EDITORIAL: It’s time for a TIF moratorium

“I’m a little TIF’d out.”

A Port Washington alderman said that at a recent Common Council meeting. Some city and school district taxpayers are probably saying, or thinking, the same thing.

The alderman was expressing doubts about a proposal to give the developer planning a downtown apartment building $2.6 million in tax incremental financing (TIF).

That is a substantial amount, but it’s chicken feed compared to the TIF the Council approved for the Vantage data centers—a breathtaking $458 million.

How does that affect taxpayers?

The short answer is that the data-center valuation that will be added to the city tax base will provide no tax relief for as long as 18 years. All of the revenue derived from property taxes on the assessed value of the campus occupied by Oracle and OpenAI will be used to pay back the TIF amount. None of it will go to paying for services and projects in the city budget.

A more detailed answer was discussed in three thoughtful opinion pieces published in the Press—a letter to the editor from a Port alderman, another letter from a candidate for alderman and an op-ed essay from a lawyer who has litigated TIF cases before the Wisconsin Supreme Court.

The writers analyzed a quirk in state tax law that can result in TIFs actually increasing taxes. This can happen because the state includes the value of property in TIF projects in its calculation of a municipality’s levy limit. The valuation gains in TIF districts raise the levy limit—the cap on the amount of taxes a municipality can collect from property owners each year.

As Tom Kamenick, the TIF litigator, pointed out in the case of the Vantage development, “if the city uses any portion of that increase in levy limit coming from the Vantage project, property owners outside of the TIF district pay all of it.”

In his letter, Ald. Michael Gasper, who cast one of the votes contributing to the Council’s unanimous approval of the data-center TIF, did not dispute the levy limit impact of the Vantage TIF, but pointed out that the city could opt to not take advantage of the opportunity to raise taxes.

On a more promising note, he wrote that the city is hopeful the Legislature will change the law to allow levy gains to be deferred until the end of the TIF district.

Taxpayers should second that hope. Without that statute change, there is no assurance city officials will be able to resist the temptation to take advantage of TIF-affected levy limit increases to relieve what they habitually refer to as a “tight budget” that is not adequate to meet all of the city’s pressing needs.

The data-center TIF is up and running, already funding infrastructure for the development, but it remains a magnet for criticism in the heated controversy over the city’s decision to annex a vast area of Town of Port Washington land for a data-center campus that is predicted to be the largest in the country. It sparked a referendum that will be on the April city ballot requiring voter approval of future TIF proposals exceeding $10 million. Separately, the group called Great Lakes Neighbors United is suing the city in an attempt to void the data center TIF.

The use of TIF has evolved from its original purpose of encouraging development of blighted property to an incentive to attract developers of high-value land. Why the city government decided it was necessary to create a TIF district to accommodate a developer that, far from needing an incentive, was aggressively acquiring land at exorbitant prices, pushing the city to commit to annex the land and was well along in securing two of the biggest players in the artificial intelligence boom to occupy data-center facilities worth billions is a question that has not been satisfactorily answered.

In response to critics who say the commitment to the enormous development is wrong for Port Washington, city officials have steadfastly maintained that hosting the data centers is an irresistible benefit to the community because it will power city growth and prosperity without increasing the tax burden on property owners.

If that is true, it is a reward that will be delayed for years until the TIF is paid off. In the meantime, the city will be cutting a check each year, using the tax revenue harvested from the development, to reimburse Vantage for infrastructure costs it is paying for upfront under the TIF. 

Back in downtown Port Washington, city officials like the apartment development that is seeking TIF support in the belief that it will increase the population of the city center and thereby add vitality to the business district. However, two aldermen have reservations about the TIF and the matter has been tabled for negotiation.

Better than negotiation would be a moratorium on new TIF projects—because Port Washington is TIF’d out.