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Village of Marathon disputes TIF analysis

Village of  Marathon disputes TIF analysis Village of  Marathon disputes TIF analysis

By Andy Kurtz, Village of Marathon City administrator and Art Scheller, Dietrich VanderWaal, S.C.

The Village of Marathon City (“Marathon City” or the “Village”) was invited by The Record-Review to respond to its article and editorial regarding the purported “evils” of Tax Incremental Finance (“TIF”), which the author concludes is a “win-winlose” proposition. Marathon City felt compelled to address the paper’s opinion piece (falsely presented as “investigative” journalism) given the author’s clear bias. Indeed, the author openly shared with Marathon City representatives his opinion that TIF and Tax Increment Districts (“TIDs”) are “legalized stealing.” Given the author’s lack of objectivity, it should come as no surprise to readers that the article relies on faulty assumptions, misstates or omits critical facts regarding TIF, demonstrates a fundamental animosity toward TIF, and misrepresents the relationship between levy and property taxes. Marathon City welcomes the opportunity to respond, and hopefully educate readers on how TIDs work and the many benefits provided by TIF and TIDs.

Marathon City has the benefit of two successful TIDs. These TIDs have funded the acquisition of land, led to the construction of a business park, and enabled 21 new and existing businesses to expand in Marathon City. These businesses, in turn, have brought over 150 new jobs to our community, expanded dining options, increased senior housing and care, and led to the construction of 32 residential apartments.

Today, development in the Marathon City TIDs has added $36,756,400 to the value of the village. Based on these numbers, the Return on Investment (ROI) over a 20 year period is 270.41 percent and 6.32 percent annually. Additionally, further growth is anticipated in both TIDs over the next five years and beyond, with a corresponding growth in the village’s tremendous ROI. This growth would not have occurred “but for” the establishment and management of the TIDs.

TIDs are heavily regulated in the State of Wisconsin. TIDs can only be established in Wisconsin if the city or village applying for approval can demonstrate that development, blight elimination, or environmental cleanup wouldn’t occur “but for” the opportunities created by the TID. A special local oversight group, the Joint Review Board, carefully evaluates the application and either approves or denies it. The Joint Review Board consists of a broad array of community representatives, including members of the school district, the county, the local technical college, the local government, and an at-large citizen. Even after this careful local review, a TID cannot be created unless the State of Wisconsin Department of Revenue grants final approval following its own independent review.

When Marathon City’s TIDs were created, the village also created a corresponding plan for each TID. The plan outlines the TID’s boundaries, goals, planned infrastructure projects, eligible expenses, and starting value. The TID plan is used by the village and the Joint Review Board to ensure that the TID is managed properly, complies with applicable law, fulfills its annual reporting requirements and delivers on its goals. Importantly, revenues and expenses of the TID are accounted for separately from the village’s general fund. Accordingly, contrary to the paper’s claim, TID funds cannot and are not utilized to fill gaps in the village’s general fund budget.

TIDs are an important tool that municipalities use to foster economic development. Businesses that choose to build in the TID don’t get free land, free roads, free curbs and gutters, free public utilities, or free money as the article contends. Instead, these businesses sign developer contracts with the village that commit them to guaranteed tax payments for the term of their contract and the life of the TID. For most of the businesses in Marathon City’s TIDs, those contracts run 10 years and, in some cases, 15 or 20 years. The tax revenue generated by these agreements pays for the infrastructure installed to support the businesses. That means the $10,788,163 Marathon City invested in the TIDs is being paid back through the taxes collected under these contracts. In sum, the TIDs in Marathon City don’t subsidize select businesses nor do they constitute “bribes” as the paper would have you believe. Our TIDs contain a variety of diverse businesses that are important to our community growth. Accordingly, Marathon City welcomes the opportunity to work with new and existing businesses willing to invest, grow, and pursue their success in tandem with our community.

Despite the many advantages TIF and TIDs provide communities in meeting their redevelopment goals, The Record-Review purposefully dismisses those benefits in pursuit of its crusade against TIF. Notably, The Record-Review provided Marathon City with two rounds of analysis that it claimed supported its opinion piece prior to publication. None of this analysis is being made public by The Record- Review because the author stated the analysis is “far too wonky for the general public” and “never meant for public consumption.” Although Marathon City provided detailed responses to The Record-Review’s analysis demonstrating numerous flaws in the paper’s methodology, the paper chose to ignore the village’s responses and proceed to publication.

