SHOREWOOD VILLAGE OFFICIALS RESPOND TO QUESTIONS ABOUT FINANCING ON PROPOSED MANDEL PROJECT (WALGREENS & RESIDENTIAL DEVELOPMENT)
According to more than one news report, the proposed Mandel Project in Shorewood, will not be profitable as designed and presented.
It was also reported that Funding from Shorewood of up to $10 Million, is being requested.
There has been a lot of funding by Shorewood for various projects over the past few years, and to learn that a project that would not be profitable might be the recipient of Public Financing by Shorewood, certainly brings a number of questions to mind.
I wrote an e mail (copy following) to all the Village Board Trustees, the Trustee Elect, and the Village Board President.
I am very happy to report that President Guy Johnson, and Trustee Hanewall responded to my inquiry, in great detail. I thank them for their responses, and helping to keep the Public informed.
Copies of their responses are below --- and I hope that they can be a great starting point for a public discussion on this particular project, and Village Financing over all.
Hopefully many of you who read this blog will respond with your opinions, and possibly questions for Mr Johnson and Mr Hanewall, as well as the other Trustees.
The workings of the Shorewood CDA are a mystery to many of us in Shorewood, and hopefully this discourse will help to educate Shorewood’s residents, and give them the knowledge needed to interact with our Village Officials.
COPY OF CORRESPONDENCE TO VILLAGE BOARD
Dear President, Trustee(s), and Trustee Elect
According the the posting below by Mr Daykin of the Journal Sentinel, Shorewood is being asked to provide funding for a project that the developer is saying WILL NOT PAY FOR ITSELF !!
Would you please respond if:
1) You have been made aware that the project in Not Profitable as proposed?
2) You will vote for providing the Financing Requested from the Village?
By Tom Daykin of the Journal Sentinel
"The village's financing is needed because the rental income provided by Walgreens and the apartment doesn't generate cash to cover the costs of the parking decks, Ehlers says."
RESPONSES FROM MESSRS JOHNSON AND HANEWALL
RE: Shorewood asks for Financing for Project
Saturday, April 30, 2011 7:49 AM
"Trustee Hanewall" <TrusteeHanewall@villageofshorewood.org>
As with so many "I gotcha" moments, the line that you referenced is out of context when trying to be used to "prove" what a waste of money the proposed project is. The whole purpose of TID financing is to provide an incentive to a private enterprise so that they will do something that will otherwise not be done. If I am not mistaken, I believe the state law REQUIRES that the governmental body show that if not for the TID financing that the project would not move forward.
Without the lower cost loans that TIF can offer, these projects would cost too much, and the developer would not make money. Consequently, the project would not happen. So if the Village wants a significant project, then we use the TID mechanism to help it happen. This involvement gives us two main pieces of control that we otherwise would not have. Because we have a financial stake, the Village is able to make certain design demands that a wholly privately funded project would not be subject to. It also allows the Village to demand a project of a certain final dollar value. So rather than perhaps being stuck with a low valued property, we can help create a much higher valued property which in the end adds to the tax base.
With the understanding that TID financing has had a demonstrated success in providing an increased tax base to the Village while allowing the Village to direct the type of development that most seem to appreciate (e.g., Edgewood Place, the Cornerstone, etc.), and with the understanding that any grants to developers are covered within the overall TID financial plan (i.e. that the system is working according to law and its intended purpose), then why wouldn't someone support such projects? If we choose not to do these, then we have no other means to generate more tax dollars other than to raise the tax rate on everyone. Furthermore, we must settle for whatever a land ower chooses to do with their property. I for one am completely comfortable with using TIF to make improvements to the Village.
To your two questions, yes, I was/am aware of the fact that the developer needs the Village's support. As I've just said above, that's the whole reason for being of the TID. And I cannot tell you if I will ultimately vote in favor of the proposed project, because we are still in the middle of the review process. The Board does not just hear one presentation, and then makes a decision. This project has been under public review for months and will continue for several more before we have all the information we need to vote.
I realize that the purpose of TIDs and the rules that govern them are not immediately apparent to most people. And though I may be wrong - and I am sorry if this is not the case - I suspect that what you are really trying to get at is "why is the Village engaging in corporate welfare?" If that's really your question, and if I haven't adequately answered it above, then I would turn the question back on you because it is a good question. Why would we hand out money like this? The fact is that the Board and CDA members are all tax payers too, and our gain is no different than any other resident. The only reason that we agree to TIF grants is because through a long vetting process, we believe this is the best for the residents of the Village.
Again, I am sorry if this is not one of your concerns, but in most of the writings about Village supported projects, more often than not, the tone suggests that the Village just loves to give money to our friends to make rich guys richer. Does that really make any sense? We're not the yahoos in Madison and DC that depend on money from these folks to keep us in power until we die. It would be nice if once in a while, that people recognized that Village government is not run by ignorant, selfish fools. There will always be issues that we do not all agree upon, and times when we just make mistakes, but I would hope that people could give us the benefit of the doubt that these times are not due to stupidity or lack or forethought.
Shorewood asks for Financing for Project
Saturday, April 30, 2011 4:53 PM
From: "Guy Johnson"
To: David Tatarowitz
(I'm sending this from my personal email account because my send-function on my village account didn't work just now.)
Thanks for your email.
Tax incremental financing is a tool we can use to control the pace and type of redevelopment that fits into the desires of the master plan for our business district.
This financing tool allows us to invest in infrastructure and other improvements in conjunction with the project, and pay for these investments by capturing property tax revenue from the newly developed property. An area is identified (the tax incremental district, or TID) as appropriate for a certain type of development, and projects are identified to encourage and facilitate the desired development. Then as property values rise, the property tax paid on that private development is used by the municipality to pay for the projects. The tax paid to the schools, county and technical college district (the overlying taxing jurisdictions) is also sent to the municipality to pay for the improvements. After the costs of the projects are paid off, the TID is closed and the value of all the new development gets shared by the municipality, schools, county and technical college as it does for other property.
The decision criteria for approving tax incremental financing for this kind of a project are put forth in s. 66.1105 (4m)(c) of Wisconsin statutes. They are:
1. whether the development expected in the TID would occur without the use of TIF,
2. whether the economic benefits of the TID, as measured by increased employment, business and personal income and property value, are insufficient to compensate for the cost of the improvements, and
3. whether the benefits of the proposal outweigh the anticipated tax increments to be paid by the owners of property in the overlying taxing districts.
These criteria are currently being thoroughly vetted to determine if the project can be approved.
You might want to look over the following TIF manual from the Wisconsin Dept. of Revenue for more clarification: http://www.revenue.wi.gov/pubs/slf/tif/cvmanual.html
Please call me if you’d like to discuss in more detail.
I LOOK FORWARD TO COMMENTS AND QUESTIONS THAT YOU MAY HAVE ON THIS PARTICULAR PROJECT, OTHER VILLAGE FUNDING OF PROJECTS, THE CDA, AND TIF’S IN GENERAL