While several TIF development agreements with the city of Milton have paused, City Administrator Al Hulick says development within the city continues to grow, but at a decreased rate.
Citing rapid changes since COVID-19, Hulick said, Milton continues to maintain a “growth trajectory.”
“Development projects are moving forward. Has the pace slowed? Absolutely. We are increasing at a decreasing rate. We are still growing. We are not flat and we are not in decline,” he said.
Metrics such as building permit applications and home sales are increasing, Hulick said.
At least six entities are in discussions with the city about new construction projects, he said, adding: “It’s not like all of a sudden the lights went out.”
COVID-19: harbinger of uncertainty
Hulick said COVID-19 played a role in making less certain the business environment, and while he was not fully aware of the business plans followed by each company with a paused development plan, he said, in the case of Badgerland Disposal, one of several companies with a development project on hold, the company faced uncertainties selling products to a tertiary marketplace and often overseas.
Citing, as example, COVID-related supply chain interruptions at the local level, for Badgerland, he said: “Now we are talking about raw materials and international markets, and supply chains … and the cost of construction has increased dramatically.”
COVID-19 brought scheduling changes and layoffs to contractors, Hulick said.
“There are myriad variables that came with COVID-19 that are impacting construction, including the cost of goods, interruptions in the supply chain and the availability of contractors,” he said.
Looking at Midwest Tennis Center, another company with a project on hold, Hulick said, as a provider of interpersonal recreation, COVID-19 likely affected the company’s business model, and particularly how it delivers services.
“So they face a reduced ability of service provisions and then challenges in construction as well,” Hulick said.
Hulick described the development process as a “mosaic of events” that takes place to bring a project through the full development process.
“We engage in business conversations all the time that never come to fruition, but rarely do they get as far as Badgerland and Midwest Tennis got. At that point, those things seem to be pretty sure bets.
“That was pre-COVID-19. Then COVID-19 hits and that changed everything,” Hulick said, adding that since the pandemic arrived, there is a lessened ability to know if projects will complete.
“We had to get our started projects through the system, and now that we are in a new normal, whatever that is, people are more cautious,” he said.
Even as the pandemic changed the development landscape, Hulick said, TIF resources and rules did not change.
“Mindset about the process,” has changed, he said,
“It’s really more of a change in perspective, with more flexibility and understanding that the process may be elongated,” Hulick said. That might include waiting longer for stages in the process to complete or extending deadlines, he said.
Changes in TIF agreements
While TIF development agreements are in place with Badgerland Disposal and Midwest Tennis, they have never been fully executed, Hulick said.
Therefore, he said, there is no liability on either side.
In the case of Badgerland Disposal, Hulick said, the city was responsible for transferring land, but that step had not yet occurred.
“With this project, the city hasn’t incurred any costs. Had we deeded the land or had we made public improvements, they would owe the city back those dollars. Because there are no considerations, meaning any kind of exchanges of resources one way or another, no obligations or liability exists.
“We wait to the last possible minute to execute any considerations that might be incurred, like public improvements or up front incentives,” Hulick said.
If an agreement that hasn’t been executed changes or defaults, he said: “There is no risk for the city, we just move forward as if it never happened.” Developers run the risk of losing to another purchaser land identified for their projects, he said.
A potential exists for a missed opportunity for the city to sell the land to another buyer while it is involved with an agreement, Hulick said, but, he added, “We have other land being marketed, it’s not the only piece we have, so while there is some opportunity costs, they are very negligible.”
If a developer completes a project, which does not receive an assessment in the amount stated within the TIF agreement, then the developer would owe the city the difference, Hulick said.
Hulick said he hopes the paused projects will still come to fruition.
“We were moving forward, and when COVID struck, it caused those with projects to regroup, but we still have projects moving forward.”
He cited as examples the recently proposed fast food restaurant and DiMAX.
“We are negotiating with other developers. In 2020, there is still a lot of activity,” Hulick said, adding: “It’s also possible those projects may not materialize.”
Milton’s growth trajectory began in 2016, Hulick said.