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Monday, 09 August 2010
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Wauwatosa TIF District for UWM Engineering School on Hold

I went to Wauwatosa City Hall tonight in order to attend the Planning Commission meeting, which was considering a TIF District in order to pay for infrastructure to support the UWM Engineering School proposed for the County Grounds on Watertown Plank Rd. There were approximately two dozen people present, along with representatives from UWM in support of the measure. The vast majority of those present (except for the aldermen) were opposed to the TIF District for various reasons. Most were against it either for environmental reasons, or because it seemed like the UWM plan was based on too much speculation without enough backing data. The meeting began with an overview by the Community Development Director who wrote the TIF along with a representative from UWM:

  • The TIF is for $12 million which is to be used solely for infrastructure improvements including water, sewer, roads and "decorative" improvements to the roadways.
  • The Land Use and Zoning plans were already approved by the Common Council, and are no longer under review. This was only for the TIF District.
  • The funds were for infrastructure only, and would only be used by the city.
  • The money would not be spent all up front, but as development required it. In other words, the $12 million is the maximum to be spent, but would not all have to be spent.
  • The plan calls for both the UWM Engineering school, a research park, and housing and rental properties that would be ideally suited to graduate students, professors and area professionals.

After that, there was one member of the Citizens Advisory Board in favor, followed by a rather long line of people against. A member of the Milwaukee River Keepers was concerned that:

  • There was a lack of information in general, and that approval of the TIF district seemed premature based on that lack of information.
  • All data regarding the potential value seemed to be from UWM. (As it turns out the Springsted report was commissioned by the Common Council).
  • Unlike most TIF Districts, this area is not considered blighted.
  • The land has not been purchased yet, and funds have yet to be allocated by UWM.
  • The plan incorporates plans for private housing, despite a very soft housing market.
  • Current business parks (including the other Wauwatosa Research Park) have significant vacancies. Condo and rental development also has many vacancies as well.

Other concerns were voiced by various members of the community, including:

  • UWM has already missed two payment on the County Grounds, and the entire proposal seemed to be dependent on the TIF district for success.
  • Everyone seemed to be in agreement that infrastructure would be placed in phases, but based on past developments, this is usually not efficient, and most infrastructure is done up front. This seems contradictory. What happens if all this infrastructure money is spent up-front, and the Business Park flops?
  • Everyone seemed very concerned regarding the guarantee of preserving the Eschweiler buildings. (The UWM plan does call for the renovation of those buildings for rental property.)
  • There seemed to be no information regarding ROI calculations on the research park, and also no information regarding what the bond rates would be, and what effect it would have on the city's bond rating.
  • For those who were opposed to the County Grounds plans in general, using tax dollars further for this purpose seems like a slap in the face.

I personally voiced several concerns:

  • In many instances, infrastructure improvements are paid for by the developers. Since many of the proposed research interests are supported by large businesses (like Honeywell for instance), it is troubling that the city is being asked to back what seems to be Corporate Welfare. If this were a good business decision, then the TIF would be unnecessary. It would seems that they are coming to the Wauwatosa Taxpayers to help finance a marginal plan which nobody else is willing to finance.
  • The UWM plan would renovate the old Eschweiler for rental housing. However, based on the experience of the renovated buildings in the other Research Park in Wauwatosa, it seems doubtful that professionals would want to live in an old renovated building like that. Most businesses that are in the older renovated buildings in the current Research Park absolutely hate them because of how old they are, with no air conditioning, and limited ability to make the space as they'd like. Its only used by small startups until they can afford something even marginally better. As soon as a small startup grows to a certain size, they immediately bolt to a newer building, often times in a different office park. It is doubtful that the Eschweiler building renovations will be that much better for housing rentals and would attract many renters.
  • The Springsted Plan payback plan seemed to be based on very speculative land valuation which would be highly dependent on the actual development plans which don't exist. In other words, it was their best guess based on plans that are still in flux. Even then, they can only say it's likely that it would be paid off in the maximum time allotted for in state law. So if anything went wrong, it would take even longer to pay off.
  • The $12 millon for infrastructure is based on today's dollars. But if it's a phased plan, then those estimates will have to go up, as inflation takes hold. That means that if the City invests a certain amount of money now, the people will be committed to potentially more than $12 million in the future as inflation takes hold in order to continue the needed infrastructure improvements. Even in the TIF District were to amended and require approval for the extra money, the sunk cost will likely make the passage of such an amendment a virtual guarantee. In other words, it will end up being a snowball rolling downhill.
  • With the housing market in it's current condition, is really that smart for the city to become involved in more housing speculation? If a private entity wants to take this risk on it's own, then that's their business. But it is not the Wauwatosa's job to speculate on real estate.
  • The City Development Director admitted that the UWM plan could not go forward without the TIF District approval, and that more research and planning was also dependent on the TIF approval. In other words, we wouldn't know how much this would all truly cost until it was approved. This seems to be the local version of "you don't know what's in the bill until you pass it."

