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Tuesday

September 2014

2

Crunch time for donor TIF approval

City working faster after state help falls through

City of Oconomowoc - No one spoke in opposition of the city's quest to create an opportunity to help its ailing downtown tax incremental financing district (TIF) at a public hearing Wednesday.

In fact, no one appeared at all for the public hearing, which is the first meeting of many in the process to create a donor TIF from the Pabst Farms TIF 3 to downtown's lagging TIF 4.

A lack of development downtown coupled with news last year that the state had changed the way it calculates the equalized value of TIFs created a bleak outlook that TIF 4 would be repaid by its closeout date. Even though TIF 4 isn't set to close until 2030, City Finance Director Sarah Kitsembel said $25 million in new development would be needed before that time.

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 Wisconsin Avenue reconstruction could fall on taxpayers, the city discovered it could have money donated from another TIF. The city is pursuing establishing a donor TIF from the Pabst TIF 3 to downtown TIF 4.

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.

However, the city is now seeking approval from governing bodies to keep the Pabst TIF open so it can be used as a donor TIF for downtown.

The process is lengthy and recently became lengthier when a request for Rep. Joel Kleefisch to push for the approval of an amendment to the donor TIF law did not happen. Under state donor TIF legislation, to qualify for a donor TIF both districts must have the same taxing jurisdictions. However, TIF 4 has 23 parcels included in the Lac La Belle Management District. Gard said the parcels contribute less than $200 to the district.

This spring, the city met with Kleefisch asking that he present an amendment to the donor TIF law that would offer an option of approval of donor TIFs that have overlapping districts similar to Oconomowoc's. Kleefisch agreed to work to get the amendment passed, but later said the issues going on in Madison over Act 10 made it impossible, according to Gard. Kleefisch did not respond to messages for comment. His aide said he is currently on vacation.

"He offered to meet with us to look at moving the legislation forward when the next session convenes," said Gard. However, that will be too late for the city.

Director of Economic Development Bob Duffy said because the legislation was not passed, the city is under a time crunch to remove the parcels and then follow through with the donor TIF process before the Pabst TIF closes in a few years. Duffy said that lake, fire and other specialized taxing districts are common in state municipalities, and the legislation could help others in the future.

Next for the city is the joint Board of Review and Common Council approvals in August for the parcel removal,which must be completed by September. Then starting next year the city can begin the process of establishing a donor TIF.

Duffy said it's unlikely that projected development downtown - including the Rockwell development and a new apartment complex - would be in time to help. He said all future development in the downtown TIF must be self-sustaining because the city does not plan to borrow any more from the currently underperforming TIF.

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