The city of Waupaca has begun the process to designate certain Tax Incremental Financing districts “distressed,” allowing other TIF districts to become donors for them.
“The city of Waupaca is not alone in this challenge we have with the development not occurring as quickly as it had been anticipated,” said City Administrator Henry Veleker. “To get this statewide law in place, it had to address a problem occurring across the state, so the city is not unique.”
The new distressed TIF law allows TIF districts that are designated distressed to have their maximum life extended by 10 years. The opportunity to do this will sunset in 2012.
Veleker said that under this new law, every TIF district, regardless of its classification, can be a donor or a recipient.
“It gives us a lot of flexibility. As other TIFs do well and have excess balances, we can kick it over and help other TIFs,” he said.
The plan calls for three of the city’s districts – 3, 5 and 8 – to be designated distressed. TIF districts 4 and 6 would then become donors for those three districts.
TIF districts 3, 5 and 8 make up the city’s East Gateway.
TIF 3 is the city’s business park, TIF 5 is the older portion of the airport property, and TIF 8 runs from Wendt Drive south and across the river north of the new runway, he said.
“We’re not seeing the level of development we had expected to see,” Veleker said of those three districts. “While there have been some bright spots the last couple of years – Centerline Machine, Spirit Industries – the level of development in TIF 8 needs to be $40 million to have that one cash flow. We are at maybe $7 or $8 million.”
Presently, whenever there is a negative final balance in a TIF district, it is being funded through water, sewer or general reserves. “In all cases, we are tracking those advances,” he said.
Veleker said the city’s picture would be better if there was a better economy and if some properties in TIF districts had not been reassessed.
For example, the equalized value in TIF District No. 6 went from $32.3 million in 2008 to $29.879 million in 2010.
TIF 6 is on West Fulton Street. It includes the golf course, banquet hall and hotel – properties that foreclosed in the past and eventually reassessed at lower numbers.
Veleker said the owners and operators of those three facilities are now doing better. “They seemed to have turned the corner and are working together.”
The test with TIF development is to consider whether those projects would have occurred if it had not been for TIF, he said.
“In the last 10 years, we have had development across the city. A lot of it was non-TIF, but if you look at the TIFs, we got quality commercial projects – individual projects with jobs that could have gone to other communities,” Veleker said.
He said the Fox Valley Technical College project is among them and that the housing options available in the city also would not have occurred without TIF.
Veleker said setting up a TIF district for the bypass was forward thinking. The fact that the bypass was delayed by more than two years, however, put the city at a disadvantage, he said.
He said the distressed TIF legislation is no different than someone with a 15-year home mortgage with aggressive payments refinancing that home mortgage today to 30 years in order to free up cash.
Designating three city TIF districts as distressed will take a few months.
The project plans for the districts have to be amended. There will also have to be a public hearing and approval by the city’s Plan Commission and by the Joint Review Board – the board that includes representation by each of the taxing jurisdictions affected by TIF districts.
Veleker said the city made huge investments and that as land is sold and projects are developed, it takes two to three years before those projects are actually on the city’s tax roll.
TIF debt has put a strain on the city the last couple of years.
“With the distressed law, we will get breathing room to weather the current economic environment,” he said. “We will be able to free up some cash and relieve some of the pressure on other funds that support TIF.”