This post may not win me any popularity contests in downtown Racine and perhaps I shouldn't blog with steam coming out of my ears, but here goes.
The Journal Times has a story about a $5.5 million redevelopment of the Porters building that you can read here.
As Free Racine readers may know, I have noted numerous times over the years that the tax burden is so great in Racine that redevelopment is a very risky proposition without some tax breaks. I have advocated an incentive plan that would reduce the tax burden on property improvements for anyone wishing to improve their property, suggesting a tax break of five years or so. I called it a microTIF (TIF standing for tax incremental financing).
Here is the problem with the proposed Porters redevelopment. They are getting a 20 year break on taxes. Assuming our current tax of $25.47 (per thousand of property value) and the assessment of the Porters improvement of $5.5 million doesn't change over 20 years, the developers will save $2.8 million over twenty years (5500 X 25.47 X 20 = $2,801,700).
Now that is all well and good for the developers of Porters. For the record, I know and like Micah Waters and I hope my opposition to this sweetheart deal is not considered personal as I can assure you it is not.
As it happens, I have a ready comparison of redevelopment projects, the Porters project with my own that does not include a twenty year tax break. The bulk of the improvements at my property at 416 Main Street were for two residential units. After my improvements my property value increase was deemed to be about $300,000. That adds about $7,600 annually to my tax burden. Had I gotten the same deal and property tax rates and my property assessment remained constant, I would save over $150,000 over twenty years.
The Porters folks and building owners like me will be in the same business, competing for tenants. Because Porters won't have to pay property taxes on their $5.5 million improvement, they will save roughly $140,000 per year, or an average of about $3,255 per their 43 residential and retail units. This amounts to a $271 monthly advantage for Porters over the rest of us who are required to pay our taxes. This is a huge difference that will enable them to offer deals to renters while maintaining a healthy profit margin. By comparison again, had I the same deal with the city, I could lower my rent or pocket $317 per month per rental unit.
The bottom line is that taxes are too high for development to occur in Racine. While the city apparently recognizes that fact sporadically, the result is that well connected developers get great deals that virtually ensure financial success, while the rest of us get to pay the taxes.
I feel like a sucker.
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10 comments:
It is amazing what can be accomplished when you don't have to pay taxes. Two things were telling: How they crowed over rental units not exceeding $1000. Why shouldn't they crow, being the rents are in effect subsidized by the taxpayers!
Second, the project will survive with NONE of the storefronts rented. Nothing like a little more excess capacity dumped on the market. But I have to admit it is a nice adaptive reuse of property. I've looked at downtown property more than once and would love that deal. Sucks to be me, I guess.
I see a similar thing going on with condo projects that went bust. The bank owns them now, and stuffed renters into them. Why should someone pay me $800 for an old (but really nice) West Racine 3-bed two-family lower, when they can rent a 3-bed 2.5 bath shiny condo for pretty much the same amount? Shoot, why would ANYONE want to buy?
And the absolutely hilarious part is that you have to pay the salaries, field trip, and entertaiment expenses for the Racine Economic Development department, including Corridor Development Expert (CDROM). If the Mayor says something bad about you you'll be paying even more.
Denis opened a can of Whopp-Ass this morning!! Clear the decks!
What the City Council and our Mayor should learn from this episode is that if taxes are lower people will flock here! Developers, residents and businesses! I am thrilled with this project, since the city and the developer has listened to the residents of Downtown..to PLEASE refrain from more "Subsidized" housing which discourages middle and upper-end residents from moving, investing and improving downtown. I know some folks claim Downtown is for the "Rich and White", I think they miss the point, the idea of our downtown being nicer than the rest of the city is GOOD not Bad! It's on the East side of the City and blocked by water to the East. The only way to attract people here is by having it be better and special!
I agree with Denis's anger that one person is getting a TIF deal that everyone should be able to get. Bottom line is lower taxes all over our city, by cutting spending through outsourcing, reduced borrowing, and responsible spending. It can be done..and eventually we will all benefit!
I agree, playing favorites like this is always problematic and it seems to be pervasive: http://www.jsonline.com/news/wisconsin/state-spends-millions-for-202-new-jobs-f4411f2-139170044.html
I have to take issue with Brownie's analysis however, what this shows is not that companies would flock to Racine if taxes were lower, but rather that A company will come if their taxes are ZERO for 20 years. After which of course they will simply pass the costs along to their renters, if thay are ever even afforded the savings in the first place.
Sean and I agree on something!!!!!! Do I dare spoil the moment and note that the offenders at city hall are Democrats? Of course, but it is good to know that Sean recognizes the problem of crony capitalism.
Something is wrong in Racine when the tax rate is double that of the suburbs. Pick N Save moved their Racine based store across from the mall to Mt Pleasant recently resulting in about $7 million of lost tax base. All of the development around the mall is in Mt Pleasant while the city based mall outlots sit nearly empty.
You didn't need to point that out Denis, I knew that. I could give you GOBs of examples from the GOPs, but let us instead bask in the moment.
Ano, tax rates are lower in the burbs, because they don't have anywhere near the same expenses.
I'm listening to a fascinating book on Wisconsin Public Radio about the escape of a slave from Missouri and help he received to reach freedom in Canada by the underground railroad in Racine and SE Wisconsin: http://wpr.org/webcasting/audioarchives_display.cfm?Code=cad&repeats=no
Fascinating stuff including that the first anti-slavery group in Wisconsin was the Burlington Liberty Association formed in 1844.
I also recounts that in 1853 bouyed by the growth of Racine due to it's harbor and connections to the west to Janesville by the plank toll road, the City Council ordered 70 gas lights for the streets at a cost of more than $2,500. The citizens protested and the number was reduced to 30 lights at less than $1,000. A lamp tender turned them all off at midnight and they weren't lit at all on Moonlit nights. Some things never change!
Know when to hold 'em, and know when to fold 'em.
ADVICE: Run up as much credit and posessions as you can - ones that can't be taken from you, or hidden.
Take it to millions if you can.
Prepare plan B - declare bankruptcy.
Done properly you can retire, or live like a King for a long time whie you plan your next venture.
Ano: I don't gamble and I don't run up debt I can't repay and I don't have any idea what you're talking about . . . do you?
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