Bill seeks to exempt Port from TIF cap for data center

Communities throughout Wisconsin can only create tax incremental financing districts that total 12% or less of their equalized property value, but a bill being considered by the state Legislature would allow the City of Port Washington to exceed that limit if it creates a TIF district for a proposed data center complex.

The bill would exempt a TIF district created to accommodate a proposed data center from the valuation cap, attorney Chris Smith, who represents the city in matters pertaining to the data center, said.

It’s needed, he said, because while the data center would add a significant amount of property value to the city, it would also likely cause Port to hit the 12% cap for TIF districts.

The cap was put in place to prevent communities from placing too much of their property into TIF districts, which use taxes from the increased property values within them to finance such things as infrastructure.

However, these increased taxes are not available to the community to use until the TIF district closes, which can take decades.

In the case of the data center, officials have said a TIF district could be used to cover the multi-million-dollar cost of extending sewer and water services to the site, which is currently in the Town of Port but would be annexed to the city.

Even if the city’s other TIF districts closed, the data center’s district would likely still exceed the 12% cap, Smith said.

That would mean the city couldn’t open another TIF district to accommodate other developments, no matter how desirable, until the data center TIF was closed.

Port currently has three open TIF districts that comprise 4.05% of the city’s equalized valuation, according to a report from the Wisconsin Department of Revenue.

“Port Washington would not be the first to have this exception. We thought Port was a very good candidate for this,” Smith said, noting Mount Pleasant, where Microsoft is developing a data center, also has received this exemption.

But what the city doesn’t know is how much of the data center infrastructure cost would be financed by the TIF district or how long it would take to pay off, Smith said, adding that’s not likely to be known until the end user of the data center complex is identified.

Smith said he does not foresee any roadblocks to the legislation in the state Legislature.

“I think it makes logical sense and there’s precedent for it,” he said.

The Senate bill was introduced by Senators Dan Feyen of West  Bend and Jodi Habush Sinykin of Whitefish Bay and co-sponsored by Rep. Rob Brooks of Saukville, Rep. Paul Melotik of Grafton, Rep. David Armstrong of Rice Lake and Rep. Jerry O’Connor of Fond du Lac.