MINUTES OF THE
TUESDAY, SEPTEMBER 5, 2006
Mayor Bolender called the meeting to order at 7:00 p.m. The following Commissioners were present at roll call: Commissioner St. John, Commissioner Sokol, Commissioner Siira, Commission Kopplin, Mayor Bolender, Commissioner Grabowski, Commissioner Correll and Commissioner Peterson. Commissioner Dickmann was excused. Also present were Doug Seymour, Director of Community Development and Assistant Fire Chief George Krudop.
Public Hearing
Mr. Doug Seymour explained the public hearing was for the Tax Incremental Financing District #7. This TIF is being proposed by Liberty Property Trust. The boundaries of the district are roughly 27th Street on the west, Southbranch Boulevard on the north, 20th Street on the east and the Reinhart property on the south. There are approximately 107 acres within the TIF district. Central to the proposed district is a 27 acre parcel that is being proposed for development by the Liberty Property Trust. Liberty Property Trust intends to develop an industrial and office park that would consist of one industrial warehouse building, an office/retail site and two service center buildings. The TIF is being proposed as a developer funded tax incremental district. The risk is being transferred from the City to the developer. The developer would put in the infrastructure and the City would pay the developer back with the money that was generated off the new tax increment. The developers are only returned the money if they provide the tax revenue off of the new buildings to match the increment. This is a situation that is much more beneficial to the City in that the risk is transferred to the developer.
Mr. Neil Driscoll, Liberty Property Trust, pointed out again this would be a developer funded TIF. The two big issues with TIFs are whether they are needed and they sometimes have a long pay off period and they may be a lot of risk on the City. With this proposal Liberty is assuming all of the risk because they don’t get paid back until the properties are developed so there is a lot of incentive to get the buildings built. Mr. Driscoll pointed out the proposed extension of Reinhart Drive. He showed elevations and a site plan for a distribution building and the service center building and also a smaller service center building. The smaller service center building has a lot of glass across the entire face of the building and metal canopy roofs because the building faces on 27th Street. Because it also faces onto the new road it will also have glass on the southern elevation and likely the northern elevation as well. It is a good representation of what they are trying to build. The fourth building could be for office or retail and would not be built by Liberty themselves because of the size. The site’s biggest challenge is the great amount of wetlands.
Mayor Bolender questioned if there would be an office building on the site. Mr. Driscoll explained it would not be an entire office building but rather it would have a high percentage of office and would be a service center building. Mr. Seymour questioned the percentage of office in the building. Mr. Driscoll stated it could be any where from 50 to 100%. There are alternate parking plans in place to allow for the buildings to be entirely office space. Mayor Bolender expressed concern that this would be the warehouse district for Franklin. The large building he could understand as warehouse but the other three buildings would set the tone for what is going to happen in that location. He would like to see high end like Franklin has and he would not settle for entire warehouse facilities. Mr. Driscoll explained it was not their intent to have any one of these buildings be warehouse buildings. The elevations should show based on the glass that they could not afford to put warehouse in the building based on the cost. There are additional parking plans to show parking in the rear of the buildings because based on the cost of the buildings there is not a warehouser that would pay the cost of the buildings.
Mr. Seymour opened up the public hearing for comments from the floor.
Mr. Russell Billmeier, 4433 W. Tesh Avenue, Greenfield Avenue, partial owner of one of the parcels near the TIF district. Mr. Billmeier questioned what effect the TIF district would have on his property. Mr. Seymour explained the TIF district in and of itself does not impact Mr. Billmeier’s property. The property would most likely be impact by any development that would take place under the current zoning which is manufacturing. The zoning is not really changing it is just the methods under which the public improvements are being put in place. This is a financing mechanism that will allow Reinhart Drive to be extended to the south and to the west to connect up with 27th Street. Mr. Billmeier questioned the improvements that would abut his property and if there was any financial responsibility on his part for those improvements. Mr. Seymour explained under this proposal those improvements would not be assessed for the public infrastructure.
Mr. Tony Milling, 2430 W. Oakwood Road, owns seven acres on Oakwood Road and questioned if he would be able to put a house on that property in the future because at this point he did not have access to the seven acres. Mr. Seymour questioned if there was any access onto Oakwood Road at this time. Mr. Milling does have access and currently has a house on the property but does not have access to the back of the property. Mr. Seymour stated they would have to investigate further but he did not feel it would be in the best interest of the City to allow residential development off of what is essentially a manufacturing road. Mr. Milling stated he would stay on his side of the street with the residential homes. Mr. Seymour expressed serious concerns about allowing that to happen. It would not be proper to have residential houses and driveways taking access off of the same road as a major manufacturing street. Mr. Milling questioned what type of development he could get from his property. Mr. Seymour explained there was a residential street pattern that was laid out for that and neighboring property and in the absence of any land assemblage by Mr. Milling and his neighbors he would have to develop in accordance with the zoning on the property which would require a certain amount of street frontage along a public street.
