Proposed addition

This rendering was presented to the plan commission Monday. It would be located next to the existing brewery.

Waunakee’s Plan Commission has recommended amending a Tax Incremental Finance (TIF) District to include a plan for Octopi’s brewery expansion.

The recommendation came after a public hearing at the commission’s Nov. 9 meeting, when several members of the public with some affiliation with the company spoke in favor and one community members spoke in opposition.

Octopi is seeking to build a 200,000-square-foot warehouse and canning line on Uniek Drive, across the street from its current location on 14 acres to be purchased from Tormach. In addition, the company would expand its brewery by 100,000 square feet on a parcel it currently owns adjacent to the brewery. A TIF district had previously been created on the land owned by Tormach, and the proposal would amend that district to include Octopi’s land.

Within a TIF district, the value of the land and taxes collected remain at the undeveloped level throughout the district’s life. As new development occurs and the value rises, the additional taxes generated go to pay off the project costs as an incentive to the developer.

The proposed TIF district for Octopi would be $3,061,197, with $2,975,000 going toward the development incentive, and the remaining $88,197 toward administrative expenses, according to the project plan prepared by Ehlers, the financial consultant assisting the village.

That document shows the project adding $20,600,704 in taxable value over the 20-year life of the district, with $7,193,962 in tax increment. However, Todd Taves of Ehlers noted that Octopi’s total investment is estimated at $68.2 million. Because it is a manufacturing facility, equipment is not taxed.

The incentive payments would be paid from the tax increments as they are collected on a “pay as you go” basis.

Ehlers estimates show the project generating $417,816 in tax increments per year starting in 2021.

TID No. 9 was created for Tormach when it planned to build on the property across from Octopi, but those plans never came to fruition. Without any increment resulting from new development there, the district is generating a negative balance in administrative fees.

The ‘but-for’ test

At Monday’s meeting, discussion centered around the “but for” test, with Octopi owner Isaac Showaki and Kelly Crowley of Baker Tilly, the company’s financial advisor, explaining the financial gap.

State statutes require TIF incentives be used only for projects that would not occur without the creation of the district, or would not occur within the manner, at the value or within the timeframe desired by the municipality.

Showaki said credit conditions have changed, and he is applying for other funding from the Wisconsin Development Corporation.

Crowley noted that Octopi is set up a manufacturing client and a separate entity has been created for the real estate entity with different ownership groups for tax structuring purposes, as well as liability.

Ehlers looked at the real estate entity, which creates the asset and pays property taxes. The real estate entity would be charging market rents to the operating entity, which, as a manufacturer, is not taxed in the state of Wisconsin.

“Even with that, there is a financial gap and TIF can overcome that,” Crowley said.

An email from the lender also stated that in the case of Octopi, TIF is an important component.

Showaki also noted that in 2022, the company will pay $38,605 in real estate taxes. That will rise to $442,202 annually in 2030.

“From day one, it’s all the extra revenue that we will create by bringing more jobs into Waunakee, more production into Waunakee,” Showaki said.

Showaki noted that when the company started, it had six employees, including himself. Today the company has 100 full-time employees, and the expansion will add another 50.

Public comment

During the public hearing, Waunakee resident Robert McPherson spoke against amending the TIF district, noting other companies also could not complete projects without TIF assistance.

“I think anybody here could name a ton of projects that without additional funding, or sort of ways to work tax revenues, that their projects would not work either. So I feel that you’re setting a precedent if you allow this to go forward as is,” McPherson said.

He noted the contract brewery received TIF funding initially, and if the company wants to grow, the taxpayers shouldn’t be “on the hook for it.” McPherson explained that during the TIF’s life, the school district and other taxing entities do not receive the additional tax increment.

“Maybe they should look for smaller project that’s within their means,” McPherson said about Octopi.

One Octopi employee, Joel Yaeger, spoke in support of the TID amendment, noting that the company adds to the local economy. Others echoed Yaeger’s comments, saying the business brings people into the community.

Plan commissioners generally supported Octopi’s growth and some TIF assistance, but Commissioner Phil Willems asked if the amount could be negotiated to provide about half of the request.

Willems said initially, he did not support providing assistance, but noted that he views this as an opportunity.

“We don’t have people knocking on the door to the business park,” Willems said.

Showaki said the financial gap is actually more than the amount requested in TIF assistance.

Todd Taves of Ehlers weighed in, adding that the amount of TIF assistance “just barely brings a positive return.”

Commissioner Brian Wallace asked about the status of TID 3, and whether its balance could support the expanded TID 9, but Taves said TID 3 was created in 2000 and reached the end of its expenditure period in 2018.

Asked what would happen if Octopi did not receive the TIF assistance, Showaki said the opportunity would be lost. Important clients that want the project at the contract brewery done now will go elsewhere, Showaki added.

The Tormach site has sat vacant for at least 20 years not generating any additional taxes, Commissioner Chris Zellner pointed out, and said that the TIF is an investment in the community.

Zellner said initially, his response to the TIF request was similar to Willems’, as the village had already given the company assistance.

This is Octopi’s third request for TIF assistance and the largest. In total, if the amendment to TID 9 is approved, the village’s investment of about $4 million in TIF assistance for what would be Octopi’s $100 million company is between a 4 to 5% investment, Zellner noted.

“For what it brings to the community just outside that little investment, if we think of other investments we could make in the community and the revenues and jobs that go with it, this is one of those shining stars in my opinion,” Zellner said.

The TID is projected to close in 10 years, Zellner said, adding he feels the request has significant merit and is reasonable. Citing the merits, Zellner noted the brewery brings tourism to Waunakee and 10 of its employees have built homes in the community. He believed Octopi would be the second or third largest facility, he said.

The plan commission voted unanimously to recommend the TID amendment. The village board will discuss Octopi’s request at its Nov. 16 meeting. The Joint Review Board, composed of members of each tax jurisdiction, will meet at 5 p.m. Nov. 24.

Load comments