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Germantown TIF meets with resistance from school district

June 10, 2014

Germantown — A vote by the Germantown School Board to support the creation of a new tax-incremental financing district in the village has been rescinded. The board in a 5-2 vote on June 9 changed its previous motion in favor of the proposed TIF No. 6 and replaced it with a motion to support it only if certain conditions are met.

In a subsequent 6-1 vote, the board directed Ric Erickson, who is the director of business and auxilary services, and the district's representative on the Joint Review Board, to seek to eliminate a water looping project from the TIF plan and add call-back language for purposes of a potential future referendum within the project plan.

While the village board approved the TIF, the school board has objected to the water main component of the project, as well as the effect the TIF could have on a possible referendum for a new school. As presented Monday night, about $400,000 of the $1.7 million water main project would be covered by the TIF. School officials have said the entire cost water main project should be covered. State statute appears not to allow that.

Changing votes

The school board voted in favor of the TIF in April, but reconsidered its decision at its May 19 meeting. At that point the board did not change its stance, in spite of a presentation by JRB citizen representative Dan Wing's calls for more research before the board made a final decision.

Partially as a result of that discussion, the JRB voted 3-2 on May 22 to hold up approval of the project plan for the new TIF district, located in a 192-acre triangle encompassed by Appleton Avenue and Maple and Lannon roads.

The TIF plan, which has been revised seven times, makes reference to about $1.45 million in non-project costs, which are identified within the document as "public works projects that to the extent they do not benefit the district are not eligible to be paid with TIF funds."

The only ineligible costs identified to date are portions of the water main looping project, which Village President Dean Wolter explained is happening regardless of whether the TIF moves forward. The village board previously approved the water main work to be conducted in three phases, funded as part of the utility's capital borrowing program in a separate vote unrelated to the TIF district, Wolter explained.

"Under the TIF plan, up to 25 percent of the cost to expand the water main can be covered by TIF funds, as the project is deemed to benefit the TIF," Wolter said. "Work spanning outside the boundaries of the TIF would not be covered with TIF funds."

At an estimated cost of about $1.7 million, about $400,000 could be covered with TIF funding as part of the plan. That leaves the remaining $1.45 million no covered by the TIF.

Objections

Those who have spoken against the TIF cite this gap as a reason for Germantown not to proceed with the plans.

"It just doesn't make sense to me why the proposed (TIF district) is requiring water utility customers to fund the costs of the water mains," said Mike Isherwood, a spokesperson for the Germantown Citizens Action Coalition.

The self-described taxpayer's watchdog group strongly opposes the funding, stating "the policies of the village have always required development to pay for itself."

Meanwhile, Wolter says there are limits to what the village can do as it pertains to tying the water main work to the TIF.

"They're saying the whole ($1.45 million) project should be funded within the TIF, but the state won't allow it," said Wolter, in reference to TIF naysayers. "The reality is (the water looping) is happening regardless of what happens with the TIF."

A tight TIF

The TIF plan as it stands also needs to incorporate the water main work to sustain itself, said Jim Maah, a representative of the consulting firm Ehler's, as this TIF will require what Maan called very "active management."

"You're looking at just over a four to one ratio of value to expense," said Maan. "For a standard TIF to work, for every dollar of expense you need to be generating between $4 to $5 dollars of revenue. The key factor to this is the village has walked into this knowing full well this TIF district is going to be actively managed because, yes, it is tight."

Maan said the water main project is a crucial part of that.

"The reality is for development of this kind to occur in that area in a managed way, you're not going to run the risk of having service outages, so this loop needs to go in the ground," Maan said.

Referendum effects

As the space needs of the district continue to be an issue in Germantown schools, the board also placed a high priority on maximizing dollars in the case it opts to go out for a referedum sometime in the next few years.

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