City green lights expansion of TID to facilitate AmericInn expansion
As part of a special meeting Wednesday evening, via a pair of 6-1 votes; the city’s Common Council stamped an amendment for the expansion of TID No. 3 on the city’s east side as well as a subsequent $200,000 development incentive, for an estimated $1.2 million expansion of the AmericInn – which would be included in the new TID No. 3 boundaries.
Both measures came as a recommendation from the April 11 meeting of the city’s Redevelopment Authority (RDA).
The proposed amendment to TID No. 3 would add three additional parcels between Waid Funeral Home and Pine Ridge Avenue, Subway and the AmericInn and directly west of the AmericInn.
According to documents released by the city, TID No. 3 was created under the authority provided by Wisconsin Statutes in 2005 by resolution of the Common Council.
The existing district is a “Mixed Use District” based upon a finding that at least 50%, by area, of the real property within the district was suitable for a combination of industrial, commercial and residential uses.
The district would remain in compliance with this finding after the addition of the territory identified in the proposed amendment to the TID boundaries.
Wisconsin Statutes provides authority for a city to amend the boundaries of an existing Tax Increment District, for purposes of adding and/or subtracting territory up to a total of four times during the life of the district.
According to information released by the city; TID 3 has been amended four times prior to Wednesday’s meeting; three territorial amdendments in 2006, 2013 and 2015 as well as an amendment in 2015 to share increment with Tax Incremental District Numbers 6, 7 and 8.
According to city administrator Dave Johnson, the city is not in violation of state staute given the last amendment in 2015 was not territorial in nature.
“The TID territory has now been amended 4 times as allowed by state statute,” he said.
“The amendment on September 22, 2015 was not a territorial amendment.”
The amendment to the district boundaries and the project plan will enable the city to install additional public improvements, and to make additional necessary related expenditures, that will create development and/or redevelopment opportunities consistent with the original purposes for which the District was created.
During discussion of the proposed amendment , 2nd District Alderman Pete Lokemoen objected to the expansion amendment, citing its potential negative financial impact for the city.
“One of the basic tenets of TIF is that were it not for the use of TIF funds to cover extraordinary costs which limit the potential for development of a property, such as infrastructure development, contamination remediation, blighted building removal, or a lack of development profitability, the property would not be developed. None of these situations are present in this TID proposal,” he explained. “Plain and simple, this development is a normal private business action which follows the normal business concept of investment for revenue return. At the RDA meeting, it was stated that the American Inn expansion would occur with or without the proposed $200,000 development incentive.
“It is in the City of Merrill’s best interests, financially, that we do not approve the proposed TID amendment. The projected TID increment, if the projected valuation is found to be reality, is $243,537. The proposed incentive being $200,000 leaves a net tax gain of $43,537, less any borrowing costs. If this were to fall under normal property tax provisions, the city portion of the taxes, over the same eight-year period as the current life of TID 3, would be $125,908. This is a financial gain to the city of $82,371,” he added.
“There is no ‘but for’ associated with development and it is only negative in regard to City of Merrill finances. This TID amendment should not be approved.”
As Lokemoen alluded to, during the April 11 RDA meeting, city Finance Director Kathy Unertl suggested raising the development incentive from the original proposed $125,000 incentive amount.
Unertl indicated $125,000 for almost a million in new tax base, with new job creation, is a bit lighter than other recent City of Merrill TIF development incentives.
For comparison, Kindhearted Home Care received $100,000 TIF development incentive for a projected $500,000 development and Nelson’s Powerhouse would receive $225,000 incentive for a projected $1.2 million development.
A motion by 3rd District Alderman Ryan Schwartzman, seconded by Karen Karow, recommended authorizing the development agreement by and between the City of Merrill, Wisconsin and Gateway North LLC for $200,000 TID No. 3 development incentive.
In terms of the development agreement with the AmericInn, the project would consist of an estimated 12,000-square-foot expansion to include a new entryway, elevator, common/support areas, and 20 new rooms. Projected construction costs top $1.2 million with planned future modernization of some existing hotel rooms.
Prior to the 6-1 vote (Lokemoen dissenting on both), Lokemoen motioned to amend the agreement to include a stipulation decreasing the development incentive, if the tax increment
generated by the expansion did not meet the estimated $942,500. If the increment were to fall short, the incentive would be decreased by the same percentage of which the generated revenue fell short.
During further discussion, 8th District Alderman Tim Meehean agreed with the spirit of Lokemoen’s motion, but cited the timing of the motion as his reason for opposing.
“To make this sort of change would have to go back to the Redevelopment Authority,” stated Mayor Bill Bialecki. “They are in charge of TIF districts,”
“But we are in charge of Finance” Lokemoen replied.
Lokemoen’s motion was ultimately defeated 2-5 (Alderman Rob Norton and Lokemoen in support).