In meetings Thursday, the company proposing to redevelop the Burleigh Triangle presented its plan and formally asked for public tax financing assistance to proceed.
HSA Inc. got approval for its plan from a key economic development board, but only after $1.5 million of its request was shaved off.
HSA came in requesting $8.7 million in assistance through creation of a tax-incremental financing district, City Attorney Alan Kesner said, but the Community Development Authority approved up to $7.2 million. Kesner said that the development authority held that HSA's draft project plan supported only the reduced sum.
The approval is not final; it goes next to the city's Budget and Finance Committee and must finally be approved by the full Common Council.
In detail, the TIF plan – No. 7 – being forwarded now includes up to $5.2 million in city-financed infrastructure improvements including roads and utilities, Kesner said, and a $2 million forgiveable loan on the development itself.
No money up front in this plan
But both of those investments are hedged, Kesner said, in what he called a "perfomance incentive tax financing district" plan.
HSA must initially pay for the infrastructure improvements itself, Kesner said. Only when the firm can demonstrate that the development is 65 percent occupied will it be repaid up to $5.2 million from the city – and that amount will be based on HSA's actual expenditure's on city-approved improvements.
Likewise, HSA will not get the additional $2 million loan up front, Kesner said. It must demonstrate that it is 85 percent occupied before it can access the loan, and even then must show that it is still in compliance with that level of occupancy as each year's payment comes due.
If it meets those requirements, the then-current loan payments will be forgiven; if not, HSA would have to pay the city back.
HSA proposed more than a year and a half ago to redevelop the blighted Burleigh Triangle property, formerly home to a Roundy's Foods distribution center and other warehouse and trucking facilities.
It was clear from the beginning that HSA would seek public assistance from the city for the project through a TIF district for the projected $45 million first phase of redevelopment. But the city was methodical and cautious in approaching it. Wauwatosa planners and lawmakers had wanted a mixed-use development; HSA was proposing a retail center.
HSA named the redevelopment The Mayfair Collection and has so far announced lease agreements with Nordstrom Rack and Dick's Sporting Goods, two tenants it had courted from the start.
Avoiding high-risk developments
It is rare and often risky for municipalities to provide TIF assistance for purely retail projects. In Menomonee Falls, for instance, the city provided $17.65 million for a single player to develop a Radisson Hotel downtown. The developers have defaulted, leaving the city with a white elephant on its hands and poor prospects of recovering its funding.
In the Town of Brookfield, a $37 million TIF district was approved last month for The Corners development, including a Von Mauer department store – a huge investment of public funds from a town-level municipality that had to get special Legislative approval to create a TIF at all.
Ald. Craig Wilson, who represents the Burleigh Triangle home district, the 8th, and chairs the Budget and Finance Committee, told Wauwatosa Patch in an earlier interview that, as much as he wants to see the HSA development succeed, he and other lawmakers as well as city staff wanted no part of such high-risk investments of public funds as Menomonee Falls and the Town of Brookfield entered.
Wilson said that negotiations toward this TIF would be rigorously directed at protecting the city and its taxpayers from risk and would place high demands on the developer to show success before reaping public funds – demands laid out Thursday in the "performance incentive" plan Kesner described.
Fundamentally, in tax-incremental financing, those investing in TIF-supported projects pay higher rates of property taxes as their developments go forward, paying back the taxpayers' investment, with interest.
TIF districts are limited to a 27-year life for second-class cities like Wauwatosa but are usually set for repayment at a much earlier date and are intended to repay investments in full accounting for inflation.
The forgiveable loan concept also is hinged on a successful project outcome, with new property tax proceeds from large-scale additions to the tax base making up for the public's investment.
Other tax receivers introduced to the plan
Earlier Thursday, the Joint Review Board also heard HSA's TIF request but was not required or authorized to take any action. The board is composed of representatives of all the entities for which Wauwatosa collects property taxes – the city itself, the Wauwatosa School District, Milwaukee County, MMSD, MATC – plus a citizen representative.
That meeting was for introduction of the request only, and was notable for the presence of three Wauwatosa mayors: Kathy Ehley, Jill Didier and Jim Bentz.