Bruce Murphy
Murphy’s Law

Does Downer Avenue Need a Tax Subsidy?

Developer Joel Lee claims the buzzing retail strip needs help from the city.

By - Jan 9th, 2014 01:23 pm
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Downer Theater. Photo by Jeramey Jannene.

Downer Theater. Photo by Jeramey Jannene.

There’s nothing quite like the Downer Avenue retail strip on Milwaukee’s East Side. “Can you name me another two-block stretch in the city that has a bank, a grocery store, four restaurants, a movie theater, a hardware store, liquor store, bakery, barber shop, book store, wine store, coffee house and doctors offices?” asks Ald Nik Kovac, ticking off a list that still leaves out some of the other retail shops.

Kovac’s East Side district includes the strip, and he grew up just off Downer and knows first hand the strengths of this retail area, which serves the wealthiest neighborhood in the city.

And yet developer Joel Lee, who owns somewhere between half and three-fourths of property on this strip, says he needs the city to create $2.5 million Tax Incremental Financing (TIF) district to subsidize new development, as the Milwaukee Journal Sentinel has reported.

Lee, president of Van Buren Management Inc., wants this $2.5 million TIF to subsidize his $30 million development plan, which will include an 80-room, seven-story hotel; a five-story, 32-unit apartment building at the southeast corner of Downer Ave. and Park Place; an 11-story, 97-unit apartment building at the northeast corner of Stowell Ave. and Webster Place; and renovations to the Downer Theatre and other commercial buildings.

As this list suggests, Lee thinks the area can support a stunningly ambitious development plan, which makes it hard for him to hold out a tin cup to the city. Downer Avenue is one of the most vibrant areas in town. If it needs a TIF, then pretty much every retail area in the city would as well.

The fact that Lee would even make this demand shows just how common it’s become for businesses to demand hand-outs from government, and how routinely the state law allowing TIF districts is abused. TIFs are supposed to be for development in blighted areas, brown fields and the like, in areas where development would not occur without such a subsidy. Taxes collected in that district help fund the development and are eventually repaid from taxes spinning off from the future development. Former Mayor John Norquist, who served in the legislature when the law was passed, once told me that legislators saw the TIF tool as “a way to hot wire the inner city.”

Norquist struggled with this issue, using TIFs when he had to, but trying to avoid it. Mayor Tom Barrett, statistics suggest, was more generous. In Norquist’s last two years in office, 2002 and 2003, the city spent a combined $96 million on TIF subsidies. That increased to $159 million in 2005 and 2006 under Barrett, at a time when development was booming and you wouldn’t think so much subsidy money would be needed.

Once the economic meltdown occurred, it was hard to blame Barrett from dangling everything short of his first-born child to get some development. Moreover, the city must compete with surrounding suburbs, who are generally very generous with TIF dollars.

“Look at Shorewood and Whitefish Bay and the money they are spending on TIFs,” notes a source who is familiar with and supports Lee’s plan. “Just eight percent of the plan would be financed with the TIF,” he adds. “Some suburban projects go as high as 12 percent or even 15 percent.” Yep, it’s a slippery slope; once you start handing out subsidies the blackmailing and bailouts get ever more extravagant.

There was a time when Lee’s pitch might have been more persuasive. Old timers may remember the long-dark building that once housed the old Coffee Trader and seemed to stay empty for decades. For many years you couldn’t find a decent restaurant on the street; now there are four of them, including two different pizza places.

But Kovac, who knows the street’s history well, suggests any of the problems on Downer Avenue were due to developer Daniel (Danny) Katz, who bought up much of the property in the area and jacked up the rental rates. “Katz would hold out forever for a high price from retail tenants,” Kovac recalls. “It made no difference to him economically if the places stayed empty but it made a huge difference to other retail businesses on the street.” (Katz became so infamous that Milwaukee Magazine devoted an entire feature story, written by Jim Romenesko, to Katz and his negative impact on the city.)

Katz eventually sold out, with much of it going to Boris Gokhman, who later sold much of it to Lee. For years, Kovac contends, Lee followed a similar approach, waiting for high rents even if it resulted in empty buildings.

