NO TIF

Cobalt Partners, LLC and La Macchia Holdings, LLC submitted a TIF financing request on October 13, 2021 to redevelop the buildings and property they own in an area bordered by Brown Deer and Port Washington roads.

The village will pay $19.5m including going into debt of $4.5m (developer grant/gift) while the developer is only putting up $15m in equity. They talk about a value of $100m, but that includes the value of the existing buildings. The incremental value is supposedly $75m so the village is paying for more than 20% of the incremental value.

On November 14, 2021 the Village President Walny announced on NextDoor the $ 4.5m (developer grant/gift) was removed from the developer’s TIF request.

There is no information on the actual total cost.

The developers are making no firm commitments as to what or when they are going to build anything, or how much it will cost, but they know with certainty how much they need from us.

This is a 27-year TIF meaning the village is guaranteeing itself almost no increase in tax revenue for almost 30-years while taking on the direct risk of debt.

We are told no payments will be made to the developers unless certain project financial goals are met. This sounds like a good deal for Village taxpayers, right?

What happens if the developers fail to reach these goals in order to receive reimbursement from the Village provided TIF?

It says that the developer will pay off the debt if they don’t reach certain landmarks, but we know they will be setting up a special purpose entity (i.e. no personal guarantees) to sign these contracts that will not put any of their current assets at risk, so they can just declare bankruptcy instead.

We could be stuck with an unfinished project subject to the developer’s bankruptcy, sale to another developer who demands a better deal with the village including lowered property tax assessments (Bayshore and Shorewood TIF’s are examples of this), and prolonged legal litigation.

Why not let the property owners (i.e. developers) utilize their fiscal resources without the dependence upon the financial strength of the Village?

After all they have owned the properties for 10+ years (with the exception of Scott Yauck of Cobalt Partners) and let them become blighted.

Interest rates are low and there’s an abundance of investment money available for successful developers.

This approach eliminates the potential financial risk to the taxpayers.  So which approach sounds better for the village taxpayers?

Without a TIF, the village would receive additional tax revenue starting in 2023 and each subsequent year instead of a 27+ year delay.

“the Village anticipates making total expenditures of approximately $36.8 million (“Project Costs”) to undertake the projects listed in this Project Plan (“Plan”). The Village also estimates it will incur $2.79 million in interest on long-term debt and financing expense related to the Project Loan. Other costs include an estimated $5.89 million for traffic safety and other public infrastructure improvements, and $430,000 for administrative costs.

Here’s the TIF draft prepared by Ehlers, Inc. at your expense fast tracked for approval on December 1st, 2021.

Based upon the language in their document it appears the approval is expected at the November 17, 2021 meeting by the Plan Commission instead of the Community Development Authority.

Odd since the CDA powers include the creation of Tax Increment Financing (TIF) districts, the right to borrow including issuing of bonds, to develop urban redevelopment/renewal plans, to buy and sell property, to make a blight determination, and to condemn property.

The CDA hasn’t held a meeting since September 27, 2018 according to the Village website.

Unfortunately the Village Trustees and Village President Walny have failed to provide Zoom access to the North Shore residents for any of the meetings despite repeated written requests. This has limited input from residents who are unable to attend these meetings due to health concerns related to the Covid-19 pandemic.

The following meetings that will determine the future of this unprecedented Village financial gamble are scheduled at Bayside Village Hall.

  • Organizational Joint Review Board Meeting Held:
    Scheduled for Nov. 17, 2021
  • Public Hearing Held:
    Scheduled for Nov. 17, 2021
  • Approval by Plan Commission:
    Scheduled for Nov. 17, 2021
  • Adoption by Village Board:
    Scheduled for Dec. 1, 2021
  • Approval by the Joint Review Board:
    TBD

If you are opposed to a TIF we ask that you do any or all of the following:

Bayside Village Trustees

Bayside Village Plan Commission

  • Mike Barth
    9270 N Waverly Drive
    414-228-7203
    mbarth@baysidewi.gov
  • Marisa Roberts
  • Ari Friedman
  • John Kramp
  • Ed Harris
  • Jeff Jubelirer
  • Eido Walny, Village President
    9440 N Fairway Drive
    414-751-7531
    ewalny@baysidewi.gov

TIF Primer

Under the terms of a TIF, any revenue from the development will be paid first to the developer, while the Village residents will not begin to receive any tax revenue that may remain for up to the maximum TIF timeframe of 27-years.

