Tax incremental financing taking shape for Mandel project
Bay would invest $4.9 million
Whitefish Bay - Whitefish Bay would invest approximately $4.9 million in the Mandel Group's proposed 100-unit luxury apartment complex if a new tax incremental financing district is approved, according to project plan from the village's financial adviser.
An initial meeting of a joint review board composed of representatives from the affected taxing jurisdictions - Milwaukee County, Milwaukee Area Technical College, Whitefish Bay School District, village of Whitefish Bay - and a representative from the public met last week to hear an overview of the financing plan and set a date for final review and potential approval - tentatively Oct. 18.
The village Community Development Authority met as well to consider the financing plan, ultimately deciding to put off its approval until negotiations between the village and Mandel come to a conclusion.
According to the project plan the invested amount would be paid off with the added property tax revenue (the tax increments) over a 27-year period and the district would close in 2040, at which point the new revenue would be available for use by the underlying taxing authorities represented by the joint review board.
However, if the apartment complex generates more revenue than expected, as has been the case with the village's existing TIF district, the investment would be repaid faster than projected and the district would close at an earlier date.
"All the taxing jurisdictions would rather have the new money sooner than later," CDA Chairperson Ray Kreuger said, "and we're mindful of that."
The approximately $4.9 million the village would contribute toward Mandel's project breaks down into three parts: $1.62 million in general obligation bonds as an immediate grant to Mandel; approximately $2.17 million in a developer "pay-as-you-go" grant, which would be paid to Mandel annually only if the added tax revenue exceeds the amount necessary to cover the village's bond payments; lastly, the village would front slightly more than an estimated $1 million worth of air rights to Mandel for the space directly above the municipal lots behind the Fox Bay building.
Michael Harrigan of public finance firm Ehlers, also the village's financial adviser, said that the new tax incremental district would generate a positive cash flow over its life span, taking in more new tax revenue each year than the annual cost of repaying Whitefish Bay for its investment.
Though the cost of constructing the complex is estimated between $28-30 million, according to state law, the assessed value of the property for tax purposes would be based on the income it would draw in rent - estimated at approximately $14 million.
"You're required to assess based on income," Harrigan said.
The "but for" test
During a public hearing at the CDA meeting, resident Robert Crawford questioned the need for Whitefish Bay taxpayers to invest in Mandel's project.
"I don't think it's necessary," Crawford told the CDA. "I think good old-fashioned capitalism will see that this project is built. If the developer can borrow and spend twenty-eight million dollars to put this project up, they can borrow another two or three million at historically low interest rates."
Harrigan responded by pointing to a section of Wisconsin tax incremental financing law which stipulates that, "but for" the public investment the development would not take place. Harrigan and Kreuger both brought up prior proposals to develop that had included public financing, but ultimately didn't pan out.
"We haven't had viable proposals made to the village that could be successful or sustained without village support," Kreuger said.
Robert Monnat, Chief Operating Office of Mandel Group, said that the village grants would largely help cover the added costs of preserving the municipal parking lots on the development.
"The village wants to get some value out of the land, the village wants to retain public parking there, and we want to develop private real estate there," Monnat said. "There are costs that are incurred to create the public parking, and it's not insignificant. It's a very expensive parking garage."
Should the CDA vote to approve the tax incremental district, the issue will come before the Village Board for approval in early October, and before the joint review board for final approval in mid-October.
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