 tonight we're going to take team of presentation called tax incremental financing 101 we're going to give a little bit of a background about TIF districts some definitions some information and then dive into the current districts and the financials related to that so the city has retained elders associates to help us look at the districts and make some recommendations moving forward on their financial stability and or closure of those districts so we'll go through some of that in detail so to start out with what is a TIF a TIF is a mechanism for funding development and infrastructure related to redevelopment and or development it allows all taxing jurisdictions benefiting from the development to share in its costs we interchangeably use the word TIF in TID so a TIF is the actual financing option that allows a municipality a town village or city to fund infrastructure and other improvements through property tax revenue on a new developed property and a TID is the actual boundary or the district of the area identified by the municipality for the certain type of development so a little bit about the TID law background the TIF law was adopted by legislation at the state in 1975 to eliminate blighted areas and urban neighborhoods before the TIF law was enacted a mean us if a municipality wanted to expand its local tax-based municipality alone would have to pay the cost but the overlapping taxing jurisdictions would also benefit from the growth the legislator saw this as a situation as unfair and viewed TIF as a way to help remedy the problem and encourage cooperation between local governments and the city of shabuigan's case the other taxing jurisdictions is the shabuigan county the school district shabuigan area school district and Lakeshore technical college so there's a number of tids or tips tids blight elimination was an early one and that was replaced sometime later by a rehabilitation district this district is technically is typically open for 27 years an industrial TID is used to fund industrial and business parks and it's open for 20 years a mixed-use district is mixed-use development so it could be residential and or commercial that is open for 20 years and then an environmental district is used to fund environmental cleanup so how does TIF work and we've had a lot of discussions about this but upon creation the value of the TID is frozen for the property for property tax distribution purposes so basically whatever the value of that property within that district is at the time of certification by the Department of Revenue that's basically held stagnant and that's the value that the in our case the city would get in the taxing jurisdictions would get from a value going into the general fund any new value created in the district above that then goes into the district and used to pay down expenditures within the district so that's kind of and then when the district closes all taxing entities start to realize the benefits of the new value so the the purpose of this is really economic development tool and to revitalize in our case old areas that are vacant or blighted or underutilized bring some new value in and then when the district closes that goes back on the tax rolls and everybody sees a benefit so there's a number of ways that TIF projects can be funded it can be done through bonding of a upfront funding where the city would go out and borrow the money and give it basically a grant if you will to the developer another one is a city led pays you go so that's the one that we typically use so that's where the developer has to capital outlay the monies and then based on the income from future tax generation they get paid back over time as well as the developer led pays you go I guess those could be kind of interchangeably basically that they're for their paying for the improvements in their financing package and then as they perform over time we would pay them back so there's a number of ways that you can amend districts for reasons to amend a different district would be to modify the project plan to add or subtract property within the TID to extend the maximum life or to donate tax increments to other districts TIF amendments boundaries may be changed up to four times there's no limit on the project plan amendments one expenditure period amendment if it's not cash flowing and then both the TID amendments and project plan change plane project plan changes need to be approved by the joint review board so what is the joint review board in our case it's a representative from the Sheboygan area school district one from the technical college one from Sheboygan County a representative from the city and a public member and then there's the opportunity for an affordable housing extension so this was added to TIF in 2009 and it allows a city that has a district that has retired its debt or other obligations to extend the life of the district for one year and if the city adopts a resolution extending the district for one year and disclose it how it intends to improve its housing stock you can take these funds and use them for other purposes so the Department of Revenue grants approval on these extensions 75% of the tax increments need to benefit affordable housing anywhere within the city not just specific to that district and affordable housing is defined by the law as housing costing norm no more than 30% of the households gross monthly income so this is a listing of the current tids within the city of Sheboygan so TIF 6 is south pier and the lakefront out to the marina that's our oldest district tid 10 is the water street area primarily down here along the river the kingsbury apartments and some of those garden toy apartments were included in that tid 12 is a street office building so that is the Nemsha what used to be the Nemsha for Herman Miller office building where roadie dales is today and the grand stay hotel so it's a small district kind of on that corner the land tid 13 is landmark condo so this is the landmark building that had burnt in 2007 and was rebuilt that includes that property as well as the founders club or the old Sheboygan senior community tid 14 it was originally created for festival foods development and has since expanded to include the Meyer foods tid 15 is the pick and save property and some residential property on the south side of Sheboygan tid 16 is downtown a street basically it's a street from the river up to the Weill center and then expands out to include the Wells Fargo property to the east tid 17 is Indiana Avenue so it's