Bad timing, a fickle state bureaucracy and even a death are being blamed for a failing plan to develop a portion of the City of Rice Lake. But city officials remain hopeful that the plan can be rescued without a taxpayer bailout. The Rice Lake Planning Commission voted Thursday to hold a public hearing Aug. 29 on a proposal to fix the troubled Tax Incremental Finance District #4. The TID, which encompasses a large area in the southeastern portion of the city, was formed in 2007 as a way to use the growth in property values there to help spur further development that might not otherwise occur in that part of the city. But instead of a gain in value-which would then generate more property taxes to pay development costs-many of the properties have lost value. The net result is the district, initially valued by the state at $50.8 million, is now worth $37.2 million. Because there has been no gain in district property values, the city has no TID-generated funds to pay off the $1.5 million it borrowed for its share of the Camelot Lane reconstruction project. That leaves city property taxpayers on the hook for debt service costs, which will spike in 2015 when the city must begin paying off the principal. TIDs are commonly used by communities throughout Wisconsin to help spur private development. Rice Lake has successfully used them in the past, especially for industrial parks and commercial development.
Why is TID #4 failing? City administrator Curt Snyder outlined for the Commission Thursday the "perfect storm" of troubles that has beset the district. Synder said the first hint of trouble came when the city received the initial valuation for district by the state Department of Revenue, which was $10 million higher than the value established by the city's assessor. Synder said he wasn't overly concerned at the time, especially after the first year when the district's property values increased from the base of $50.8 million to $51.8 million. But then came the recession that hit property values hard throughout the country. From 2008 to 2009 the value of the district slipped to $48.8 million, meaning it was no longer generating any additional property taxes to pay development costs. Then in 2010 the Department of Revenue changed its assessment methods, and the district lost a further $5.4 million in property value. There was a slight rebound in values for 2011, but the district still had a total valuation $6.3 million under the initial base value. Another major blow to the district came with the death of developer Dick Freund, whose plan to develop 233 units of housing on 30 acres was one of the chief reasons the TID was formed. TID #4 then took its biggest hit in 2012 losing an additional $7.3 million. The 2013 valuation won't be known until later this month, but city officials aren't expecting a miraculous recovery. It would take the construction of two Walmart Supercenters to restore enough value, Snyder told the commissioners.
Rescue plan forms Meanwhile, Synder and city planner Harry Skulan weren't sitting on their hands. They had contacted the DOR to determine if anything could be done to remedy the situation. When that failed, they called on Sen. Bob Jauch and Rep, Stephen Smith for legislation that would allow the city to reset TID #4's base value. But that idea met with strong opposition from legislative leaders concerned that other TIDs around the state would want the same consideration. Smith and Jauch, however, were able to get city and DOR officials together to work out a plan that looks as if it will not only stop the bleeding of red ink in TID #4, but also put the district back into the black. Under existing laws TIDs can be amended four times. City staff is recommending changing the boundaries of the district by removing some parcels that are already developed-and therefore less likely to increase much in value-and some undeveloped parcels that will be more costly to develop, again making them less likely to be developed and increase in value. Most of the properties being considered for removal are north of South Street and east of Main Street and those west of Main Street south of South Street. If approved, the plan would take the TID from its current estimated deficit of $13.7 million to a positive of about $800,000.