Pabst TIF to soon help struggling downtown TIF
Donor TIFs can help others lacking increment
City of Oconomowoc - Despite the lack of a regional mall, the Pabst Farms area has developed well enough over the past several years to create a successful tax increment. The increased property values are so successful, in fact, that the city is exploring ways to use extra increment from a tax incremental financing district (TIF) created for Pabst Farms - TIF 3 - to help a lack of development downtown in TIF 4.
TIFs are methods of borrowing money for public projects against the projected future increase of property tax revenues in the project area. The completion of the project results in an increase in property value and tax revenue called the "tax increment." In an effort to avoid missing repayment, which could result in the $6 million spent on the Wisconsin Avenue reconstruction falling on taxpayers, the city discovered it could have money donated from another TIF.
TIF 4 isn't set to close until 2030, but City Finance Director Sarah Kitsembel said $25 million in new development would be needed before that time. Wisconsin also changed the way it calculates the equalized value of TIF districts, creating a bleaker outlook that TIF 4 would be repaid by its closeout date.
The Pabst TIF was created in 2001 and assessed then at $6 million. Since then, its value has grown more than $275 million, even with the mall property still sitting undeveloped. City Administrator Diane Gard said that even with no more development, the Pabst TIF will likely pay off ahead of its 2017 end date.
The city is establishing a donor TIF from the Pabst TIF 3 to downtown TIF 4. However, under state legislation, to qualify for a donor TIF both districts must have the same taxing jurisdictions. TIF 4 has 23 parcels included in the Lac La Belle Management District that must be removed to establish the donor TIF.
The city's Joint Review Board held a public hearing Dec. 4 and approved plans to exchange the land. Gard said the action was taken with no opposition. The next step is to present the changes to Common Council on Jan. 3 and then return to the Joint Review Board on Jan. 7 for final approval before submitting the request to the state Department of Revenue.
The city does have two projects on the slate that will eventually add about $20 million of increment to the downtown TIF. The Fowler Lake Village is anticipated to add $16 million and The Worthington, $3 million. However, Director of Economic Development Bob Duffy said neither of the projects' tax increment will be on the books in time for TIF 4 repayment.
"The increment will not be realized in time because the value doesn't take place until Jan. 1 after the project is built. We can't use value that is not there," explained Duffy.
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