Village on Main

Shown is a rendering of the Village on Main provided by the developer, Cohen Esrey. The developer is now seeking tax incremental financing to purchase the property next door for the project.

The Waunakee Village Board discussed using two very different types of Tax Incremental Financing for equally different projects in the village at the Nov. 16 meeting.

The board approved the first, an expansion of existing Tax Incremental District originally created for Tormach to allow Octopi Brewing to expand its operation. That TID request will go to the Joint Review Board Nov. 24 for consideration.

The second would be a completely new use of TIF in Waunakee, extending an existing TID and using the tax increment collected in that year to fund an affordable housing project.

Cohen Esrey Development Group had planned to build a 50-unit apartment building just west of McDonald’s and had received a nearly $700,000 grant from the Wisconsin Housing and Economic Development Authority. Cohen Esrey had also applied for a Federal Home Loan Bank Affordable Housing Program grant but was denied.

“We were very hopeful that we would receive the $600,000 grant. We did not,” said Brian Sweeney of Cohen Esrey. “So that was kind of a disappointment.”

Also adding to the cost of the project was the decision to purchase an adjacent property for a cost of $450,000.

“In our discussions since April-May with staff and consultants regarding the design of our project, the 50-unit project was a lot to put on the veterinarian site, 701 West Main,” Sweeney said.

Staff had urged Cohen Esrey to inquire about purchasing the adjacent property, and Cohen Esrey has a tentative agreement with the owners.

Cohen Esrey is asking the board to consider a contribution of $450,000 to purchase that property with the use of TIF.

Financial consultant Todd Taves of Ehlers explained to the board that a new district could be created or TID 2, which is currently contributing to the downtown TID 5, could be extended for one year. A provision in state law enacted 10 years ago allows a Tax Increment District, when it reaches the end of its life either by reaching the statutory timeframe or it has paid its cost, to be extended by one year a by simple village board resolution. The extension would not require approval by a Joint Review Board, unlike the creation of a new Tax Incremental Finance district.

A TID can be extended for one year if the increment collected is used for improving housing stock within the community, and 75% of the increment goes toward affordable housing.

TID No. 2 has recovered its own cost and has remained open to share its increment with TID 5, Taves explained.

The current plan isto leave TID 2 open for the maximum life, which would allow TID 5 to close in 2024.

“Right now, TID 5 has a fairly significant fund balance. That’s why we’re moving the money there,” Taves said. “If we stick with that existing plan, the last year TID 5 would have a negative fund balance would be 2021.”

That would mean the village would first have access to the dollars in 2025.

Another scenario would involve closing TID 2 now, prior to the cut-off date for the Department of Revenue. The village could also wait until April 15 and then close TID 2, Taves said.

“In the case of the soonest possible closure, what it means is the affordable housing dollars would actually be the dollars you’re collecting as part of this 2020 levy for the 2021 budget,” Taves said. They would be available as soon as 2021 taxes were collected.

If the village waited until after April 15, the dollars would be available in the 2022, he added.

Taves then explained the impacts of the two scenarios on TID 5.

If TID 2 were to close now, the closure of TID 5 would be delayed three years, to 2027. TID 5’s negative fund balance would remain until 2024.

If the village were to wait until after April 15, TID 5 could close in 2026 and its negative fund balance would remain until 2022.

Board members referred the request to the Community Development Authority for review at its December meeting and asked the finance committee to also review it.

Finance Director Renee Meinholz noted if TID 2 closed now, the village would lose the approximately $400,000 increment from that district for TID 5, so those costs would come from the general fund.

“In my projections to the board, especially early in the process, I was projecting out the 2021 unassigned fund balance. That would have a dramatic impact. It would go from 26 percent at the end of 2021, down to 22 percent,” Meinholz said.

The other option would provide more tax relief next year, she said.

Meinholz said the auditors agreed that the village could provide the funds to Cohen Esrey up front and be repaid from the increment.

Sweeney of Cohen Esrey said that the development group had anticipated closing on the neighboring property in March.

Chris Zellner, village president, noted that this project achieves one of the village’s goals.

“One of our goals for the last several years has been to address affordable housing. This is the first project that’s in front of us to address affordable housing truly,” Zellner said. “I believe that this is a good project for the community.”

Trustee Phil Willems said initially, he was not in favor of the project because it was “too tight for the land.” But with the purchase of the neighboring lot, he supported exploring the options.

Octopi

On a 5-1 vote, with Trustee Nila Frye voting against and Trustee Bill Ranum absent, board members approved amending TID 9 to include Octopi Brewing’s project plan. It calls for building a warehouse and production facility across the road and expanding the brewery onto Octopi’s adjacent property.

The TID was originally created for Tormach’s project, which never materialized.

During the public comment section of the meeting, Dave Boetcher, president of the Waunakee school district’s Board of Education, indicated that he, as the district’s representative on the Joint Review Board, would vote against amending the district.

Boetcher said the district’s policy has been to vote against tax incremental financing that do not meet the “but-for” test, a measure required by state statues of whether the project would occur without the financing.

Waunakee resident Linda Ashmore also spoke during that public comment section, saying she was opposed to any TID. Initially, Octopi had received financing from TID 3. As it takes on funds from TID 9, Ashmore said tax increment is going to the developer for 40 years.

During the board’s discussion, trustees expressed mixed opinion.

Trustee Kristin Runge said she was in favor, noting that TIF is one of the few tools villages have for economic develop and to help businesses grow.

“What put me in the positive category is the number of living-wage jobs that are connected to it and the fact that this is projected in 10 years to be paid back,” Runge said.

Runge works in economic development and said the way to grow jobs is by encouraging entrepreneurs, like Octopi’s owner.

Trustee Phil Willems said he would prefer providing half of the amount requested.

Trustee Nila Frye said she was concerned about the increase from the initial request to the amount requested now. She added that the “but-for” test is like an elastic band that gets stretched. And she said she wished Dane County could include information on tax bills showing how much of the tax increment was used to fund costs created by TIF projects.

Zellner called Boetcher’s comments during the public comment section disappointing. He noted that he is a former teacher and his wife currently teachers in the district.

“Before we’ve even discussed this tonight, our school board president came on and basically inferred that our school district is not going to back this before we had had a chance to discuss,” Zellner said.

Zellner noted that the Tormach site has sat empty for 20 years, and this would be an opportunity to create a higher tax base.

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