Mr. Ray Serwinski, 10532 W. Euclid, West Allis. Mr. Serwinski owns property in Oak Creek and questioned when he would be getting a road down 20th Street. Mayor Bolender explained at this meeting they were discussing the TIF district and the properties within that district. Mr. Seymour stated they would need to discuss that at another time outside of this TIF district.
Ms. Carol Grundy, 9160 S. Nicholson Road, question if the district goes for 20 years does that mean they will not be paying taxes for 20 years. Mr. Seymour explained that properties within TIF districts pay the same amount of taxes at the exact same tax rate as any property in the City. Ms. Grundy questioned if the schools would be getting their portion or if they will be losing taxes for 20 years. Mr. Seymour stated the formulas that are used to calculate the aid that is assigned to the school district in regards to this TIF district will not be detrimental to the school district to have the TIF take place. The whole theory behind a TIF district is this is development that had the TIF district not been created the development would not be there so the other taxing districts would not get that increment from something that is not there. In essence they are getting the same as they would if the property would remain undeveloped for that time period. The value upon completion would be roughly 19 million dollars. The school district will get the base amount until the TIF expires. If not for the TIF the development would not be there.
Mr. Paul Thompson explained there was a joint review board that looked into the impact on the school district. The way the State funds schools the TIF district has no negative impact on the schools. In some ways it is better because of the way the State treats the Oak Creek School district as the property value goes up the State sends less aid but you don’t count property inside of a tax increment district in the growth rate. By taking the value out of the school district property value the school district will actually get more State aid which keeps the local property taxes down from what they otherwise would be. There is no negative impact on the school district with this TIF district. The way it is designed right now the TIF would be about 13 to 15 years in duration not 20 years.
Mayor Bolender closed the public hearing and opened the discussion up to the Plan Commission.
Commissioner Grabowski questioned if parcel C and the proposed building could house mini warehouses and what would go into a service center buildings. Mr. Neal Driscoll explained typically in a service center building you have a company who needs office space and who also for example use Fed Ex. In West Allis for example there is a company who makes thoracic devices in Sweden but they have a sales staff in the United States and their space is 8,000 feet 7,000 of which was office and sales and the other portion was used for Fed Ex. Commissioner Grabowski questioned how much of the entire site was envisioned as office space versus industrial warehouse and service center buildings. Mr. Driscoll explained it would be skewed because there is an existing very large industrial building but if you take that out there is going to be about 90,000 feet and about 70-75 percent of that would be office space. Commissioner Grabowski requested larger renderings of the buildings in the future.
Commissioner Peterson questioned what benefit existing business gained from being included in the TIF district. Mr. Seymour explained the addition of Reinhart Drive through to 27th Street with signalized intersections was a major benefit to property owners. There is really no disadvantage to those businesses. Commissioner Peterson questioned the need for the expanded TIF district to include existing businesses. Mr. Seymour stated there were several reasons; one being the City is working with the City of Franklin on the 27th Street Corridor Plan. By expanding the boundaries of the district beyond just the Liberty property allows some flexibility for the Common Council to add projects in the future without amending the project boundaries so that we can use excess increment that might be generated from the development within the district to pay for things such as potentially streetscaping or other unforeseen projects which might benefit more than just the Liberty property. Commission Peterson questioned what financial recourse the City would have if the development was completed on time or did not occur. Mr. Seymour explained if the project was not successful the City would have no exposure since they are not borrowing any money. The City, via development agreement with Liberty Property Trust will dictate the maximum life of the district and it will stipulate at the end of that time whether or not the increment generated from Liberty’s property is enough to pay off the district it does not matter. At that time the payment of increments to Liberty would stop. The risk is being taken by the developer in that they are funding the cost of the infrastructure and recovering the cost over the 15 year period as the tax increment from the development comes back to the City.
Commissioner Peterson questioned the status of the other TIF districts. Mr. Seymour stated TIF #1 has been retired for many years, TIFs 2 and 3 have just been retired or will be retired at the end of this year. TIF 4 is Mahn Court which has building taking place at this time. There are some financial issues with that TIF which are being straightened out. TIF 5 was for Milwaukee Steel Converting that is doing fine and TIF 6 was for the Creekside Corporate Park south of Ryan Road on 13th Street and he believes that TIF is not performing as expected. Commissioner Peterson questioned if the debt was being retired that meant that the projects had been completed. Mr. Seymour explained with the exception of Creekside which the first phase were only done all of the elements of the project plans have been implemented in those TIFs.
