City Taps TIF For Affordable Housing

An overperforming tax incremental financing (TIF) district on Milwaukee’s North Side will be used to fund citywide affordable housing efforts to the tune of $450,000.

The Department of City Development is taking advantage of a state law that allows municipalities to extend the life of a successful district by one year to harvest the incremental property tax revenue to fund affordable housing projects.

“This will allow us to use it for any number of housing programs that DCD offers,” said budget director Dennis Yaccarino in presenting the proposal to the Zoning, Neighborhoods & Development Committee on Feb. 1.

The budget director said the specific program the money would go to would be identified at a future date. DCD also has funding from the $197.2 million first tranche of the American Rescue Plan Act grant that it will use on affordable housing and housing rehabilitation efforts.

The city created what it calls “TID 52” in 2003 to support the relocation of chemical conglomerate Sigma-Aldrich Corporation (now MilliporeSigma) to a 66-acre site at 6000 N. Teutonia Ave.

Last year the city approved harvesting $312,540 in incremental revenue from the industrial district to bail out three struggling TIF districts originally intended to support the development of single-family housing.

Under state law TIF districts must be retired once their direct project costs are paid off. They have a maximum legal life of 27 years with a three-year extension available for underperforming districts. Overperforming districts can be used to pay for road paving projects within a half-mile of their borders in their last year and then can be extended one additional year to fund affordable housing. Yaccarino said the city missed the window to leverage the district for road work. Because its expenses have now been retired, TIF district #52 must be closed if not extended for affordable housing.

The Sigma-Aldrich district’s formation can be traced back to the Marquette Interchange reconstruction project. The company had a plant on W. St. Paul Ave., literally in the middle of the interchange. An eight-story building offered views down onto freeway ramps from every side, while other buildings sat underneath the elevated interchange. In 2002 the state acquired the complex for $32 million, with the company in turn building a 184,000-square-foot research, development and production addition onto its 600,000-square-foot N. Teutonia Ave. warehouse and distribution facility.

The city created TIF district 52 to induce the company to stay in Milwaukee, with a subsidy equivalent to the site preparation costs associated with the $60 million project. Known as a developer-financed TIF district, the city agreed to effectively rebate up to $5 million plus interest to the company by the end of 2020 if it maintained 550 employees in the city and the value of its plant exceeded the pre-expansion base value of $10.2 million. At the end of 2019, the company reported to the city it had 681 employees, up from 649 the year prior. The property was assessed for $28 million (including fixtures and other personal property) in 2020, exceeding projections by $6.6 million.

The committee unanimously recommended approval of the affordable housing plan. The full council will consider the proposal on Feb. 8.

Closure of a TIF district, all else being held equal, increases the amount of taxed property and thereby reduces property tax rates, but holding a district open for future use does not withhold revenue from property taxing entities under the state’s property tax cap system.

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