But in recent years that has changed, Kovac says: “I think he has done some good things for Downer Avenue and I want to see them continue to succeed.”

Kovac says that along with Barrett and Department of City Development Commissioner Rocky Marcoux, “we all agree that we want to do what we can to help.” But all three also oppose a TIF district.

The construction of Prospect Mall Apartments. Photo by Jeramey Jannene.

The construction of Prospect Mall Apartments. Photo by Jeramey Jannene.

Kovac points to other developments in the area that didn’t get a TIF, including the Prospect Mall redevelopment, whose developer Robert Schmidt asked for one and didn’t get it, the redevelopment of the East Library by HSI Properties into a public-private mixed-used development, and the new development at Oakland and North (where Pizza Man once stood) by developer Robert Joseph.

Kovac notes that Ryan Schultz and Brett Haney of HSI Properties “didn’t want a TIF but were concerned if anyone else in the area was going to get one,” because it might leave them at a competitive disadvantage. If Lee gets one on Downer Avenue, why would anyone in town do a development without a TIF?

Ironically, Lee is being represented by lobbyist Mike D’Amato, who preceded Kovac as alderman for this district. D’Amato never supported a TIF for Downer Avenue or any development on the upper East Side. Now he thinks it’s a fine idea.

The reality is that Lee doesn’t actually need a TIF district for most of the development, including the hotel, as my source notes. Rather Lee wants it strictly for the renovation of the Downer Theater and a pediatric center with doctor’s offices.

Doctors’ offices now need a TIF? It’s hard to imagine any loss for Downer Avenue if that development occurs elsewhere. Which leaves just the theater. “I think if we lose the movie theater, that would be a death knell on Downer,” Lee told the Journal Sentinel.

Nonsense. The street’s location and vibrant mix of retail would keep the street successful with or without the movie theater.

Speaking as a fan of Landmark Theatres and the movies they book at the Downer and Oriental, I would be horrified to see the Downer close, though I wouldn’t miss the uncomfortable seats. Lord knows, the Downer needs some work. Their recent improvements in the men’s bathroom, I’d guess, were the first such work in about 40 years.

But Ted Mundorff, Landmark’s chief executive officer told the Journal Sentinel that “we…love Milwaukee” and the company wants to stay in Milwaukee.” My guess is that Lee and Mundorff will find a way to make this work without the $2,5 million TIF plan.

Because, while city officials aren’t offering a TIF, Kovac says they are likely to offer other funds for facade and street improvements that will benefit the Downer Theater and other parts of Lee’s plan. In fact the city has previously kicked in with such grants or loans to help with the new Pizza Man development on Downer and for the renovation of Sendiks planned by new owner John Nehring.

But it’s one thing to hand out these smaller sweeteners and another thing to give away the store. If Kovac and Barrett cave in to a $2.5 million demand for one of the city’s most successful retail strips, they would be engulfed with requests by every developer in town.

Short Takes

-Why a hotel on Downer Avenue? My source tells me that Lee has met with officials at UW-Milwaukee and Columbia St. Mary’s and has concluded there’s a need for one to accommodate visiting professors, doctors and others. Lee had a study done which found a hotel with 80 to 120 rooms would be economically feasible.

-D’Amato has also represented the Veolia company, still fighting to win the contract for the Milwaukee county transit system, and the city of Waukesha, which wanted to buy water from Milwaukee. The latter in particular raised eyebrows in City Hall, given D’Amato’s prior skepticism as alderman to selling Milwaukee water to the suburbs.

-Kovac ran for office as an adamant critic of D’Amato and Lee, criticizing the location of the parking complex on Downer (which abuts the home of Kovac’s parents) and the way the project got approved. “For me, there’s a lot of balls in the air, it’s a complex issue because there are so many people involved I have past history with.” But he emphasizes that he wants to do all he can to support Lee’s plan.

41 thoughts on “Murphy’s Law: Does Downer Avenue Need a Tax Subsidy?”

  1. Ed Werstein says:

    If only the conservative ranters complained as much about corporate welfare as they do about our meager attempts to help the poor.