As a baseline issue, the article doesn’t mention or explain the relationship between levy, village valuation, mil rate, and resulting property taxes and it incorrectly portrays levy increases as increases in individual property tax. Additionally, the article claims that the village raised the local levies by 15%. As the village pointed out to the paper prior to publication, the article’s premise is flawed as the total tax levy of the village consists of four different taxing authorities: the village, the Marathon School District, Marathon County and North Central Regional Technical College. The article excludes all of these taxing authorities in its baseline analysis, thereby skewing the data by incorrectly allocating tax changes that result from the levies of all four taxing authorities to only one: the village.

Further, the article claims that a single property owner in the village loses money over the life of the TID. In fact, in The Record-Review’s analysis that it provided to the village on September 21st, the paper stated: Question: Will the owner of a $198,400 property at 216 Main, Marathon City, financially benefit from a $8,296,500 increment in that village’s Tax Increment Districts in 2018 over a 20-year horizon?

We can answer this question not as a real world prediction, but as a thought experiment that requires making some assumptions:

_ The Village of Marathon City budget does not change between 2018-38.

_ The taxable value of 216 Main St. stays the same between 2018-38.

_ The Village of Marathon City’s tax base does not change between 2018-38.

_ State law regarding levy limits and “net new construction” stays the same between 2018-38.

_ The Village of Marathon City closes out its TIF districts according to approved time schedules.

_ The current interest rate for standard investments, such as a federal Treasury bond, stays the same between 2018-38. (Emphasis added.) Based on this “thought experiment”, the article concludes that the property owner in Marathon City does not benefi t from the growth in Marathon City’s TID. This claim is simply not accurate because it is based on a series of unrealistic assumptions, calculations featuring hypothetical scenarios, and values derived from those calculations designed solely to support the author’s opinion. Marathon City provided the paper a detailed response disproving the author’s conclusion and demonstrating that the hypothetical property owner’s benefits from growth in the TIDs would far exceed the paper’s calculation. Notably, none of the village’s responses were mentioned in the article, giving the false impression that the paper’s analysis of a hypothetical scenario was factually accurate. Further, Marathon City, its consulting engineer Vierbicher, and its financial consultant Ehlers, communicated to the paper multiple times their fundamental disagreement with the premise and conclusions drawn by the author. In fact, the paper’s statement “We can answer this question not as a real world prediction, but as a thought experiment that requires making some assumptions” indicates the analysis is not simply hypothetical, but actually has no real world applicability. The assumptions, calculations and derived values are skewed simply to support the opinion of the author.

In correspondence sent to the author on Sept. 25, the village requested that if the paper chose to publish its “analysis”, it should be in the form of an editorial opinion as the village did not view the “analysis” as “news.” However, after being presented with the village’s response and request, the author, editor, and publisher of The Record-Review

notified the village that they intended to publish the article “False Promise – When Growth Doesn’t Deliver” as an “investigative news article” and the editorial “End TIF Now” as a call to action for those seeking to uphold American Fundamentals. The village was given two options to respond and 48 hours to do so.

The article states “This is a story nobody wanted us to write” and that a wide variety of entities declined comment, and on that point at least, the article is correct. However, the reason for the lack of comments is not part of some sinister conspiracy, as the article implies. The article is simply not news. Rather, it is the opinion of one writer that misrepresents the success of TIDs in Marathon City and communities statewide. There is no illicit use of TIDs to get around state imposed levy limits, there is no “handing out bribes to businesses,” there is no free land, free blacktop or free storm sewer. Contrary to the editorial opinion, the wealthy don’t get wealthier by raising the property taxes of regular people through TIF. They do so by following simple American values: invest in your businesses, hire good employees, and deliver useful and needed products and services to the community. And communities that have the foresight to use TIF to their advantage in eliminating blight, cleaning up their environments, and redeveloping properties for the long-term community benefit should be applauded rather than falsely vilified.

So why did others communities not respond? Simply put, they were not singled out in the analysis. However, Marathon City responded because the article misstated the facts with respect to our community. In the author’s opinion, village taxpayers are being taken advantage of as a result of TID success. Nothing could be further from the truth. We felt it was important to disprove the analysis, object to the article’s portrayal of our village, and voice our disagreement with the author’s opinion.

Marathon City’s TIDs contain 21 new or expanded businesses, have brought hundreds of jobs to the community, have increased commerce in the village, funded a downtown redevelopment grant program, resulted in a 270 percent return on investment (ROI), and added nearly $37 milion in value to the village with more growth anticipated in the years to come. Ultimately, it is the real world success of the village’s TIDs that is the best and most meaningful response.