next 16 years, using the barn as a woodshop, I encountered evidence of the fire. When I whacked off the plaster from the living room ceiling, ashes and charred wood spilled down on my head. It was a good life lesson. You take life as you find it.
As the house was slowly remodeled, it gained in value. By 1994, our house’s assessment grew to $41,400 and, within another seven years, to $90,800. By 2007, our home was assessed at $134,200.
With a rising assessment, I saw my property taxes increase, too. I paid more for all of the things itemized on the property tax bill I received in December, including village, county, K-12 school and North Central Technical College (NTC) services.
It turns out that I was paying more for one additional thing not listed on the property tax bill. This was the Wausau Center Mall, a major economic development project located 18 miles east of my house.
Over the last year, I have researched just what I and other county taxpayers paid for the mall. I wanted to find out whether Tax Incremental Finance subsidies used to support the mall were ever repaid to taxpayers and, if not, whether that proved the weakness of how we, as a county, approach economic development.
Here is the bottom line of my research. My family paid a net subsidy of $110 (in inflation adjusted 2023 dollars) for the mall by the time the retail center was bulldozed in 2021.
My gross subsidy for the mall between 1987 and 2017 was $141.90. This was during a period when the mall didn’t pay regular property taxes on its new buildings, but, instead, an “increment tax” that paid down the City of Wausau’s development loan for the mall. In 2008, after the mall paid off the city’s loan and began paying regular property taxes, I earned $32 in property tax relief. In the end, the mall died before it could fully repay my subsidy.
Tens of thousands of other county property taxpayers suffered the same loss I did, either more or less, depending on the taxable value of their property.
This is research that cries out for reform. Local governments, including Marathon County, should not be satisfied that a Tax Incremental Finance project, such as the Wausau Center Mall, delivers merely jobs and commerce, but should insist that property tax relief be included in any project’s list of benefits and, further, demand that any proposed project include a realistic schedule detailing when property taxpayers will be fully repaid for the subsidies they finance.
Some would argue that Tax Incremental Finance projects should not be judged strictly by their property tax performance, but, instead, be measured by “big picture” economic development gains. In this view, jobs, access to shopping, sales tax revenue and community pride outweigh the few bucks each year any taxpayer might pay to support a Tax Incremental Finance project.
I get it. I paid an average of $3.24 a year net for over 34 years to support the Wausau Center Mall. In exchange, I got to shop for underwear and socks at JCPenney. I bought the bourbon chicken at Zhou’s Mongolian Barbecue. I got to blush when I walked past the oversized photographs of scantily clad models in the windows of Victoria’s Secret. My son, Guthrie, got a job at the mall. He folded teen clothes at Hollister. Janet Planet, a beloved Wisconsin jazz singer, sang a song my wife composed in the mall’s central court after an outdoor concert in Wausau got rained out. The performance is a cherished family memory.
Still, I would argue that there are four reasons why Marathon County Tax Incremental Finance projects should not be solely approved based on promises of general economic development, but, instead, should commit to repay subsidies to property taxpayers.
First, a Tax Incremental District in Marathon County has to benefit the full community, not just a part or, let’s say, a more affluent part of the community. Yes, a retail shopping center, such as the Wausau Center Mall, can offer goods to people with with money to spend. But not everybody can shop at a mall. Yet everybody pays property taxes.
Second, a Tax Incremental District project in Marathon County should, on balance, make county taxpayers wealthier, not poorer. A project that fails to repay taxpayer subsidies isn’t benefiting the county. It is costing the county. Such a project may turn the wheels of commerce faster, but it is draining our checking accounts.