  2. Chris Byhre says:

    Only a Liberal would consider the 915 Billion dollars spent by the US Gov’t in 2012 on means tested welfare programs and the over 20 Trillion dollars of OPM (Other Peoples Money) spent by the US Goverment since LBJ declared a “War on Poverty” in 1964. One can only wonder what Ed thinks is not a meager amount if close to a Trillion dollars a year is deemed meager.

  3. Brian K says:

    Any word on what the boundaries of the TIF-zone would potentially be?
    How much of the city would it ensnare?

  4. galeb says:

    A $2.5 million TIF for $30million multi-use development is hardly giving away the store. Wake up people, Shorewood, Tosa even WFB are doing TIF’s to spur development. Shorewood especially has revitalized Oakland Avenue with their use of over $10 million in TIFs. The city can stand on the sideline, insist we don’t TIF (huge lie) and watch the suburbs continue to kick our butts or they can get in the game. This plan has two things neither Silver Spring or Oakland have- a hotel and an historic theater. Without the city Downer will have neither and fall further behind. This is a no-brainer.

  5. Andy says:

    TIF districts can be a handy tool… and sometimes a necessary evil when you know you’re competing against areas that are readily courting the same developments, tenants, etc. But this case includes neither. No reason to have a TIF here.

    Through my interactions with Nik Kovac, I don’t picture him as someone who does a good job of keeping his personal feelings out of his political actions. I can at least empathize with Lee and D’Amato in that regard.

  6. galeb says:

    A $2.5 million TIF for $30million multi-use development is hardly giving away the store. Wake up people, Shorewood, Tosa even WFB are doing TIF’s to spur development. Shorewood especially has revitalized Oakland Avenue with their use of over $10 million in TIFs. The city can stand on the sideline, insist we don’t TIF (huge lie) and watch the suburbs continue to kick our butts or they can get in the game. This plan has two things neither Silver Spring or Oakland have- a hotel and an historic theater. Without the city Downer will have neither. This is a no-brainer.

  7. Stacy Moss says:

    First, regarding “conservative ranters” above….. Is there no shelter from the storm?

    Great article. Being a free country as it is, Lee can sell this property to Barry Mandel.

    But then again, didn’t Mandel get some money from the city for his project on the River, another
    prime location in Milwaukee? Maybe Lee is just being a competitor.

    Tom

  8. galeb says:

    “Kovac says that along with Barrett and Department of City Development Commissioner Rocky Marcoux, “we all agree that we want to do what we can to help.” But all three also oppose a TIF district.”
    What ?!?!?!?!?!? How does this make any sense at all? typical political/DCD double-speak- “we want to do all we can to help except approve anything that would actually help”. Have they even looked at a request or examined the numbers or heard from the public? Without any of that they’re already opposed? Ludicrous.

  9. STACY MOSS says:

    Nice job. It’s a free country. Joel Lee can sell the Downer Theater to Barry Mandel. Come to think of it, didn’t Mandel just get some city money for another prime location on the River? Maybe it is a competitive thing.

    Also, regarding the the conservative v liberal banter above… is there no shelter from the storm? Some people should check their brain into a carwash to get that loop out of their heads.

  10. Mark Foley says:

    Area residents know this retail district is vulnerable. Katz nearly ruined it by emptying the street of paying retail shops. As mentioned, the Coffee Trader site was empty for a decade. The Chancery/Einstein Bagels location has been empty since 2007. Gokhman’s destruction of perfectly good houses on Webster to support his now dead condo project left an unhealed scar. The old Associated Bank site remains empty at Park. The Downer Sendik’s has become the least attractive in the two groups that bear the Sendik’s name and needs a thorough revamp. The entire second floor on the East side has been empty (or grossly underutilized) for 15 years. Boswell’s is great, but every bookstore is at risk from technology changes and Amazon. The theatre is beloved, but not exactly modern or thriving financially. Some of the recent additions are not grossing renters. It all needs support. If someone is willing to build it out, upgrade maintenance, and actually fill the space with retail, a little public support it not unwarranted. For those criticizing “corporate welfare”, it is a concern, but at least factor into the calculus that when the TIF expires the improvements remain to generate property taxes and pay wages in the future.

