Judge rejects two challenges of TIFs in Eau Claire

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An Eau Claire County judge last week tossed out two lawsuits challenging the city of Eau Claire’s use of a common incentive to encourage redevelopment projects in its central city.

The conservative organization Wisconsin Institute for Law and Liberty joined a local group called Voters With Facts to challenge the city’s use of tax-increment-financing districts for both a $14 million student-housing complex and the $85 million riverfront Confluence Center in downtown Eau Claire — a project that last year withstood a legal challenge before the Wisconsin Supreme Court.

The latest cases threatened to undermine TIF incentives, which are the primary means that local governments in Wisconsin have to encourage new development. WILL has argued that TIF districts, which allow taxes generated by new development or property-value increases to be diverted to finance specific projects in specific places, effectively increase property taxes.

But a judge last week tossed out the group’s attempt to contest a TIF district established near a new student-housing complex after finding the challenge had been filed too late. The court also closed out parts of a challenge to the Confluence that had remained open even after the Supreme Court had sided with the city in June 2018 in a dispute over that project.

WILL said it may appeal that ruling.

“We’re exploring all our options at the moment, including appealing the cases,” said Tom Kamenick, WILL deputy counsel and litigation manager, in a statement.

Eau Claire Assistant City Attorney Doug Hofer said the court’s decisions are further proof that local governments have broad discretion to marshal their resources how they see fit in support of redevelopment. City officials have been fighting lawsuits over development projects for the past four years.

“We characterize these as policy disagreements,” he said. “Courts are not the place to address policy disagreements.”

In its latest challenge to Wisconsin TIF laws, WILL argued that the city’s decision to draw a development district around a new mixed-use housing complex violated a provision in state law requiring local officials to prove that whatever projects they are trying to encourage wouldn’t happen without public support — a criteria often called the “but for” test. The group noted the city had not approved the TIF district before construction had begun on the housing complex, but rather after it had ended. WILL also contended city officials had furnished an inadequate description of the developments they expected to come as a result of the district.

WILL was tripped up, in large part, by a technicality, having waited too long to file its challenge. State law requires lawsuits over such deals to be brought within six months. The group filed its suit in April, long after city officials had approved the deal in September 2017, a fact prompting Eau Claire County Judge Michael Schumacher to toss the lawsuit on Wednesday.

A judge on Friday also put an end to WILL’s and Voters With Facts’s lawsuit challenging the downtown Confluence Project. In 2018, the Supreme Court found TIF incentives do not lead to unfair distributions of property taxes. The ruling not only upheld the TIF district used for the Confluence but also similar ones throughout the state, such as those benefiting Foxconn Technology Group’s planned factory in Racine County.

Even in issuing that ruling, though, the Supreme Court left some questions to the Eau Claire Circuit Court, including whether Eau Claire officials had acted properly when they declared the Confluence site blighted.

Eau Claire County Judge Sarah Harless found on Friday that a city is within its rights to rely on promises made by the developer of a particular project when deciding if public support is warranted for that same project. The judge also found that the city’s decision in 2002 to designate the future Confluence site as blighted still held up in 2014. Blight designations are often a necessary precursor to drawing up TIF districts.

Hofer said the city presented reams of documents to make its case that the Confluence site and nearby places are plagued by contamination, crime, flooding and various other urban ills that have scared away private investment. The city’s use of TIF to develop the site has led to development in the city’s downtown that wouldn’t have happened otherwise, he said.

“People need to remember that especially with urban redevelopment it can be hard for investors to take on the risk without local communities making investments in infrastructure to make redevelopment more feasible,” he said. Follow @natebeck9