EDITORIAL: How Port voters got their say on the data centers

An organization that describes itself as southeast Wisconsin’s most influential business network sued the City of Port Washington, saying it was for the city’s own good. Some of Port’s elected officials agreed and hoped the city would lose the lawsuit.

Ozaukee County Circuit Judge Adam Gerol, in a well reasoned, clearly explained decision, dismissed the suit last week.

The lawsuit was filed by the Metropolitan Milwaukee Association of Commerce to overturn a Port Washington law created by a referendum the organization said would be “devastating for economic development in Port  Washington.”

It was nice of the business organization to express its concern for the little city 25 miles north of metropolitan Milwaukee, but the lawsuit was really not about Port Washington. It was meant to quash a precedent that could result in other municipalities facing the requirement now codified by ordinance in Port Washington that tax incremental financing for large developments be subject to the consent of  voters in referendums. 

The MMAC’s worries about copy-cat TIF referendums are probably exaggerated. Few Wisconsin cities and villages are in Port Washington’s situation, with a citizenry angry over its elected representatives’ actions in bringing what has been called the largest data center campus in the country into their city. The TIF factor in the referendum was merely the means for residents to express their views, ranging from displeasure to outrage, on the city’s approval of virtually everything the data center developers asked for. 

The referendum’s effect on TIF projects is incidental. Its primary importance is that it was a rebuke to Port officials for their actions accommodating the construction of four hyperscale data centers in the city of 13,000 people.

And a powerful rebuke it was: More that two-thirds of the residents who cast ballots in the April 7 referendum voted to pass an ordinance that prohibits the city from using TIF district funding for futute projects worth $10 million or more without voter approval in referendums.

As opposition to the data centers grew last year, with a local organization called Great Lakes Neighbors United formed for the express purpose of opposing the Port Washington data centers, with City Hall meetings packed with anti-data center protesters and with repeated public criticism over the Common Council’s closed meetings preceding data center decisions, calls for the city to give residents the opportunity to approve or disapprove of the data centers in a referendum became a familiar refrain.

City officials would not have granted those wishes in any case, but before the referendum talk had built momentum, agreements permitting the data center development to proceed had already been signed and sealed. Referendum advocates were out of luck. 

But then the Common Council and mayor unintentionally opened the door for a referendum by approving a mega TIF tax subsidy for the data centers that still has eyes rolling, even among people who support the selective use of TIF districts as a development incentive. No incentive was needed for the data center developers—they were all in, having spent millions to buy land annexed to the city and contracts approved for a $15 billion investment. Nevertheless, they asked, and Port officials graciously responded by granting a TIF subsidy worth $458 million.

That was a staggering amount for city taxpayers, but at less than 3% of the data centers’ costs was small change for the developers. They could easily afford to pay for their own infrastructure and were certainly not going to back out of the deal.

The TIF gift was not only gratuitous, it deflated city officials’ primary rationale for their embrace of the data centers—that the development’s enormous addition to the tax base would yield substantial benefits for city taxpayers. Because property taxes on the data centers will be used to pay back TIF spending, city taxpayers will have to wait about 20 years to see if those rewards materialize.

In his decision, Judge Gerol dismissed plaintiffs’ claims that the TIF referendum question was too vaguely written to be allowed to stand as law with a single sentence: “To me, it’s quite clear the intent of the ordinance is to require a referendum.”

He added that the ordinance complements state laws regulating TIF districts rather than conflicting with them.

The decision will likely be appealed, but if it stands, Port Washington Common Councils now and in the future will have to justify to voters TIF districts that exceed the low bar of $10 million. But there is no reason to take for granted that worthy projects will not be approved by voters. That is, unless they are tainted by those two incendiary words—data center.