  11. I opposes the tiff for lee. but I think njk kovac is Milwaukee’s best alderman

  12. Tyrell Track Master says:

    These plans sound phenomenal and I think a hotel is an excellent idea. There isn’t a single hotel on the east side right now.

    That said, having read what I’ve read here I’m definitely not super TIF friendly in this case. A TIF really is for poor areas in the inner city, etc. It’s a shame that suburbs are now playing games with them, but c’est la vie.

    But – on the other hand. Does a TIF really *cost* anything? All it means is forgoeing some taxes for a while. The economic engine still rolls right?

  13. Bruce Murphy says:

    To Tyrell Track Master: Yes, there is a cost. During the period of time the property taxes stay in the district to repay the $2.5 million given to the project, none of that tax money goes to regular city, county, MPS or MMSD property taxes. Taxpayers make up the difference. If that development would have have happened without the TIF, as in a blighted area, then it’s a good deal for community as it creates new tax base. If the development would have happened anyway, then its a clear loss of tax dollars.

  14. tom cunningham says:

    it is not exactly a hand out; it is an allocation of the incremental increase in property tax revenue due to the improvements to pay a portion of the improvements. So, it is an assist, but the developer has a lot of skin in the game. And characterizing Downer ave as one of the more vital commercial areas around just reveals how little vitality there is in the city. I am wi/ Mark Foley above. The area is on the way up, but still vulnerable, and some support is worth a look. As to TIFs see http://www.revenue.wi.gov/pubs/slf/tif/1-2.pdf

  15. Bruce Thompson says:

    A good summary of the issues.
    Downer Avenue is my neighborhood shopping area (I really like not having to get in the car whenever we need some milk) and I really want it to prosper, but a TIF seems like an abuse. One issue is whether it simply moves business activity around.
    I wonder whether historical tax credits would be an option for the theater.

  16. Mike Bark says:

    I’m a fiscal conservative and these types of tax giveaways annoy the hell out of me. If you’re a well connected business and you are opening a retail site you’ll get the taxpayers to throw some money at you. The classic example is Alterra (Colectivo). They get Industrial revenue bonding to partially finance their Bay View site despite the fact that the area already had a Stone Creek and Lowlands Group restaurant among other things. Wauwatosa did some preferential financing for their 68th Street location. They’re not the only one. Even Anodyne got some governmental financing for their 5th Ward location.

    There are times when this governmental financing or TIF district makes some sense but too often it goes to the well connected regardless of the location that they’re opening.

  17. Tobias Krause says:

    Why did he say ‘grocery store’ twice in his first quote…is it that good? I’m not sure — I haven’t lived in that neighborhood in 10 years…

  18. Clark W says:

    I’m a developer and I live in this neighborhood. I can see straight through this PR stunt. This project unequivocally does not need a TIF. He’s holding out the Downer Theater as bait to try to make it seem like that’s what it’s all about. It isn’t. It’s about trying to make the numbers work on a cockamamie plan to build apartments and hotel rooms we don’t need. If the city wants to TIF an old theater, TIF the Avalon. Let’s not forget that, as someone else already pointed out, this project would qualify for historic tax credits to the tune of a 20% federal credit plus an addition 20% state credit, for a combined total of 40% of the rehabilitation costs. That’s more than enough to give a facelift to an already viable theater in one of Milwaukee’s best neighborhoods. No 11-story condo. No 80-room hotel. And absolutely, positively NO TIF. Nice try though.

  19. Bruce Murphy says:

    Hey Tobias, that was a typo in the quote, just one grocery story, we fixed it.

  20. michael james says:

    The article does not mention how long it will take to pay off the TIF… I don’t know much about TIFs so I may not be thinking about this correctly, but, let’s say $2500 tax revenue per apt * 129 apts = 320,000 plus 100,000 for the hotel (my estimates) = $420,000/yr… So in six years the city is making an extra 420k per year. Seems like a good idea to me.

  21. roz says:

    rah, for hotel and fixing the theater; boo on new condos.

  22. Dave Reid says:

    @roz To be clear the current plan includes no condos. Apartments yes, condos no.

