Some developers planning projects in the Park East Freeway corridor and City of Milwaukee officials are debating about whether or not the city should provide tax incremental financing (TIF) assistance for projects in the corridor.
The developers say TIF would allow them to do bigger developments creating more jobs and, eventually, a greater boost to the city’s tax base.
While supportive of providing TIF financing in some instances, some city officials say they are reluctant to provide a subsidy for projects that compete with existing hotel and retail businesses and developments in the downtown area. After all, why should the tax dollars from existing businesses be used to help create new businesses to compete against them?
With so many residential developments in the downtown area in recent years, city officials have not provided TIF for residential projects unless they are used to assist in redeveloping heavily contaminated properties, such as the former Pfister & Vogel site, which is being redeveloped by Mandel Group Inc. into a large residential development.
But with a weak office market downtown, city officials approved a $25 million TIF for the new Manpower Inc. corporate headquarters, which is under construction. It should be noted that that project will bring about 1,000 jobs downtown.
Non-subsidized projects provide a boost to the tax base faster than TIF projects. If a TIF is used, the increased tax revenue from a development first must be used to pay back the money borrowed for the TIF funds before the local taxing authorities can collect the increased tax revenue. For that reason, local government officials prefer non-subsidized projects.
In some instances, a development could not occur without TIF assistance. But in others, a development could still succeed even without TIF help.
So when is TIF appropriate, and when is it not? Small Business Times posed that question to members of the region’s real estate industry. Here are some of their responses:
"On developments that have a financial gap that needs filling if the economic benefits outweigh the immediate costs. Or where the community has a severely blighted area that it needs to be redeveloped and knows that the economics are such that whatever were to be developed on this challenging site would require an economic incentive to attract local developers to it."
– Bob Gintoft, senior vice president of MLG Commercial.
"I believe TIF is the most effective tool a municipality can apply when it’s leaders are wholly committed to redevelopment, growth and quality. Having worked in numerous communities, we see first-hand the benefits of strong and committed leadership at the municipal level. Developers, property owners and businesses admire and value that commitment. When a TIF district is properly conceived, planned and adopted, it sends the signal that a community is dedicated to making positive changes and that investment in that community is protected."
– Steve Holzhauer, principal, Eppstein Uhen Architects.
"TIFs are only fair if they are structured to benefit a broad group of people in the community, not one or two of the mayor’s buddies."
– Robert Clemen, managing member, InvestInLand LLC.
"It’s an excellent tool to stimulate economic development that is widely misunderstood. When properly understood and applied, it can lead to incredible improvements to the quality of life for a community. Milwaukee (historically) has not fully embraced the concept, and as a result, the very place where it could bring the greatest benefits have not been realized. It should be used far more than it has been."
– Gary Billington, vice president of client relations for Plunkett Raysich Architects.
"1. TIF should be used to fund expansion or reconstruction of public improvements (streets, sidewalks, utilities) and creation of public spaces and amenities (parks, squares, public parking that supports enhanced density on adjoining parcels). These form the backbone of the public realm that will encourage/support reinvestment on private property. Private parking should not, and cannot under current state law, be built using TIF.
2. TIF should be used to acquire property that creates a blighting influence over other developable properties in the area. There is a ‘public purpose’ to buying out private property rights when the abuse of those rights results in the devaluation of adjoining property.
3. TIF should be used to stimulate catalytic development. Catalytic development should be very narrowly defined to include those unique or ‘stretch’ developments whose feasibility is clearly unattainable without creative financing. Catalytic developments should have demonstrable serial impact on adjoining real estate values – in other words, the positive appreciation of adjoining property, or the ability of adjoining developments to move forward ‘but for’ the catalytic project, should be a measure of a catalytic project’s true value to the community. Just because an idea is unique in size, design, use, etc. should not be a reason for it’s classification as a catalytic project. It must deliver repeat value for the community.
4. TIF should be used as an economic development tool. Regardless of all our efforts to improve our community, a community without jobs and job growth is in decline. We need to make secure those good jobs we already have – those in higher-paying, high-growth industries – and attract those that complement an overall jobs/economic development platform. We have yet to clearly articulate that platform, although many are at work on it. There needs to be a clear, logical and concise reason to locate your company here based on the unique attributes we offer. To entice you to consider moving or growing your company here, we have an economic development tool – TIF – that can help you overcome the friction of moving here or the cost of growing here. While it is unfortunate that we have to pay a significant share of our TIF resources to Fortune 500 companies, until every state restricts such incentives, we need to realize that there is no other way to stay in the game."
– An executive at a major Milwaukee multi-family residential developer who wishes to remain anonymous.