basically from the lake out to 14 Street and then down south 7th Street to just shy of King Park so the old Oppenberg property is kind of the southern limit tid 18 is the south point enterprise campus our new business center on the south side tid 19 is the River Bend neighborhood this is primarily around the Dolmese decor where the Water Street hotel is being watershed hotel is being developed the old glass coffee shop and then the LT Lakeshore Technical College campus across the road so it's a small district kind of on the kind of bend in the river and then the last one tid 20 is the former van der Waart where Oscar apartments and quick trip are being built so we're going to dive into the district's a little bit more detail so the tiff 6 tid 6 the south pier you can see the map on the screen it is a fairly large district it was created in 1992 the expenditure period so anything after that date of 1231 2017 we're unable to make any further expenditures in that district and it's slated to close in 2023 it had been amended a number of times it has gone through a number of years of changing of tiff loss so that's 33 years is the expansion time that's not really never seen but there was some challenges with issues related to the south pier development and blue harbor that the legislature took some additional action to extend that district the estimated close date is this year it was originally created as a blight elimination district it has currently is generating around 1.5 million in increments so that's the new tax value on top of basically the revenue that the district is creating and as I mentioned this one would be eligible for an affordable housing tax credit in 2022 and close in 2022 so we'll talk about what that looks like and what those numbers look like near the end of the slides but I would the next one I would turn it over to fill the talk about the financials great thank you Chad good evening everyone Phil cost about dollars nice to be with you we these are all going to look very similar these are our our materials and we're numbers people so bear with me what you'll see here is that in the orange heading is where we're showing the anticipated revenues for a tax increment district here we have the tax increment the revenue that's actually the increase in valuation and the taxes generated on that there's exempt computer aid and many of these that are kind of held constant by the Department of Revenue here you have a ground lease fee that is revenue that's coming back into this district some loan receivables and to a total revenue number so if you've taken that revenue number minus your obligations what we're trying to drive down to is is the district healthy enough at this point to actually close out partly why we've got involved was to make sure that we're looking at each of the districts with the intent to see whether or not a district can be closed if there could be a revenue sharing should it be amended we kind of went through all those criteria for each of the districts under the expenditures there are some remaining debt payments a transfer and some small administrative costs and as Chad indicated in 2022 we would expect to generate enough revenue to be able close out this district with the ability to again if at your it's a policy decision to keep these districts open but you would be able to collect a million 442 of revenue in 2023 to for affordable housing so we'll touch on each of these and a little bit and get more into the affordable housing discussion later on so the next district is tid 10 the water street it's set up the same way there's a map kind of showing the boundaries along the Sheboygan River this was a blight elimination district created in 1997 would close could close in 2024 or earlier it generates about 390 $2400 in tiff increment revenue it is eligible for the affordable housing extension as well and to close in 2022 so I will let Phil talk about this one all right thank you Chad and again if you look at the same setup as the last one not going to walk through each of the numbers here but again in the in the orange heading or all the revenues and the expenditures are all in the in the green you do have a development and set up with Van Horn development a group here that will be fully paid off in 2023 there's some general fund advances that are going to be reimbursed back to the general fund as part of this district and again what we're projecting in the balance columns in 2022 you would have the ability to get in to close this district out with the possibility again of retaining one years of revenue for affordable housing. The next district is Tid 12 the East Street office building and grand state and then some of the wild center black pig and some of the parking lots so this district like the other ones is a rehabilitation district created in 2000 would close could close in 2027 this is a donor district to Tid 17 so this is sharing revenues from this district to Tid 17 which was Indiana Avenue. However that may not be needed in the future because Tid 17 is doing better than anticipated. So this district generates around 191,776 in revenues and like the other districts is eligible for the affordable housing. Yeah again much smaller district much smaller revenue amounts here one of the things we discovered quickly as we got into to number 17 was that we really didn't need to share additional revenue with 17 which then freed up the ability for Tid number 12 to close out in 2022 as well as Chad indicated to 17 is healthy enough at this point is but enough development for the support itself without revenue coming from another district. So this district will be looked to be close will be looking to close out in 2022 as well. The next one Tid 13 landmark condos as I said before it's primarily the landmark condos and the founders club or the should wagon the old should wagon senior community. A very small district really generated to facilitate the development of the condo project so was created in 2005 expenditure period runs to 27 20 27 and it has an end date of 2032. It is a donor district like Tid 12 with Tid 17 generates around 442,000 and would be eligible for the affordable housing tax credit. I've been around so long I created this district back in 2005 so I'm back so this district again was created back as Chad indicated. This is a a blight district meaning it could stay open for a lot longer period of time. But again decision at least at the staff level at this point is to close this district out since revenue doesn't