Apart from the fact that TIFs deprive other local governments like school districts of future tax revenues, another concern is whether TIFs are worth the cost. It’s difficult to prove whether or not a company would have invested in a TIF district without city incentives or determine the real return on investment for taxpayers.

And developers who receive TIF subsidies are rarely, if ever, held accountable for delivering the benefits they promise. And personal financial guarantees are rare as winning the Powerball jackpot.

The proposed payment to the Village can only be used in the TIF district and will not will provide any property tax relief (if ever – ask Glendale residents about the Bayshore TIF) until the TIF is repaid in full.

With no revenue from the development and existing property tax assessments in the TIF area frozen for up to 27-years, how will Bayside and surrounding communities afford to pay the increase in shared police, fire, infrastructure, school districts and other costs during that time?

The Costs of TIF Use
Because TIF districts pay for improvements through future tax revenues, many people consider TIF ‘getting something for nothing’. This is simply not true. In fact, using TIF carries significant costs, beyond just the dollar value of improvements made in the district.

These costs fall into five general categories:

Direct Costs: When most people discuss the cost of a TIF district, they are referring to direct costs. Direct costs are the costs of the physical improvements (including labor costs) within the district, the administrative costs of managing the district, the costs of any consultancies and/or developer incentives and the costs of financing all these expenditures.

Service Costs: Although not commonly included in TIF accounting, local governments take on new service costs during the life of each TID. New development increases demand for city, county, and school district services— demand not accompanied by increases in tax revenue to provide these services. For instance, a new subdivision will send more kids to school, require additional snow and trash removal and need more road maintenance. Providing these services is costly and, over the full life of a TID, can add up to millions of dollars.

Fixed Tax Base Costs: Fixed tax base costs are the costs of lost tax revenue on private development that would have occurred without TIF. When the ‘but for’ test is administered with 100 percent accuracy the fixed tax base cost of a TID is zero. In many cases, however, the property included in TIF districts would generate some form of privately-funded development over the TID’s life without any subsidy. If the property had not been included in a TID, local governments could receive taxes on this development immediately instead of it being diverted to pay off TID project costs.

Opportunity Costs: Using TIF also imposes opportunity costs on local governments in two ways. First, by approving one project plan for TID development, local governments eliminate the opportunity to develop that piece of land in a different manner. For example, if a project plan allocates TIF funds for the creation of an entertainment district, it eliminates the possibility of developing that land into an industrial corridor. Second, when one TID is created, it limits the municipality’s ability to use TIF elsewhere within the community, because state law limits the amount of property value which municipalities can include in TIF districts.

Negative Externality Costs: Improper planning and land use is costly to a community. As a development tool, TIF can contribute to these costs when used unwisely. If TIF is used to subsidize greenfield development on the urban fringe it contributes to sprawl, congesting commuter corridors and increasing pollution. If TIF lures businesses away from dense urban centers, it contributes to the spatial mismatch between jobs and employees, simultaneously creating labor shortages and unemployment. Likewise, if TIF is used to attract employers that do not pay living wages, the public bears the cost of wage supplements and social services for the working poor.

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Historical Perspective 2018 – 2019

The names Cobalt Partners, LLC and La Macchia Holdings, LLC. may sound familiar since they made 2 prior attempts to convince the Bayside taxpayers that funding their 32-story tower development was great for the village.

Fortunately the village residents saw through this and rallied to prevent this debacle from occurring.

At the next election 3 trustees including the former Village President declined to run for office again.

Here’s the story as it abruptly ended.

BREAKING: OneNorth Bayside Developer Scott Yauck and Bill LaMacchia Abruptly Drop Development Plans One Day After August 6, 2019 Public Meeting – Neither Available for Comment

Read The Story

For a detailed review of the earlier TIF attempts by Cobalt Partners, LLC and LaMacchia Development, LLC check out www.nobaysideskyscraper.com.   Keep in mind the timeframe is from 2018 – 2019 and includes information about public officials who are no longer in office now.

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