Groups sue city to block TIF referendum

A referendum question that if approved would require the City of Port Washington to seek voter approval for any large tax incremental financing districts is being challenged in court by a group of Milwaukee area business organizations as well as a Port business and resident.

A lawsuit against the City of Port was filed Thursday, Jan. 29, by the Metropolitan Milwaukee Association of Commerce and other business organizations seeking an injunction to block the referendum slated for the April 7 ballot.

“Drastic measures like the one we’re embarking on with this lawsuit are not taken lightly,” MMAC President and CEO Dale Kooyenga said in a release.

“State statute already dictates the process in approving TIDs. A measure of this nature would not only conflict with state law, it would be devastating for economic development in Port Washington and would set a dangerous precedent with long-lasting economic impacts across the region and throughout the state.”

The lawsuit, which seeks a writ prohibiting the city from placing the proposed question on the ballot, alleges that the referendum, if approved, would take away powers given to the city and the Joint Review Board by the state, contrary to state law.

It also argues that the ballot question is vague, wrongly suggests that general tax revenue will be used, provides no standards to determine when voter approval is needed and invites arbitrary application

A hearing on a temporary restraining order sought by MMAC and the other plaintiffs is set to be heard by Ozaukee County Circuit Judge Adam Gerol on Friday, Feb. 13. The lawsuit notes that the city plans to submit the referendum question for inclusion on the spring ballot within 10 days after that — by Feb. 23.

The lawsuit is one of three filed against the city prompted by the Vantage Data Centers Lighthouse Campus on the city’s north side. One of the suits seeks to void approval of a TIF district for the data center, while the third seeks to obtain public records about the project.

Great Lakes Neighbors United, a group opposed to the Vantage Data Centers Lighthouse Campus on the city’s north side, filed a petition in December to compel the city to place the question requiring voter approval of future TIF districts on the spring ballot, something the Common Council approved despite concerns expressed by City Attorney Matt Nugent about its legality and enforceability.

The question asks voters if future TIF districts that require large capital expenditures or have a base value or project costs of at least $10 million should be the subject of binding referendums.

A representative of Great Lakes Neighbors United did not return a call seeking comment on the lawsuit or whether the group will seek to become an intervening defendant.

Other plaintiffs in the case are The Associated General Contractors of Greater Milwaukee, Building Advantage, Commercial Association of REALTORS Wisconsin, Wisconsin REALTORS Association, NAIOP Wisconsin, Port Washington based Sid’s Sealants and its owner, Sid Arthur.

In a response to the MMAC lawsuit that was filed after a closed session of the Common Council Tuesday, the city noted that because residents circulated a petition to force the referendum “the defendants find themselves in a position where they are prohibited by law from rejecting the subject legislation even though they largely agree with the concerns outlined in the complaint.”

In a press release announcing the lawsuit, MMAC argues that state law does not authorize voter referendums for TIF districts nor does it permit municipalities to alter the approval process.

“The State of Wisconsin has seen firsthand the benefit of offering TIDs in attracting economic development. Housing, infrastructure-intensive, brownfield and mixed-use projects all rely on this tool to strengthen our communities,” the release states. “The proposed referendum could introduce delays, increase financial risk and discourage investment.”

Tom Larson, Wisconsin REALTORS Association president and CEO, said that TIF districts are a vital tool in drawing business to a community.

“Tools like TIDs give Wisconsin communities the stability they need to attract development and strengthen local real estate markets,” he said. “Injecting political uncertainty through referenda would delay projects, discourage builders and employers and make Port Washington and ultimately Wisconsin far less competitive when investors decide where to commit their capital.”

If the city can’t use TIF district funding, it “would likely need to raise taxes directly to fund development improvements in the future or borrow to make improvements, which in turn increase taxes, either of which negatively affect Sid Arthur, the lawsuit states.

The release quotes Arthur talking about the negative impact the referendum requirement could have on his business.

“Our business’s success is heavily reliant on new construction,” he said. “If large-scale construction projects become subject to the process being proposed, those opportunities will dry up. That means a loss of jobs, fewer investments and less growth in our community.”

In the other TIF lawsuit, the one filed by Great Lakes Neighbors United that specifically challenges the financing district created for the data center complex, a motion hearing has been set for March 12 before Gerol.

The city has filed a motion to dismiss the lawsuit, which asks that the court declare a $458 million TIF district approved for the data center campus be declared void.

In the suit, Great Lake Neighbors United argues that the TIF district does not meet a minimum standard of half the property being blighted or industrial land and that the data center campus fails what is known as the but-for test — proving the development would not occur without the TIF district.

It 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.

The city argues that the TIF district is valid and says that a developer’s agreement between the city and Vantage shields taxpayers from financial liability.

“It is ironic that if GLN were to get what they are asking for, invalidating the TID, only then would city taxpayers be at risk because GLN will have destroyed the only shield protecting city taxpayers from the project costs,” the city’s response states.

“Citizens or citizen groups who simply disagree with the creation of the TID are entitled to their opinion, but they lack standing to seek declaratory judgment invalidating the TID.”