Archive for February, 2013

Let’s right-size Thomas Street

Posted in Uncategorized on February 20, 2013 by Jim Rosenberg

ImageFederal officials notified the City of Wausau several months back that they would not participate in funding a project to reconstruct Thomas Street because the city failed to follow the correct standards when it began purchasing property for the project. That’s a huge problem with a project that could range up to $15 million, but it also provides a chance to re-evaluate the whole premise and purpose of the Thomas Street project. In so doing, the city has the opportunity capture some real advantages:

– Instead of replacing the existing 2-lane street with a high-capacity (and inevitably higher speed) 4 or 5 lane roadway, the city can take a look at a safe, calm, neighborhood-friendly design that incorporates turning lanes to facilitate traffic flow, but doesn’t slice through with a 17th Avenue-style upgrade that would forever fragment that area.

– Instead of spending $9 million buying private property and reducing the tax base under the guise of an “economic development” project, tax base can be preserved.  While there is significant blight along that stretch, part of that problem certainly stems from property owners spending the better part of a decade in limbo. With the potential road project hanging over their heads, they couldn’t sell their property very easily and many couldn’t see their way clear to make substantial improvements or even moderate maintenance outlays.

– With a new, right-sized plan, the city will have the opportunity to regain federal participation and that’s a very important component in a project of this magnitude. Replacing federal funds with local taxes is a losing proposition and it should be avoided to the greatest extent possible, but that’s what insisting on forging ahead with the same plan would necessarily mean.

Take a look at this website about right-sizing to get an idea about what such an effort might encompass and keep in mind that not only can we have a far more attractive and functional piece of infrastructure, but we can do it for many millions of dollars less than the present plan anticipates. This will immediately lower the bar for the level of private investment required to make it all work:

Thomas Street is in serious need of reconstruction and safety enhancements, but it’s not the city’s job to build a speedway to the Rib Mountain commercial district. Importantly, such a roadway will still be constricted by the two-lane bridge over the Wisconsin River for years to come. The city would be using up more of its capacity on a project that has limited potential to build significant positive value in the tax base for the foreseeable future in relation to its cost. Simply put, the interests of promoting “though” traffic can easily be at odds with the interests of neighborhoods (“to” traffic.) Tax increment financing, on the other hand, is all about building value within a district.

Starting out with the removal of millions of dollars in tax base and no near-term prospects for significant new development, a big, wide Thomas Street would be subsidized mostly by unrelated developments far from the street’s project area and almost certainly a good dose of general revenues, too.  Under the prevailing limitations on property taxes, we could easily end up making substantial sacrifices to fund the project. An important additional risk is the potential erosion of taxpayer confidence in the tax increment financing process itself if projects are not thoughtfully advanced with attention to producing sufficient revenue streams of new property taxes from private development that would not otherwise have occurred “but for” the public investments being made via the TIF. (My rule of thumb when I was working with such districts was that I was looking for a net of at least four dollars worth of taxable, private investment for every one dollar of public investment on an overall basis.)

Compare such an outcome with what the specific TIF plan amendment involved states as a couple of its objectives:

–          Reduce the financial risk to the taxpayer by timing the implementation of the Project Plan with the creation of additional property value through business expansions. (Are you seeing that?)

–          Generate new property tax increments within a reasonable time from each specific development project within the TIF District to fully repay the City’s TIF project expenditures associated with the development project. (What do you think the chances are for that?)

You can look at the TIF Plan amendment here and decide if either is likely to happen:

It’s therefore a good time to be more innovative and cost-efficient, while trying to gain far greater leverage from whatever local dollars we need to invest to create better overall conditions for economic development. And that, after all, is what TIF districts are about.


On the subject:

Shortchanging Wisconsin: GOP mining bill puts citizens last

Posted in Uncategorized with tags , , on February 3, 2013 by Jim Rosenberg


There has been a lot of talk about SB-1, a rehash of last session’s failed mining bill that will eventually allow Gogebic Taconite to open a $1.5 billion open pit iron mine extending for miles in Wisconsin’s Northwoods. Most of the discussion has centered on environmental regulations and justifiably so. The main thrust of the legislation seems to be removing risk for the mining company and placing it on everyone else. But as egregious as all of that is, the environmental impact is not the only big problem with the bill. There’s also a money problem and it’s surprising how few seem to have their eye on that ball.

In a brief exchange with Sen. Bob Jauch of Poplar, I confirmed something that I already knew about the bill. It proposes to tax the mine based on net proceeds instead of on a per-ton production basis or the gross value. This is a really dumb thing to put into the legislation, unless you happen to own the mine. No legislator who puts the interests of constituents first should ever vote for such a provision.  (Of course, many legislators may not. The Wisconsin Democracy Campaign reports that special interests backing the loosening of mining regulations have contributed $15.6 million to the Republican-controlled legislature and GOP Governor Scott Walker between 2010 and 2012. Some of the contributions to individual legislators are truly eye-popping.)

Look, I understand the approach that says if Wisconsin doesn’t have the mine to begin with, then the tax formula is moot. That is certainly true. But there is also a part of me that says we might well end up with that mine. Moreover, we all use a lot of steel and the iron for that has to come from somewhere. But if Wisconsin is to host a mine, then the benefits to the people of this state should be direct, substantial and measurable – and that doesn’t just mean income taxes from in-state workers and some trade from an out-of-state corporation.

We’ve all heard way too much for way too long about multi-billion dollar corporations that pay nothing in income taxes. At the same time, we know that we’re paying taxes to other states every time we fill our gas tanks or flip on the lights with electricity generated from coal-fired power plants because that is the way that severance taxes work. If there is to be an iron mine in Wisconsin, then we need to set up a system in which the state taxpayers are compensated fairly and surely; not some kind of accounting game for a corporation to use to dodge its responsibilities. That’s what companies do because that — along with buying off legislators state Supreme Court seats in a post-Citizens United environment — is what passes for best practices in business these days.

Using profits as the basis for a mining tax provides a loophole big enough to drive an ore train through and that is exactly what will happen. Moreover, a less profitable mine increases the risk that state taxpayers will end up holding the bag for reclamation at some point down the road, a lose-lose proposition. We need to put taxpayers first in line instead of last by adopting a tax that begins with the first ton of production and extends to the last. Taxing profits doesn’t do that and that is why it is a poor policy option.

Taconite is a commodity with a value that can be accurately determined at any point in time. It can be weighed and it is. Those are objective factors to use in determining a mining tax. If our legislators are working in our interests, then that is what they will be employing to ensure the best possible situation for the people they are elected to serve.