Former Aldermen Richard Bachman also spoke:

  • Having previously been involved in the creation of several TIF Districts, he had never seen this much public opposition to a plan.
  • The Springsted study which said that the group would likely be able to pay off the costs in the maximum 27 years provided for by state law, seemed like a very soft promise.
  • UWM pays "user fees" to the City of Milwaukee, and members of UWM had previously said they would do the same to Wauwatosa. Now, UWM is saying they are fully tax exempt which would seem to indicate they would not do the same to Wauwatosa. What is UWM's position on this?
  • Part of the proposal includes a Federal Block Grant requiring local matching funds. Will this TIF District be considered those matching funds, and is that even legal? That concept seemed to be in contradiction to the City Development Director's statement that all money would be used solely for infrastructure improvements.

Several of the Council Members, although generally in favor of the proposal had extra concerns:

  • The UWM Master Plan had several major projects including the new Fresh Water school. The Engineering School and Research Park was the 3rd priority. What happens when money is tight? How will those priorities affect the building plans?
  • How does this TIF District compare to other successful TIF's like those in other communities like Menomonee Falls?

One of the final points made by Ms. Welch was the banks right now aren't lending money for these types of developments. The Council Members seemed to think that this was a good reason to create the TIF District, and nobody saw this as a reason for caution. Why are banks unwilling to lend on these types of development? It's not just because of the current economic environment. Currently, the market simply is not supporting these types of proposals because businesses aren't growing like this at the moment.

I did have a chance to talk to the board members afterwards for a few moments. My general impression was that everyone really wanted to vote this forward, but couldn't because of the degree of opposition that was voiced. In fact, several of the aldermen on the board talked about how Wauwatosa is too conservative when it comes to "speculative TIF Districts" and that many cities such as Menomonee Falls and West Allis have been very successful with them. Of course, those were made in very different economic times. One of the ones we talked about was Woodland Prime in Menomonee Falls. Drive up there some time. It's a virtual business park ghost town.

The motion was made to place the plan on hold without prejudice until the next Planning Commission meeting when more information could be presented next month.

# Posted at 21:32 by Nick  |  Comment Feed Link 1 Comment  |  No Trackbacks

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Wednesday, 11 August 2010 11:48:26 (Central Daylight Time, UTC-05:00)
Thanks for the update, Nick. I had gone to several of the meetings regarding the zoning. At the time of the zoning change request, there was not a peep by UWM or a question from any councilcritter on the need for a TIF. Had there been, the direction of the debate would have changed significantly.

The city is already hurting with regard to the David Israel TIF for condos in the valley, which he promised as high end, but went scrounging for gov't grants to build senior housing. Not exactly a good use of TIFs.

The TIF for GE Med comes off the books in 2013 and the city will get a nice payoff. But that was a TIF to get a sure thing that every other community would kill to have.

I am torn on this issue, but want the city to favor prudence. This parcel currently pays zero prop tax dollars and the politics will never ever allow it to be fully used by a profit-oriented business. The mixed education and business use probably holds the best chance for this parcel to provide any property tax value to Wauwatosa. However, given the state budget, I don't see many dollars coming out of Madison to spiff up UWM. The rest of the state won't stand for it and the state budget needs a meat clever taken to it.

I don't think that Tosa has the ability to take on an additional $12 million in bonds and maintain a tax levy sustainable with the existing tax base. It is now seeking to float $8 million to cover its pension contribution. $12 million for the fireman's new clubhouse. An increase annually to bonds taken out for infrastructure repair. That is a lot of debt to digest, even if it's on favorable terms at this time.
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