Group sues city to block data center TIF district

The City of Port Washington’s approval of a tax incremental financing district for the Vantage Data Center’s $15 billion Lighthouse Campus is being challenged in court.

Great Lakes Neighbors Inc., through Attorney Joseph Cincotta, filed a lawsuit in Ozaukee County Circuit Court on Friday, Jan. 2, in an attempt to void the $458 million TIF district approved for the project.

The lawsuit asks the court to declare it invalid, arguing that it does not meet a minimum standard of half the property being blighted nor does it qualify as industrial land, despite the fact the city zoned it for an industrial technology campus district. 

It also claims that the data center campus fails what is known as the but-for test — proving the development would not occur without the TIF district.

The suit argues that the data center campus does not need a TIF to be developed.

The lawsuit also claims that many of the expenses and costs the city will reimburse Vantage for through the TIF district are not allowed, particularly interest payments the city will pay Vantage.

There is no guarantee that the land in the district will significantly increase in value, the suit adds.

“City officials have literally mortgaged our future to a private developer with no guarantee of any long-term benefit,” Great Lakes Neighbors United said in a press release about the filing. 

The lawsuit also questions discussions held by officials about the TIF district, claiming some “strongly appear” to have violated the Wisconsin Open Meetings law, and claims there was little public discussion about the issue.

“The effect of the approval of the TID will be to reward the developer with more than $458 million in subsidy for merely doing what private commercial property owners are required to do by the free market, which is to maintain and as necessary renovate their properties at their own expense and risk and pay special assessments for the development of required public infrastructure necessary to allow for their development,” the suit states.

Mayor Ted Neitzke on Tuesday declined to comment on the lawsuit.

“I cannot comment on ongoing litigation,” he said.

When the district was approved in November, Chris Smith, the city’s attorney for the data center, said, “Creation of this district is in accordance with all state statutes.”

In November, the Common Council and Joint Review Board approved a TIF district that will fund $459 million in primarily infrastructure costs for the project.

The TIF district encompasses roughly 1,700 acres, the southern 675 of which are currently being developed for use by OpenAI and Oracle as part of the Stargate program, a $500 billion investment in AI infrastructure in the United States.

In a TIF district, tax revenues realized from improvements on the properties within the district are used to pay primarily infrastructure costs. When the costs are repaid, or in 20 years, the district is dissolved.

In the case of the data center TIF district, the payments are projected to end in 18 years, when the costs are repaid.

Unlike traditional TIF districts, which are financed by municipalities, this would be funded by Vantage. 

According to a TIF project plan developed by Ehlers, the city’s consultant, the projects in the TIF district are expected to cost $458.6 million. Of that amount, $455.4 million will reimburse Vantage for infrastructure costs needed for the data center campus and $3.15 million will be used to cover the city’s costs to administer the district.

The proposed TIF projects, which were outlined in the developer’s agreement approved by the city in August, include water and sewer main installation and construction of a lift station and an electrical substation.

The plan also includes a number of projects that would be done if Vantage develops the northern half of its property, a development that the plan states could include two 998,400-square-foot buildings and a central utility plant forecast to be built in 2030 and 2031. 

The report notes that without the TIF funding and Vantage’s obligation to pay for the improvements upfront, the city could not afford the infrastructure improvements.

“Financial participation through tax incremental financing is essential to securing projects of this magnitude that provide local, regional and statewide economic benefits,” the report states.

The district will not only generate economic activity as the campus is built, it will also diversify the city’s tax base, easing the burden on residential taxpayers, the report states.