  23. Steve says:

    Downer is on a precipice. It’s been that way for over a decade. Pizza Man, Hollander and Via keep the street alive but Sendik’s, even with new owners, is in danger of being run over by Whole Foods. The Downer Theater is held together with band aids and the independent retail clothing and antiques are probably struggling to stay afloat. The City should offer some TIF assistance – some is better than none and if Downer can’t solidify its, businesses all of the eastside property values will suffer.

    Compare the value of a house in Shorewood two blocks away from a similar house in Milwaukee. The price difference is over $100K. If Downer fails that number will grow.

  24. galeb says:

    The idea of historic tax credits is an interesting one. However I think they are only available for exterior work on historic buildings and only for pure historic renovation. From the Milwaukee Journal article it sounds like all theater improvements are interior- seats/new screens/concession area/digital equipment. So, historic tax credits don’t seem to be an answer here to fill the financial gap.

  25. Al says:

    It doesn’t sound like the TIF is absolutely necessary, but if it is granted, it should come with the caveat that Lee make his commercial rents more affordable to bring back in businesses to fill the vacancies that have been hurting the street for years. Renovating The Downer Theater is a no-brainer. The hotel and apartments are good ideas, but I’m concerned about their height in relationship to the rest of the neighborhood. Don’t want to create another couple of monstrosities like the parking garage across from the theater!

  26. Joe says:

    IF ONLY the decision to TIF was made after a committee reviewed and analyzed each request individually by measuring the economic rewards vs. taxpayer risk, and the decision to grant or deny was made practically instead of politically, this city would be in a much better place. For developers, this issue isn’t about greed or pulling a fast one on tax payers. It’s about financial roadblocks that prevent development of a certain kind in particular markets. Lets keep in mind, these developers are usually investing millions of dollars of their own money into our city. We should work with them, not throw up road blocks. For those that actually understand TIF and how it works (probably 3% of the public and 30% of elected officials), you realize that if it’s DONE CORRECTLY it can be an extremely useful tool to improve a city’s well-being and elevate economic development. TIF is necessary for certain cities, Milwaukee being a prime example. The need for TIF actually comes down to one simple issue that developers across the country face daily; the cost to build vs. income generation (which determines value). Milwaukee is a very expensive place to build. The cost of construction far exceeds that of most US markets. Yet, attainable commercial and residential rental rates are lower than almost every major market in the US. That creates a FUNDAMENTAL PROBLEM for building and investing in real estate. Why would a developer build a $10 million project in Milwaukee when the value of that property will barely reach $8 million, when they can go to Chicago, New York, DC, LA, Miami, Dallas, Etc., and spend $9 million for the EXACT same project and have it valued at $12 million??? If that problem presents itself to a project that the city wants, they should step in and make it happen. Other cities are incentivizing development by utilizing this unique tool. And guess what, developers are taking their millions of dollars to those cities instead of ours. It’s a shame. And pretty soon Milwaukee will have solidified it’s reputation to the rest of the country as a ‘one horse town’, closed for business. The excuse that “if we do it for them, than we’ll have to do it for everyone” is an excuse that shows how lazy and close minded our city has become. If elected officials don’t have time to personally review each request than a viable solution would be to have our common council form a special committee who’s sole purpose is to review, analyze, and recommend or approve/deny requests as they come in. If the city can grant $3 million to a project, pay it’s bills from incremental tax revenue, and after the course of a few years be left with a property that nets $500,000 of property taxes annually rather than $10,000. DO IT! If you could get that return on a stock, you would gladly invest yourself. Bottom line; it’s time to step out of the past and move into the present. Incentivize instead of deter. Improve instead of maintain. The silent majority and new wave of downtown residents are getting fed up with how this city always finds a way to kill exciting development.

  27. Chris says:

    I’ve heard rumors that plans for the hotel include gutting the theater to turn it into the hotel’s lobby. Not sure if it’s true, but I wonder if this ploy for a TIF — to basically finance the theater renovations — is just a move to facilitate this design strategy? The City says “no”, so the developer then says, “well, we can’t save the theater but we will repurpose it.”

