Declining property values have done more than affect single-family homeowners. They’ve also hurt property values in tax incremental financing districts.
In 2012, South Milwaukee is feeling the impact of those changes.
Those reductions in tax incremental district (TID) valuations – determined by the state – are why the city is looking at refinancing a portion of the existing debt ($1,535,000) for TIDs 1, 2 and 3.
The City Council will take up the refinancing issue at its meeting Wednesday night.
A TID is basically a financing tool a municipality can use to promote expansion of its tax base.
With a TID, the city borrows money to make infrastructure and other improvements to properties within that district – and pays back the money with property tax revenue generated from the higher value of the redeveloped property (the increment).
The stated goal of city leaders is to pay back that loan, “close” the TID as quickly as possible, and then get the property within the TID back on the property tax rolls, with the higher tax revenue flowing into the city, school district and other taxing bodies (vs. funding the loan).
The upshot of the refinancing action the council is considering: The length of the debt service will be extended, and it will take longer to pay off the TIDs. At the same time, the interest rate will be lower.
While this is unfortunate, the fact that we’re getting less “increment” from these properties is a reality of the economic situation we’re in. Simply, property is not worth as much now as it was five, 10, 15 years ago, something readers of this blog know all too well with the 2011 property revaluation.
This Milwaukee Journal Sentinel story from 2010 explains the broader issue well – and why then-Gov. Jim Doyle signed a law allowing for communities to extend the length of their TIDs.
(Learn more about our TIDs at the South Milwaukee Community Development Authority website.)
And one other note: The refinancing does not at all impact the development agreement with Walmart, nor will it lessen any amount of property taxes Walmart pays. Walmart has pledged to pay the city property taxes based on a $12 million “increment” — the value of the developed property vs. its value now — through at least 2027.
This borrowing is one of several the council will consider Wednesday.
- We will also consider a resolution for an intent to borrow funds for TID 2 projects – the environmental cleanup and related costs associated with the Walmart project. The borrowing would be for up to $1.5 million to fund the city’s potential portion of the costs to clean up its property at 222 N. Chicago Ave.
- Another resolution calls for refinancing $1,260,000 in “callable” bonds at a lower interest rate, resulting in savings of approximately $38,000.
- Another resolution is an intent to borrow through the Clean Water Fund program for upgrades to the city’s wastewater facility – improvements that will be partially funded through the proposed rate increase I wrote about today.
I’ll keep you posted on all of these resolutions.