There are no guarantees Racine will turn a profit, or even break even, if the city borrows $14.2 million to drum up redevelopment of a riverside property.
Risky though it may be, the concept is on the table as city officials search for roughly $4 million for streets, sewer and cleanup work on the site and as much as $10 million in incentives for developers.
Racine is proposing to get that money through tax-incremental financing, which would let the city borrow and then pay off the debt with taxes generated by new developments on the land.
But there are no proposals for the property, so city officials are planning to dedicate $14.2 million in taxes from completed projects in a separate TIF district, essentially shifting the profit from one district to support another. The city predicts it will realize the $14.2 million in taxes from the first district during the next 10 years.
“The cases where you have a solid developer and a known development and a guarantee that things are going to be built, that’s not the place where TIFs were meant to be used,” said Brian O’Connell, Racine director of city development.
To get the $14.2 million, the city needs approval from Racine County, the local school district and technical college, all of which must agree to forgo their shares of the taxes from the first district. Instead of the taxes from new developments in that district going to local governments this year, the money would pay for the riverside property’s redevelopment for another 10 years.
For Racine County, that means county taxpayers would defer the benefit of a slightly lower tax rate, said Doug Stansil, county finance director. He said he is considering whether to support the plan. The question, he said, is whether the $14.2 million would generate development in the new district.
“That gets into projections of how quickly construction would take place if this infrastructure is put into place,” Stansil said.
One project proposed for the site has failed. In 2006 and 2007, Key Bridge Group Inc., Oconomowoc, proposed building more than 400 condominiums on the property, O’Connell said. But the company dropped out of the project in late 2008 and later went out of business.
The new plan is designed to get the property back on track, O’Connell said. The city is engineering a new system of roads and sewers for the property, he said, and will send out a request for development proposals after the plans are complete. He said most of the infrastructure work will wait until a development is approved.
John Engel, a citizen representative on the board that must approve Racine’s plan, said risk is part of the deal. But, he said, it is minimal in this case because the site eventually will be developed.
“I think it’s a worthwhile decision,” he said. “Does it change the stakes? Yes.”