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.