Currently, the owner of an averaged priced $214,238 house in Marathon County pays an additional $301.47 in property taxes each year to subsidize the county’s 39 Tax Incremental Districts. This is in the same ballpark for what an average taxpayer pays for important county services, such as, for instance, the sheriff’s department ($348.83) or the highway department ($154.13). The City of Wausau’s close out report for Tax Incremental District No. 1 shows that county taxpayers paid $57.7 million (2023 inflation adjusted dollars) in higher property taxes to subsidize the Wausau Center Mall. They received $7,984,098 (2023 inflation adjusted dollars) in tax relief before the mall was hauled away in 2021. This is a major financial loss, equal to something like an entire county property tax levy for a year.
Tax Incremental Finance advocates point out that “investments” in projects like a mall reap a “multiplier” of economic development benefits. But I would argue, too, there is a negative multiplier that burdens a community’s fiscal health when subsidies are never repaid. Marginal businesses will close when people have to pay higher property taxes than they otherwise would have to.
Third, a Tax Increment District in Marathon County that reimburses property taxpayers for their subsidies stays true to the spirit of state law. The state Department of Revenue’s Tax Incremental Finance Manual states that the “basic function” of a Tax Incremental District is to “create a larger tax base for the municipality and the overlying taxing jurisdictions” and the reason to do so is because “when the tax base grows and spending is stable, tax rates go down, decreasing property taxes for everyone.” The Department of Revenue tells us here that the overarching purpose of Tax Incremental Finance is eventual property tax relief. Something is dramatically wrong when a Tax Incremental District hurts property taxpayers in the end.
Fourth, a Tax Incremental Finance process in Marathon County that gives priority to taxpayers will be more cautious, make smaller bets and be less prone to risky, grand schemes. Some might argue that the City of Wausau would never have attempted the Wausau Center Mall if, as a first consideration, it had to strictly promise to repay taxpayers for the subsidies they funded. But, looking back, would that have been such a bad thing?
In 1981, the city demolished 67 downtown retail businesses, many with upstairs rental apartments, built and then bulldozed a mall and, now, a short four decades later, wants to rebuild storefronts with high-rise apartments all pretty much in the same part of downtown. The project price tag for this circular “development” will easily top $100 million. Would it have been more prudent and less costly to, perhaps, rejuvenate Wausau’s old storefronts and downtown housing slowly over time rather than gamble big on a landlocked upscale mall unable to add anchor stores? Would these smaller businesses have been better able to compete with the “big box” discount stores that had already started to locate on the fringe of the metro area?
These are questions that, perhaps, are impossible to answer. And, further, it is pointless to re debate the city’s development decisions going back decades. But we can learn something here. It is that the modern economy is hard to predict and that it can prove foolhardy for governments to make economic development commitments far into the future. Things can go badly. People who support Tax Incremental Finance say it is a municipality’s “only tool in the toolbox” to grow a local economy. That may be so, but we should recognize that this tool is not a screwdriver or pliers, but a jackhammer. It is powerful and, often, unpredictable. A taxpayer centered Tax Incremental Finance program will allow governments to use this tool in a controlled and productive way over a shorter, more reasonable timeframe.
I don’t expect politicians in Madison to reform the state’s Tax Incremental Finance law. Both Republicans and Democrats in the statehouse fully support Tax Incremental Finance. It is more likely, as has happened over the last number of years, that a bipartisan coalition within the legislature will further liberalize Tax Incremental Finance regulation.
This means that it falls to local government boards, members of the Joint Review Board (the state-mandated local committee that oversees tax incremental districts) and regular citizens to insist that Tax Incremental Finance projects are set up in a way that protects the long-term interest of taxpayers.
The Marathon County Board of Supervisors is expected in March to debate what its Tax Incremental Finance policy should be. Prior to this debate, citizens should tell their supervisors that they want a new approach to Tax Incremental Finance, one that puts taxpayers first, not last.
Making change happen will prove no easy task. Currently more than $1.4 billion, or eight percent, of all Marathon County property is part of a Tax Increment District. Tax Incremental Finance is an integral part of how business gets done in our county.
But we should not shrink from reform just because reform will be hard. You take life as you find it. And then you make things better.
