News Column

Confluence foes, backers differ on TIFs

February 12, 2014

By Eric Lindquist and Andrew Dowd, The Leader-Telegram, Eau Claire, Wis.

Feb. 12--Opponents of the $77.2 millionConfluence Project expanded their campaign against the potential downtown arts center, student housing and commercial development Tuesday by attacking the method proposed to fund city expenses associated with it.

The Citizens Referendum Committee released documents purporting to show the risks and pitfalls connected with using tax increment financing, or TIF, funding to pave the way for the project.

Using TIF funding to finance the Confluence is "crony capitalism," Confluence Project opponent Cindy Burton said, noting she objects to the idea of government getting involved in business through a private-public partnership to build the project.

In TIF districts, the city makes improvements to utilities and roads to entice developers. Those costs are repaid by the increased taxable value of those projects.

"It's a way that the general taxpayer doesn't have to front the cost of a project because the project itself -- the new tax valuation -- pays the debt for the improvements rather than the taxpayer," said Mike Schatz, city economic development administrator. "But (Confluence referendum proponents) are making it seem like it's just the opposite."

A Citizens Referendum Committee document titled "The Myths of TIFs" makes the case that taxpayers would be on the hook for paying back the bonds used to fund the improvements if the assessed value of the TIF's property doesn't rise enough to cover the principal and interest payments.

However, the Confluence Project advocacy group Voices for Growth issued its own rebuttal statement Tuesday, accusing detractors of offering a biased perspective on the city's proposed TIF use.

The group indicated the mixed-used building along Barstow Street that would include retails shops and restaurants on the first floor and student housing on the floors above has been guaranteed by the developers to have a value of at least $21.5 million. The tax increment of $500,000 generated by the $19.3 million increase from the current value of the property would cover city's financing of the $5 million investment in the arts center, the statement continued.

"In other words, the tax increment generated by the mixed-use facility covers the investment in the performing arts center and no taxpayer funds are used to make the city's investment in the performing arts center," the Voices for Growth statement says.

The group also touted the Confluence Project's expected ability to foster additional downtown development, thus generating even more new tax revenue.

Common tool

Schatz said TIFs are among the most widely used and effective economic development tools employed by Wisconsin municipalities to promote tax base expansion. TIFs were created by the Legislature in 1975 as a way of eliminating blight, rehabilitating declining property values, promoting industry or encouraging mixed-used development.

The city used a TIF district, for instance, to fund improvements needed to attract Hutchinson Technology Inc. in 1995, he said.

"Critics can say what they want about it not working," Schatz said. "But without that tool, we would not have been able to attract a company like HTI and all of the wages and taxes they have paid for nearly 20 years."

The city's Oct. 22 pledge of $5 million toward the arts center included a provision that an existing downtown TIF district be amended.

Approved by an 8-3 vote, the council's pledge would not come from general tax revenue. However, the wording of the measure did not specify which funding source the $5 million arts center contribution would come from. The city did specify that any additional funding toward the Confluence Project for site preparation, infrastructure and parking would come from TIF financing.

Beyond what's already pledged, Confluence Project backers are seeking $5.9 million from the city for site work for the mixed-use building. The council has not yet amended the TIF district or decided on that additional contribution.

Differing views

At Monday night's City Council meeting, supporters of a citywide April 1Confluence Project referendum criticized TIF districts.

Maryjo Cohen, president of National Presto Industries, an officer in three local charitable foundations and a leading voice against the project, called TIF districts unjustifiable from an investment point of view and labeled existing downtown TIFs a "disaster."

Burton argued that using a TIF district to support a private development amounts to the City Council "picking losers and winners," a concept she opposes.

City Manager Russell Van Gompel, however, cautioned that it is extremely difficult for private developers to pursue major downtown projects without public involvement because of the necessity to combine so many older, smaller parcels. The run-down condition of parts of downtown is evidence that such projects usually don't happen on their own, he said, citing the North Barstow TIF district that led to Phoenix Park, RCU and other new developments replacing a bunch of dilapidated buildings.

Proponents suggested a successful TIF can lead to improvement of a district that benefits the whole community.

Downtown buildings in the Confluence area have fallen into disrepair, and Councilwoman Kathleen Mitchell said the TIF program can assist in redevelopment there.

"TIFs are one of the best tools that cities have for economic development, particularly in blighted areas like our downtown," said Mitchell, who has been supportive of the Confluence Project.

Even though it can take decades for new construction in TIFs to pay off the city's borrowing for infrastructure and go onto the property tax rolls, Mitchell said the alternative is no new development.

But Councilman Bob Von Haden, a Confluence skeptic who voted against the city pledge, contended that businesses that built in TIF districts likely otherwise would have gone to other parts of the city.

Von Haden also disagrees with those who point to the vacant buildings at the proposed development site at the confluence of the Eau Claire and Chippewa rivers as an example of downtown blight.

"Every building in there would've been occupied right now had it not been for the Confluence Project," he said, suggesting private developers would develop the land on their own if local government stayed out of the way.

Lindquist can be reached at 715-833-9209, 800-236-7077 or eric.lindquist@ecpc.com. Dowd can be reached at 715-833-9204 or andrew.dowd@ecpc.com.

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(c)2014 the Leader-Telegram (Eau Claire, Wis.)

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Source: Leader-Telegram (Eau Claire, WI)


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