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Boston Store TIF sparks questions

Two Milwaukee aldermen want the city’s comptroller to vet a proposed tax incremental financing district extension that would keep Boston Store downtown until 2018.

The aldermen, Robert Bauman and Michael Murphy, said they are concerned the extension does not pass the “but for” test that is the crux of TIFs.

“The first question you should always ask yourself is ‘but for,’” Murphy said. “If we do not do this, will they still survive?”

According to the state’s TIF manual, a proposal passes the test if development would not happen “but for” TIF assistance.

“Let’s just say I have some reservations,” Murphy said.

He isn’t alone.

Milwaukee created the TIF in 1998 to revitalize the Shops of Grand Avenue, according to a city report, and amended it in 2000 to add $5 million for Boston Store renovations. The Department of City Development now is proposing extending the TIF one year to 2016 to provide up to $1.2 million to York, Pa.-based The Bon-Ton Stores Inc.

In exchange, Boston Store would extend its retail lease, expiring in 2015, and office lease, expiring in 2017, through January 2018. The store and headquarters, both at North Fourth Street and West Wisconsin Avenue, also would retain 750 full-time employees.

DCD spokesman Jeff Fleming said Bon-Ton could use the $1.2 million, distributed in four annual $300,000 payments, for equipment, working capital, advertising, leasehold improvements and store promotions.

Alderman Nik Kovac said that raises a red flag.

He said he supports preserving office jobs. But, he said, the proposal for Bon-Ton could stretch the interpretation of proper use of TIF money.

“TIF is for new construction,” he said, “or major rehab.”

Pedestrians walk past the Boston Store in downtown Milwaukee recently. (File photo by Kevin Harnack)

Pedestrians walk past the Boston Store in downtown Milwaukee recently. (File photo by Kevin Harnack)

Using the money to preserve the office jobs would raise questions, he said, about whether the city would pay to keep other tenants downtown.

But Fleming insisted the extension is a good investment. Bon-Ton’s annual payroll for its downtown jobs is between $50 million and $60 million, he said, and the 750 jobs are “the bulk” of the retail and office positions, though he did not provide exact numbers.

“In this case, I think there’s a pretty strong argument that but for the TIF investment here,” Fleming said, “Bon-Ton’s presence at Fourth and Wisconsin would be far from secure.”

Bon-Ton, he said, could buy itself out of its office lease if its retail lease lapses. Fleming would not comment on the details of negotiations between the DCD and Bon-Ton.

Bon-Ton’s spokeswoman did not immediately respond to a request for comment.

Keeping Boston Store downtown, Fleming said, could spark renewed interest in vacant storefronts in the area. Furthermore, he said, those vacant storefronts suggest attracting a replacement for Boston Store would be difficult.

But Russ Kashian, an economics professor at the University of Wisconsin-Whitewater who has studied TIFs extensively, discounted that suggestion.

“I think the development downtown,” he said, “sends out a signal that it isn’t, it isn’t an abandoned area. It might just be challenged retail-wise.”

Kashian said the proposed extension might only temporarily prop up a business that is not the best use for the property. There is no assurance for the city, he said, that Bon-Ton would stay at Fourth and Wisconsin after the money runs out.

“You’re basically just delaying, well, maybe the inevitable,” Kashian said.

Wisconsin cities, he said, have bent TIF rules so much that the interpretation of them has become warped. What once was a tool to buoy blighted areas has become just another enticement cities use to court development that would happen anyway, Kashian said.

“I question the fairness of that,” he said, “because if they are the winners, then they should win on their own.”

Bauman, whose district includes Boston Store, said misuse of TIF money in general is one source of his skepticism. The original intent of TIF districts, he said, has been eclipsed.

“Now it’s just morphed into a subsidy,” he said, “for everybody who can muster the political support.”

Murphy, Bauman and Kovac acknowledged they do not have enough details of the TIF proposal to make a decision. Murphy said he expects to have the comptroller’s report before the Zoning, Neighborhoods & Development Committee, of which he and Bauman are members, votes on the TIF extension.

But Bauman said he does not need all the information to start examining the proposal’s merit.

“I guess the fundamental question for me is: Well, why?” Bauman said. “What’s the problem? Is it just the location?”

About Beth Kevit

Beth Kevit is the Milwaukee city beat reporter and also covers real estate. She can be reached at [email protected] or 414-225-1820.

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