Caution could signal weakness as Milwaukee tries to drum up more money for road projects.
The city is preparing to put into action Alderman Jim Bohl’s proposal to use tax-incremental financing to pay for street construction. Under the plan, the city would extend the lives of TIF districts by up to two years so the property taxes collected within the districts can pay for road projects. The city has five districts that could dedicate money to roads in 2011 and 2012.
Tax-incremental financing districts let cities borrow money to pay for public projects and support private development in a designated area. The increased property taxes generated within the district pay off the project debt. When the debt is paid, the district dissolves and the property taxes revert back to traditional collections.
Bohl’s proposal requires approval from Milwaukee County, Milwaukee Public Schools and Milwaukee Area Technical College because it would delay their tax collections on the TIF properties by up to two years so the city can use the money on roadwork. The targeted TIF districts are scheduled to close in 2011 and 2012.
“It’s not going to be the easiest sell,” said Jim Scherer, vice president of the Milwaukee Economic Development Corp. “But if we can take this one step at a time, it may be more digestible.”
Baby steps are at the heart of a counterproposal, backed by Milwaukee Mayor Tom Barrett and the Department of City Development, to at first extend only one TIF district. That proposal would pay for $395,000 in road projects, while Bohl’s would generate $6.7 million.
“The intent of setting up the pilot is obviously to see if the intent of the legislation works,” said Steve Kwaterski, Barrett’s spokesman.
The city will present the plan for the pilot TIF district Thursday to representatives from Milwaukee County, MPS and MATC. Those representatives are not expected to vote on the plan Thursday.
Bohl said the pilot TIF is a dangerous move because Milwaukee will have a tough time asking others to delay tax collections if city officials are concerned about whether the plan will work. If there are concerns, he said, they should have been brought up in October when the Common Council was considering the legislation.
“Ultimately, we have the Common Council directive that says prepare these amendments,” Bohl said, “and then you have the mayor turning around during that same time period and saying ‘I am going to redirect you.’”
Scherer said the city is still working out how to put the TIF proposal into action. If projects scheduled for construction after 2012 cannot be accelerated, there would be delays closing the districts and delays in collecting taxes on the TIF properties.
“What we’re trying to work out is: Will we accelerate all of those projects into this year rather than have them implemented over a period of time?” Scherer said. “And if we can do that, we can close the districts out sooner?”
Bohl said the city can engineer the projects if there is TIF money to pay for planning. He said he does not support keeping the districts open longer than two years.
The fact is, Bohl said, the city needs more road construction money even though the 2010 budget set more aside.
“We need alternative sources,” he said, “and that’s why I think this concept, albeit difficult to swallow, was supported by this council.”