Commissioner Sokol questioned the basic cost for each of the buildings within the TIF. Mr. Seymour explained the warehouse building would be roughly $10.3 million, the service center building roughly $3.4-3.7 million and the retail about $1.6 million. Commissioner Sokol questioned if the accesses going into the parking lots were consistent with the 27th Street Access Management Plan. Mr. Driscoll explained they have met with DOT and building 2 will not have access on 27th Street but just at the intersection. Commissioner Sokol questioned who would be building the median turn around on 27th Street. Mr. Driscoll stated it was a proposed idea but in discussion with the DOT they are not sure if they want that opening or not at this point. Commissioner Sokol questioned the 2% per year reduction in tax rate. Mr. Seymour explained it acknowledge the fact that as levies are held in check over the next several years given the growth that has occurred in the City and values within in the City it is likely that the tax rate may decline or there may be changes in other variables such as State aids that might cause the tax rate to decline and that is why Paul and his analysis made a conservative estimate of what that tax rate would be. If those things don’t go down then the district pays off faster but if the variables rate were to decrease it would still be a viable TIF in the 14 to 15 year time period. Commissioner Sokol questioned if the reduction would revert back to the 2006 rate or would it stay locked in. Mr. Seymour explained the rate was not something that would be a special rate for the TIF district it would be the same rate as charged to anybody. It is not a variable with respect to this district. Mr. Paul Thompson explained they were trying to reflect if all of the taxing jurisdictions tax levy stayed the same from year to year but the valuation was growing the tax rate would just naturally drop. If the tax levy stays the same and the value keeps going up the tax rate drops. We have seen that in a number of communities. We have no way of predicting what the exact change will be but we are trying to take into account some decline in tax rate and then if it stabilizes after a period of years in the year 2012. We can’t predict much beyond that five or six year period. Whatever the tax rate is…we tend to think the tax rate will go down as values go up. Commissioner Sokol asked Paul to explain the bond because it is not actually a bond. Mr. Paul Thompson stated it was actually a type written bond that is put together and the City of Oak Creek in the bond promises to pay to Liberty Trust the tax increments that are collected. Not just owed but collected. If the tax is not collected it is not paid. Typically the City would issue the bond and that bond would be sold to investors who in essence are giving the City the money and in return getting an interest rate. This bond is privately between the City and the developer with the promise to pay with the limitation the City will only pay up to what is collected.
Commissioner St. John commented he understood they would only recover the money that came from their land in the increment. It is not stated that way in the project plan and should fall under section “D”. Mr. Paul Thompson stated in the project plan it states that it is anticipated that all improvement costs will be paid for by the developer the City will transfer all tax increment collections to the developer as reimbursement for the project costs as defined in the developer’s agreement which has yet to be drafted. Commissioner St. John questioned the economic feasibility study. Mr. Paul Thompson explained it was a handout that showed the collection of the tax increments and the repayment of the bond. Commissioner St. John stated as part of this TIF a major sanitary sewer abandonment would need to take place. Mr. Driscoll stated they would be happy to use it if they could.
Commissioner St. John questioned if there was any implication by approving the project costs that these were the project cost that will be reimbursed. Mr. Seymour explained under the draft terms of the development agreement the City will be presented with the costs as incurred by Liberty Property Trust to make sure that those costs are being submitted essentially for reimbursement are related to the district. Commissioner St. John questioned if it was a given with approval that the signage will be paid for. Mr. Driscoll stated it would not be it would be negotiated with the developer’s agreement.
Commissioner Kopplin questioned how much of the 2 million square feet built by Liberty in Milwaukee was done with a TIF. Mr. Driscoll stated to his knowledge he did not believe it was funded with a TIF. (Inaudible) Commissioner Kopplin questioned if the TIF would be paying back the interest paid by Liberty to fund the infrastructure. Mr. John DiVall explained any money put out by Liberty for investment either borrowed or internal funds the cost of that capital is always recovered.
