TIF district closures boost City of Milwaukee tax base

The City of Milwaukee dissolved one tax incremental finance district in 2014, which provided a $54 million boost to the city’s tax base.

The city plans to dissolve two more TIF districts this year, which will provide a combined $34.8 million increase to the city’s tax base.

Of the city’s 47 TIF districts, all but 11 of them have generated increased property values, and that includes four new TIF districts that really have not had a chance to grow yet.

Those are some of the numerous observations that can be gleaned from the city’s annual TIF report, completed recently by the Department of City Development. The report is important because TIF is the most common economic development tool used by the city, and demonstrates the level of success those efforts have had.

TIF districts do not impact the amount of property taxes paid by property owners, but they do impact how property taxes are spent. When a TIF district is created, the amount of tax revenue going from properties in the district to the local governments (the city, county, Milwaukee Public Schools and the Metropolitan Milwaukee Sewerage District) is frozen. As property values rise and tax revenues from the district increase, the increased revenue (the tax increment) is used to pay for infrastructure improvements and/or other subsidies provided to assist economic development in the TIF district. Once the cost of the improvements and/or subsidies is paid for, the TIF district is dissolved and the increased tax revenue (the tax increment) goes to the local governments.

In 2014, the city dissolved a TIF district that was created for the Lindsay Heights neighborhood in 2001. From 2001 to 2011 the property value of the TIF district rose by $54 million.

Nearly $7 million was appropriated in the district to: provide forgivable loans for housing renovation and new home construction; provide a $341,000 loan for the 37-unit Franklin Square affordable housing development at Center and 15th streets; and spend $2.2 million for infrastructure, site and green space improvements for the Josey Heights development.

Josey Heights was to have 37 single family homes and 16 town homes at a site bounded by 12th, Brown, 14th and Lloyd streets, but the project failed during the Great Recession and the property was taken over by the city. However, by the end of 2007, about $2.7 million in loans for housing renovation and new loan construction in the TIF district leveraged more than $31 million in new investment, according to the city’s TIF report. And the $8.7 million Franklin Square project was completed and fully leased in 2011.

This year, city officials plan to dissolve two TIF districts: the Westown Village TIF district and the West North Avenue TIF District.

The Westown Village TIF was created in 1996. The city appropriated $7.5 million in the district to pay for the site assembly for the 139-unit Library Hill Apartments development at North 8th Street and West Wisconsin Avenue. The city also used $100,000 in funds from the district for street paving costs for North 8th Street between Wisconsin Avenue and Michigan Street in 2012.

Because of significant cost overruns and the anticipated future valuation of this project, it was determined that the district would not recover its project costs by the end of its statutory life without an infusion of funds from another source. The Common Council approved an amendment to the Theater TIF district to donate funds totaling $7.4 million over a five-year period that ended in 2006.

The use of TIF funds for the Library Hill project shows how eager city officials were in the ’90s to assist a downtown apartment development. Today, there are numerous apartment developments under construction in the downtown area and most are receiving no city subsidy. The property value for the Westown Village TIF has increased from $14 million in 1996 to $31.6 million in 2014.

The West North Avenue TIF was created in 2000 in an effort to revitalize the North Avenue commercial district between North 31st Street and North Sherman Boulevard. The project is anchored by the Todd Wehr Metcalf Park Community Center and a Pick ’n Save store on North 35th Street. The city appropriated $2.95 million in the district, including $1 million for street lighting and pedestrian improvements and $1.1 million for business development grants or loans to encourage investment in vacant commercial storefronts. Since the district was created, 13 business development grants/loans totaling $984,387 have been awarded to projects in the district. That funding complemented about $23.2 million in private investment, according to the city’s TIF report. The property value of the TIF district has grown from $3.9 million in 2000 to $21.3 million.

The Westown Village and West North Avenue TIF districts could have been dissolved sooner, but the city extended them by a year to provide $1.25 million to the city’s Strong Neighborhoods Program to benefit affordable housing and improve the city’s housing stock.

The West North Avenue TIF and the City Homes TIF were also amended to provide an additional $800,000 to the city’s street paving program.

Similarly, the city plans to extend some TIF districts this year. The City Homes TIF and the New Covenant Housing TIF will be extended for one year, if approved by the Common Council, to fund affordable housing activities.

The property value of the Grand Avenue TIF district has increased by $68.8 million since it was created in 1998 to help revitalize downtown retail and the Shops of Grand Avenue. The Common Council amended the TIF last year to provide $1.2 million to keep the Boston Store, which is not profitable, open through 2018, and to maintain the Bon-Ton Stores Inc. corporate headquarters office with employment of at least 750.

Some of the city’s TIF districts have failed to generate adequate tax revenue growth and need funds donated from other TIF districts to pay for project costs. The 20th and Walnut TIF, the North 20th/West Brown Street TIF and the Metcalf Park Homes TIF will receive donations this year from other TIF districts to insure recovery of project costs. The Florida Yards TIF is expected to recover its costs this year, but received donations from two other TIF districts in previous years.

But the city could dissolve several TIF districts in upcoming years that would result in a major boost to the property tax base.

The most significant is the Beerline B TIF district, created in 1993 to revitalize the Commerce Street area. The costs for the Beerline B TIF are projected to be recovered in 2017, and the district already has an increased property value of $172.6 million.

The Time Warner/Manpower/Schlitz Park TIF, created in 2000, has: assisted with the renovation of the former Commerce Street Power Plant into the Milwaukee office for Time Warner; been used to attract the ManpowerGroup corporate headquarters; and assisted in redevelopment of the Schlitz Park office complex. That TIF district’s costs could be recovered in 2019. The district already has an increased property value of $108.8 million.

The Midtown Center TIF was created in 2000 to assist in the redevelopment of the Capitol Court mall property. The district’s property value has risen from $7.1 million in 2000 to $62 million. The district could recover its costs in 2016.

The total incremental property value (the increase in property value of the TIF districts since they were created) of the city’s TIF districts in 2014 was $1.1 billion, an increase of 1.1 percent.

With so many TIF districts, it may seem like the city is covered with them, but the incremental value of the city’s TIF districts is only 4.2 percent of the city’s total property value, according to the city report.

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