need to be shared with 17 as well so this will be able to be closed out and again possibly up to about $400,000 available for affordable housing also. Tid 14 the Taylor Heights Festival Foods and Myers so you can see the district that this covers primarily the area around Taylor and Erie Avenue and some of the on and off ramps and then the old the sunny ridge and some of that redevelopment area to the northeast I guess you could say so this was created in 2011 could close in 2031 it was created as a mixed use district which would give it a maximum life of 20 years. It generates about 1.5 million a year in revenues and like the other ones is eligible for the housing affordable housing extension. Yes, I was involved in this district creation as well. And really this this really was the old Menards building that was in turn into festival foods Walmart sorry Walmart building. It has been a while thank you back back a while so again similar to the other districts we expect this district to be able to pay off all its obligations with the cumulative balance that remains and again 2022 bill close out this district. Tid 15 the pick and save. So this was used for the redevelopment of the what used to be the came out into the pick and save that unfortunately sets vacant however there is a lease that they're they're paying that the same rate as if they were in the building so the developer really has no interest in going out and finding a tenant but the tax value has to our benefits stayed at that high level as if the building is occupied. So this was created in 2011 as well would could have a closure of 2031 as a mixed use district for 20 years. Revenue is about 230,000 and is eligible for the housing extension in 2024 and could close in 2024 because there's some obligations that still need to be met. Yeah, very similar story here. There are obligations here that run through 2024. There's a cumulative balance that's been built up in that in that did fun and again enough in 22 are ready to close out this district. This is one you could you could probably keep open for other purposes in that neighborhood but with all another prospect it makes sense to close this out at this time. Tid 16 the downtown Sheboygan a street as I said basically runs from the visitor center property all the way up to Wisconsin Avenue and then that little leg that goes to the East is the wall Wells Fargo and some property that they own West of North 6th Street. I think that is so anyway that district was created in 2015. It was created to provide development incentives to develop the high point apartments and the encore apartments. It's a 20 year district. It runs through 2035 its annual income is around 587,000. So there's a little bit more to tell here. Yeah, so if you spend a little bit of time looking at this cash flow and you look at the last columns on the right where it says annual and cumulative you'll see that for the time being this district is in the red. Not unusual for newer districts to be in the red until development really picks up. There's projected shortfalls for the next couple of years. Until a lot of the debt and the incentives fall off. We fully expect that will be fully reimbursed back. And in 2032 this district will be in the black and will have the ability to close out at that time, which will still be 5 years earlier than the maximum life. So it's just taking a little time to to work its way through. But from all project our projections at this point will be a healthy district in the future. So this is a real example of how what if it's set up for is to take on a lot of debt in the beginning and then pay it off over time as the increment comes in. There had there was some there's been a number of capital projects that have been funded against this district like the updates to the street lighting to LED conversion along a street. So that's an ongoing expense that has been built into this as well. So to 17 is the Indiana district was created in 2018. So it's relatively new. It's a 27 year district. It could run through 2042. It sees increment revenue of about 800,000 per year. And the indications are that it will be it'll do fine. It'll be cat. It'll be positive cash flow moving forward. It was really created to facilitate some of the redevelopment along Indiana Avenue, the former pentaire property and then the opt and bird property to the south. So you can see that it's a relatively large district. It has seen some successful projects with the Badger state lofts and the condo development that occurred along the Sheboygan River and then should the development on the former Kepsil move forward that will only help it out a lot more. So it right now is a recipient of tids 12 and 13. But going forward it has plenty of cash flow that it doesn't necessarily need that. Yeah. If you look at the the revenue projections and you look at the projected revenue, you'll see that we do show in the third and fourth, fourth and fifth columns from the left. The revenues that have come in from 12 and 13. And then the third column from the right is that cumulative balance. So there is a healthy fund balance in this tax increment district. In part, I think through from revenues from to 12 13, a little bit of bomb proceeds, some land sale as well. We expect this district. If you look at the cumulative column to stay in the black through the life and again close out well early 11 years earlier than the allowed life of the district at this point be a very successful district for the city. So the next few districts are pretty new and there's some opportunity. So there is you won't see a ellers comparison on these because we're because of the age, frankly. So I'm just going to go through some of the details and then there won't be any additional slides on the performance. But the tit 18 south point enterprise campus created in 2018, the expenditure period through 2035, the end date was 2038 has now been approved by the Department of Revenue to 2040. And that's based on an update of the lack basically to try to get us through the pandemic because we haven't had a lot of development out there as was originally anticipated. So we had worked with ellers to extend this to 2040 to cover some cash flow issues going forward. And we believe that it will make it's got about 15 to 18 million or so of outstanding debt. But we believe in the end, it'll ultimately make it. It'll cash flow itself. Right now, it's generating around 900,000 in revenue is what we budgeted. And that's primarily from the FedEx