Should the village assist in funding The Mandel Group's 100-unit luxury apartment development near Silver Spring Drive?
This was the question posed to residents at a public hearing of the Community Development Authority Thursday night.
The village estimates it will contribute through a tax incremental finance (TIF) district to The Mandel Group's $27-million, three-building development containing 100 high-end apartments in the parking lots north of Silver Spring Drive, between Santa Monica and Consaul Place.
At the hearing attended by less than 10 residents, resident Robert Crawford said he likes the project, but he questioned the use of public TIF funds for it.
"I think good, old-fashioned capitalism will see that this project is built," he said. "If any of us came in and wanted to build a big house in Whitefish Bay, we'd be paying taxes on it the next year."
The 'but for' test
According to state guidelines, the use of TIF funding by a municipality must meet the "but for test," which attempts to evaluate if the development would not occur "but for" the use of TIF funding.
CDA Chairman Ray Krueger said history has shown the development would not occur without public financing, and it is in the village's interest to make the project happen because it is part of the Silver Spring Master Plan.
"Capitalism should always have the first oppportunity to work," Krueger said. "But to my knowledge in the past 10 years, through good economic times and bad, we have not had viable proposals made to the village that could be successful or sustained without village support."
Resident Lynn Weber, who recalled when Whitefish Bay still had farmland, said she was more concerned about the added congestion in the parking lot and side streets directly neighboring her condominium on Beaumont Avenue.
"Can you imagine doubling the amount of traffic?" she said. "How is that going to be an advantage to our enjoyment of living here?"
Village officials are still in negotiations with the developer about public funding, so the TIF plan was tabled at Thursday night's meeting.
A tax incremental finance district allows a municipality to borrow and spend money on public improvements, and then recoup the money through the growth in tax revenue generated by those improvements.
Breaking down dollars and cents
The village's $4.9 million contribution includes:
- $1.6 million in direct capital from bond proceeds.
- $2.2 million pay-as-you-go TIF note, which places the up-front project costs on the developer's shoulders with a promise from the village to reimburse the developer.
- $1.1 million in "air rights" to symbolize the value of the air above the public parking lots on the east end. When all other TIF bonds have been paid off, the village will pay itself for the contribution.
Once the project is built and stabilized, the developer estimates the property will be valued at $14 million, and return an additional $320,000 in annual tax revenue. The developer expects the TIF will close by 2040, one year earlier than the 27-year maximum prescribed under state law.
Resident Santo Sturino questioned how the project's estimated assessed value is only $14 million.
"I'm a little shocked that they'd spend $27 million on a $14 million project," Sturino said.
The assessed value was calculated by The Mandel Group and Mike Harrigan of Ehlers and Associates, the village's financial advisor, using the state assessor's rules, said Robert Monnat of The Mandel Group. The assessed value estimation will be vetted by the village assessor in the future, he said.
Going forward, the TIF will go before a joint review board consisting of entities that will lose out on potential new tax revenue from the development for a maximum of 27 years, which is the legal lifetime of a TIF district . The board includes representatives from the village, Milwaukee County, Milwaukee Area Technical College, Whitefish Bay School District and the public.
After the Joint Review Board reviews the plan, it will go in front of the Village Board for final amendments. The Joint Review Board will then have a chance to approve any amendments to the plan. Once the state certifies the TID, it will be effective as of Jan. 1.