    I certainly hope this isn’t the case. As others have pointed out, there are likely historic tax credits available for the theater. And losing this amenity would be a huge blow to the street. Despite recent success stories like Pizza Man, Hollander, and Via, Downer remains on shaky ground.

    To those questioning the need for a hotel and additional apartments, all I can say is Really? Absolutely yes to both. Housing density will help the street.

  28. Dave Reid says:

    @Joe Before a TIF even gets to the council it would go through DCD to determine if it makes financial sense. i.e. will it pay back and does it meet the “but for test.” Now the “but for test,” can be pretty widely interpreted. And I agree TIF can be an invaluable tool for the city (for Milwaukee I believe we get something like a 7 to 1 return), but I believe Bruce is questioning does this project really meet the “but for test?”

    Personally, I’d love to see the hotel, apartments, and the Downer renovated and seeing how up in Shorewood all sorts of great things are happening along Oakland with Shorewood assistance that makes me a bit TIF curious, but I do get Bruce’s point. Further, thinking back I believe it was D’Amato who in the past argued the city did not use TIF enough, and I tend to agree.

  29. Tyrell Track Master says:

    Why are some you guys against this hotel idea? I think it’s a fantastic idea… bring some real 24/7 life to Downer and a hotel near UWM and Columbia within walking distance… talk about a win!

  30. East Slider says:

    The one question I NEVER hear answered is where the taxing boundaries of the TIF will be-i.e. exactly WHO’S houses will be ensnared by yet ANOTHER tax in a property tax HELL??? Yes, it would be a tiny tax compared to the mountain of taxes we already pay to live on the east side where the properties are the highest valued in the city, but every cent counts! We’ve passed the point where living in this area costs DOUBLE property tax wise compared to any city in Waukesha County, sooner or later there’s a tipping point to be reached for people looking to move in or considering whether or not to stay or move. When you’re talking about many homes in the vicinity now costing over $10,000, $20,000 a year or more to simply pay the property tax bill, you’re talking about serious money even for someone making over $200,000 a year.

    I absolutely love living on the east side but when you start talking about paying $1000 a month simply to cover city property tax, not a cent going to the mortgage, maintenance on the house or anything else, that really starts to hurt. If I’d bite my lip and move to Brookfield for instance, I could pay the payment on a very nice car and have money left for gas just from the savings on the property tax alone! Add in to that the fact that many wealthy east side residents with kids see no choice but to send their kids to private schools because they see no benefit in sending them to MPS (Where of course a majority of those tax dollars are going) and there’s another large expense that you only find in the city of Milwaukee. There’s a tipping point to this, I haven’t reached it yet myself but sooner or later everyone will!

  31. Dave Reid says:

    @East Slider There won’t be any houses included in the TIF (I don’t believe that is legally even possible) and more importantly a TIF isn’t a new tax. The boundaries haven’t been set but would likely only include the sites being developed on anyhow.

  32. LJ says:

    the comment made by East Slider demonstrates why having a general public discussion on TIF is so dangerous- few people actually understand what it is and how it works. Unfortunately, that includes the author of this article. To call TIF a “subsidy” is not accurate. It gives people the impression that funds are available to use anywhere in the city and someone is losing if Downer is gaining or there is a pot of money that can be used for multiple purposes in multiple locations. This is simply not the case. These funds would only become available because of the proposed project and can only be used in that same boundary. No project, no money. Smaller project, less tax base. It’s a mathematical equation on whether it’s a good deal for taxpayers or not.
    The ultimate question for East Siders is whether they want the market to work unfettered or whether they want a street that has a unique character. The theater (and likely the bookstore) has paid below market rent for years. They only exist because the landlord (and Dan Katz to his credit, despite his reputation) felt they added to the charm of the street. If the theater closes, which is likely without assistance because of the economics of the movie business, they can easily be replaced by tenants paying market rents- bars, restaurants, Domino’s pizza, sub-shops, cell phone store, etc. Just look at the new tenant coming to Prospect and North that is willing to pay market rent (hint: it’s Burger King) They would be equally at home on Downer with its proximity to UWM. Is that what people want? Or is the better answer to preserve the unique character of the street by taking advantage of a once in a multiple generation opportunity? Do you consider the Downer Theater and Boswell Books community assets? Either way the street survives. One way, no TIF, offers more of the same, anyplace U.S.A. The other, with a small TIF, preserves the distinctive character of Downer and doesn’t increase taxes by even a penny. Isn’t the choice is obvious?