project. That's also in this district and some improvements that torgonals making in our current business center. Tid 19 River Bend neighborhood. So this was also created in 2018. It will close in 2038. It's a mixed use district. You can see where this is. The this is a fluid situation. We've got a number of developments happening. We may need to extend this to include the former may line and the adjacent redevelopment authority property, JP Marine along commerce street to facilitate some redevelopment and some street construction upgrades in that area going forward. And then the last one is the Tid 20, which is the former Vanderbilt. This was a 27 year district created in 2020 closes in 2047 as a rehabilitation district and could basically has minimal debt against it other than some street lights on Georgia Avenue and potentially some trail improvements. So this could be a future donor district with other rehabilitation districts if needed or close early. This has to pay a fairly large tip incentive, almost $7.5 million to the roughly $47 million Oscar apartment deal. Well, here's the good news, folks. It's it's really a situation where you have a lot of activity in districts, districts that have been around for quite some time. And you're at a point where you have the ability to close out six of the districts this year. And there's some financial impacts to that there's there's really three impacts. One is that the city like most other communities in the state of Wisconsin are are trying to figure out workforce and affordable housing. This will be one avenue to deal with that. So what we projected if you close out in 22 these six districts that if you look at where it says anticipated amount for affordable housing, the projection is about $3.9 million that would go into a fund that Chad talked about earlier that there's some some some you have to kind of work through the process of how the funds can be used. But it's really your mark for affordable housing. So it'll be a really good start to a fund in the city of Sheboygan that will allow the city to be more active and working towards workforce and affordable housing issues. Second, when we look at tax impact of anticipated borrowings and and in your operating lobby, one of the benefits of closing out districts is you get a big bump in valuation where you're spreading the overall operations and debt over a larger tax base. Closing out these districts about $190 million of value will come back online. That will help absorb again future increases in both operating and debt service and kind of hopefully level out the tax levy as well. And then finally the third is that I mentioned earlier in tip number 10. There's a general fund reimbursement above 419,000 I'll go back to the general fund so you get a bump in valuation which helps when it comes budget time. That'll really take effect in budget year 2024. You have about $3.9 million that'll go into an affordable housing fund and a little bit of money coming back to the general fund as well. So wrapping this up so the last couple slides here are just some information that we hear all the time. How many tids can the city have? Obviously, if we close six districts will be creating additional opportunity should the need arise. But the state statute requires that the equalized value of taxable property in all districts does not exceed 12%. With the most recent creation of TID 20, the city's total equalized value of existing tids was around 190 million and we could go up to a maximum of 350 million. So we prior to that if we didn't close any districts would have still plenty of value to do that. But with closing districts obviously that total number will go down. Couple advantages of tids. It can increase property values, spur private development, create a stronger, broader tax base, stimulates the investment outside the district typically and benefits the underlying taxing districts at the end of the TIF as we just discussed. Some disadvantages of the district doesn't materialize as planned. The city may have to find other sources to fund it and that's kind of where some of those advances from the general fund have happened over the years. Tids may be used in areas where development would have not normally occurred and it can increase the administrative burden of managing these local districts. So that's it in a nutshell. If there's any questions, we would be happy to answer them. All right. Thanks Chitinville for that very informative and engaging conversation. Any questions from Alders? Alder Flicky Pineski. Thank you. For an example, TID 13 right now, if we close it, we get about 200,000 of revenue. If we keep it open, if I read the charts correctly, if we keep it open, we get a million dollars in a couple more years. Is that accurate? Yeah, I think it's 300,000 is the revenue, the increment that's generated. So either that would keep going into building up a fund balance or in this case could be shared with the donor district, which was TID 17. I don't know where the 1.5 million, what it came from. Okay, I guess more generally my question is when I looked at the charts, closing them out now gives us a certain dollar amount. If we wait another year, we get a higher increment. Is that accurate? You want to answer that? Yeah. Mr. Cossin. I just wanted to pull this up, sir. It was TID 13 that I was looking at. Yeah, so there's a couple of things. There are one, once you have, the state statute is very clear that once you have... I don't know why this is different, but it's not advancing the slides. Sorry. Okay. Well, I'll just answer it generally. So the statutes are very clear that once you have met all the obligations that you're required statutorily to close out the district. You can't just keep it open to build a fund balance in a tax increment district. So to keep it open, in the case of TID 13, you would have to undertake additional capital expenditures to keep it open. If there aren't expenditures that be made in TID 13, then statutorily you're required to close out the district. I think the decision by staff has been, at this point, there are no future capital expenditures in that area. Therefore, we don't need to share the revenue with TID number 17 anymore. Let's close out the district. Okay. That answered my question. Thank you. Any other follow-ups? Older Flicky Paneski? No. Any additional questions from elders? All right. Thank you, Chad. Thank you, Phil. Thank you, Illars, for all your work and keeping the TIFFs rolling and in pretty good health. Thank you.