Ashwaubenon adopts policy for awarding TIF incentives
By Kevin Boneske
ASHWAUBENON – A policy related to whether to award financial incentives for a development to locate in a Tax Incremental Financing (TIF) District was approved Jan. 26 by the village board.
Village Manager Joel Gregozeski said the resolution adopted by the board establishes a written policy village staff can use to evaluate requests for TIF assistance for private development forwarded to the board for possible approval.
After the board discussed providing TIF assistance in December, Gregozeski said “it’s become apparent that it would be important for us to establish this policy to create these guidelines for us to use in evaluating assistance.”
During that time, a divided board initially voted down a development agreement with General Capital to build a three-story, 60-unit senior apartment building and 15, two-story, three-bedroom rental townhomes between Mike McCarthy Way and Borvan Avenue.
It then reversed course with a 4-3 vote if favor of an agreement for the company to receive a $1.2-million TIF loan incentive upon issuance of the final occupancy permit.
Under the agreement terms, repayment of the loan by General Capital will be guaranteed over a 20-year period, starting in 2022, with annual payments of at least $80,825.
When board members considered whether to approve the agreement, their discussion focused on the financial risk the project could have for Ashwaubenon, and whether the village would miss out on another the opportunity for a better investment on the site.
Gregozeski said the TIF financing policy is intended for the board to “make an informed, best-case financial decision as it related to incentives to be provided.”
“Ultimately, the village board will retain the prerogative to make decisions at it relates to the incentive,” he said. “But as we go through it, and as staff meets with private developers that are seeking assistance, these will be more or less gating criteria that we could use that establishes a framework of which (the board) will use to evaluate whether assistance is given.”
Gregozeski said the eight criteria for evaluating TIF assistance requests include:
An equity requirement. Developers must provide a minimum 15 percent equity of total project costs. Projects that exceed the 15 equity requirement will be looked upon favorably by the village. Equity is defined as cash or unleveraged value in land or prepaid costs attributable to the project. The TIF shall not be used to supplant cash equity.
A 50 percent rule. No more than 50 percent of the net present value of the tax increment generated by a private development shall be made available to the project.
A payback period with a 20-year maximum. Preference will be given to projects with payback periods of 10 years or less. Payback periods cannot exceed the remaining life expectancy of the TIF District.
A TIF cap. The total amount of TIF assistance should not exceed 25 percent of total project costs. This limitation may be waived if the project involves redevelopment of existing structures or the assembly and clearance of land upon which existing structures are located.
Self-supporting projects. Each project requesting TIF assistance should generate a sufficient tax increment to cover the requested TIF assistance and a portion of any public infrastructure costs within the district. No increment from other private development projects within the district may be used to supplement another project’s inability to generate sufficient tax increment to cover project costs.
A land assembly cap. TIF assistance for land/property assembly costs will not be provided in an amount exceeding 10 percent of the fair market value of the land. The fair market value will be determined by an independent appraiser contracted by the village with the cost of appraisal paid for by the developer.
An internal rate of return. The amount of assistance provided to a developer will be limited to the amount necessary to provide the developer a reasonable rate of return on investment in the project and the subject site. A developer’s return on equity, return on cost or internal rate of return will be based on current market conditions as determined by the village or its financial advisor. In no case shall the internal rate of return exceed 30 percent.
A taxable increase. The project should result in an increase in taxable valuation of at least 20 percent above the base value upon project completion.
Gregozeski said the determination of whether to provide TIF assistance will ultimately be a policy choice evaluated on a case-by-case basis by the board.
“There are some elements here, too – that as we have worked on these projects in the past – that aren’t necessarily within the criteria, but may provide some importance to the village,” he said. “In particular, job creation, so we don’t have it as a measurable criteria, but you may forego a certain criteria measure, that if in the event that it creates X number of jobs.”
Trustee Steve Kubacki said having a policy in place will provide the board direction for determining whether to provide TIF assistance.
“I think it’s a good guideline to use as we go forward,” he said.