  33. Bruce Murphy says:

    To LJ: Yes a TIF is a subsidy, which of course is why the developer wants it. True, it can’t be used anywhere in the city, but it’s still a taxpayer contribution used to help finance the development and for many years after the money is repaid to the city by using taxes paid by the new development and using them to repay the TIF. If that development wouldn’t have happened without tax support (which I question in this case), then you can always make the argument that it’s a gain for the city, but that doesn’t mean its not a subsidy.

  34. Bruce Thompson says:

    LJ,
    TIFs also come at a cost to city taxpayers, because until the money spent is paid back all taxes raised in the TIF are not available for the schools, the county, MATC, or normal city operations. So either taxes have to be raised or services cut.

    On national chains, neither Downer nor the east end of North has turned out well for them. Einsteins closed on Downer some years ago (I heard they were mildly profitable and wanted to stay but could not reach agreement on their lease). More recently Brueggers closed on North. We will see whether Burger King makes it.

  35. LJ says:

    Bruce, your observation is not quite correct. The taxing bodies always collect the base taxes from the district, so nothing is lost from the baseline. It is only the increment that’s affected. This is a common misperception. So no taxes need be raised nor services cut. I will concede that lengthy TIFs can be a burden on all parties. But here the math seems to indicate a 5 to 7 year payback. So is it worth investing the increment for 5 years to get 50 years of a much higher tax base? On another note, you seem to miss the point on national chains. The question isnt if they will succeed or not, its will they pay market rent. Whether they succeed or not the problem is the theater has already been lost.

  36. Bruce Thompson says:

    LJ-you are correct about the TIF taking only taxes from the increase in property value. My mistake. I do recall some years ago hearing considerable concern from MPS financial people about increasing TIF funding. But that was a time when property values were increasing substantially (with the largest % increases in the lowest aldermanic districts. My guess (but the details are fuzzy) is that they were concerned about the loss of benefit from the increase that would have happened anyway.

    My point on the national chains is that it is likely many have concluded the East Side is not a prime market for their offerings. Certainly there is plenty of unused that would be available at market rates if they wished to enter this market. The rather dismal record of those who have tried would support such a conclusion. I also recall a McDonalds on Oakland and a Burger King (I believe) at the corner of Kenwood and Downer.

  37. Bruce Murphy says:

    To LJ: I agree the taxes are only lost on the increment. But that’s huge. That’s how a city is run, by capturing increases in the property tax base. And in a TiF you lose that for a period of years while instead subsiding the business that gets the TIF.

  38. LJ says:

    I’ll leave you with this quote from Mass. Senator Elizabeth Warren that is apropos and too often describes the administrations conservative approach to development in Milwaukee :
    “Refusing to invest is the budgetary equivalent of cutting off your feet to save money on shoes”
    Cheers

  39. Tim says:

    If a TIF is used to improve the infrastructure of the city, that’s great. Too often it’s used to improve the developer’s profit margin.

    Unless the State of WI steps in & outlaws TIFs as giveaways, Milwaukee still has to take part in the battle for developer investment. However, I don’t see a slam dunk case on Downer Avenue for a TIF. What are we missing out on if they just develop the parcel without a TIF? Scare mondering about the Downer theater doesn’t help the case either, if the developer wants them out, they’ll do it regardless.

  40. Bruce Thompson says:

    galeb,
    It appears that the limitation on interior rehabilitation for historic tax credits applies to residences but not income producing buildings. Makes sense, since the public does not get to enjoy the interior of a residence but does with, say, a theater. Of course, there are a number of hoops the owners would have to go through if they wanted to go that route and they often resist the restrictions that come with historic designation.

  41. galeb says:

    Bruce, great follow up. thanks for clarifying. Probably tough to keep historic integrity in an old movie house when you intend on tearing it all up to add more screens. maybe its possible.

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