Commissioner Grabowski stated the project costs could be substantially higher once the City enters into a development agreement. The Commission does not have the numbers of what would be ultimately approved. City Attorney Larry Haskin explained in the development agreement they will negotiate a maximum project cost. Commissioner Grabowski questioned why that wouldn’t be looked at prior to going into a development agreement process. Mr. Haskin explained that is the way the process works. Commissioner Grabowski questioned if the numbers came back way off then what would happen. Mr. Haskin explained then at that point the Council would not approve the TIF. This is one step in a multi-step process; this is not the final step. The final step is the joint review board’s approval but the next step is the Common Councils creation of the district and their approval of the project plan. Commissioner Grabowski expressed concern for the limited information the Plan Commission has regarding the dollar figures given the fact the 27th Street streetscape and so forth. These numbers seem so obscure; they seem to be on the minimal side. Mr. Haskin assured the Commission whatever was in the development agreement was what was going to be repaid. Mr. Haskin explained the estimated costs were likely arrived on a reasonable basis. If it is recommended for approval at this time it is not the final action. Then it would go before the Common Council and there is plenty of work that needs to be done before it goes before the Common Council for approval. Mr. Seymour explained the Plan Commission was one step in the process of creating the TIF but they were the final step in approving the site and building plans for the parcels.
Mr. Driscoll explained the numbers they were working with at this time were representative of a bid they received in July. The numbers were based on the infrastructure and civil requirements of the City of Oak Creek in terms of the road. The landscaping that is included in the plan is only for the road landscaping and not for the entire site.
Commissioner St. John questioned if the TIF district was bigger than this project and Liberty only recovers the increment from their project and there is nothing in the project plan for the other revenue stream, the increment from offsite, can a TIF actually be formed with no plan to spend that money. Mr. Paul Thompson explained they could form a TIF with this being the first focal point of development. There may be other developments that would develop or build additions. The tax increment that those buildings generate could be used for amenities on 27th Street or those increments could be used to pay off the developer funded bond early and close out the TIF early. In the bond that would be written between the City and Liberty Trust the City has the sole right to pay the bond off early at its discretion. Commissioner St. John commented it was good to pay off early but in this particular case you are using the time as an inducement for them to get the buildings up early to get their full capture. If they get them up late you do not want to buy them off because they will not get the full capture.
Commissioner Sokol questioned if 90,000 square feet was for both of the service center buildings or for one. Mr. Driscoll stated it was for the two buildings together. Commissioner Sokol questioned the price per square foot. Mr. Driscoll estimated about $80 per foot. Commissioner Sokol questioned the order the buildings were being built. Mr. Driscoll stated the dates on the plan designated the timing.
Mayor Bolender closed the question and answer period for the Commission.
Mr. Seymour commented the westerly 300 feet of the project was covered under the overlay district that is part of the corridor plan. This site is really a transitional area between what we hope will be the economic engine of 27th Street with the higher quality buildings and more value. The Southbranch Industrial Park is not the most attractive thing in the world and to suggest that if this development went away that tomorrow a Northwestern Mutual would coming knocking on the door and say they would like to build a campus is a bit unrealistic. The angle that we are trying to shoot for here is to make an appropriate transition between the 1960s vintage industrial park and the higher value uses along 27th Street. This site plan which has been modified slightly from the original addresses that concern by placing the higher quality buildings along 27th Street and having the pure warehouse distribution buildings further back adjacent to the Southbranch Industrial Park and the Reinhart Foods.
Commissioner Grabowski commented if this was not a TIF district would we be saying is this the best, highest grade development that we could get there. She did not believe that it was. It is fine to have one building for warehouse but she would like to see shooting for the highest level. Is this the highest level of development that Liberty Mutual can bring forward? She expressed concern for just adding this site to the Southbranch site. Mr. Seymour questioned Mr. John DiVall if this was not a TIF would he come forward with a higher and more valuable than this site plan? Mr. John DiVall stated he would not be here period if there were not a TIF. This would not even be a remotely possible project without a TIF. This is a bridge between Southbranch which is not a pretty thing to look at. The warehouse building in the back which will be next to Reinhart Foods is going to be the best building ten fold that exists in the industrial park today. Wetlands are encroaching on the site from the north and from the south daily. The DNR is not working with Liberty Property Trust. They are trying to combine the existing site with what the market will bear and the City’s wishes. There is not a market for a five story office building at this site. Franklin Industrial site has been successful and the nice buildings at the front of that site are what we are trying to improve on with more glass.
Commissioner St. John commented (with respect to stormwater) they were either going to lose some more land or they would need to over compensate on the south. They stated they would be working with the City on the final stormwater management plan for each component of the site.
Commissioner Correll moved that the Plan Commission approve the project plan for Tax Increment Financing District #7.
Commissioner St. John seconds. Roll call, St. John; aye, Sokol; aye, Siira; aye, Kopplin; nay, Bolender; aye, Grabowski; nay, Correll; aye, Peterson; nay. Motion carries.
Commissioner Peterson moved to adjourn. Commissioner Grabowski seconds. Roll call, all voted aye. The special meeting was adjourned at 7:40 p.m.