HomeMy WebLinkAbout08-412OCTOBER 28, 2008 08 -412 RESOLUTION
(CARRIED 4 -3 LOST LAID OVER WITHDRAWN )
PURPOSE: APPROVE TAX INCREMENT DISTRICT NO. 22 PROJECT
PLAN; DESIGNATE TAX INCREMENT DISTRICT NO. 22
BOUNDARIES; CREATE TAX INCREMENT DISTRICT NO. 22
FAIR ACRES DEVELOPMENT AREA PROJECT
INITIATED BY: CITY ADMINISTRATION
PLAN COMMISSION RECOMMENDATION: Approved
WHEREAS, pursuant to Section 66.1105, Wis. Stats., the City of Oshkosh proposes
to create Tax Increment District No. 22 Fair Acres Development Area; and
WHEREAS, the City of Oshkosh Plan Commission has prepared and adopted a
project plan for Tax Increment District No. 22 Fair Acres Development Area, which:
1) Includes a statement listing the kind, number and location of all proposed public
works or improvements within such District.
2) Contains an economic feasibility study.
3) Contains a detailed list of estimated project costs.
4) Contains a description of the methods of financing all estimated project costs and
the time when such costs or monetary obligations related thereto are to be incurred.
5) Includes a map showing existing uses and conditions of real property in such
District.
6) Includes a map showing proposed improvements and uses therein.
7) Contains a list of estimated non - project costs.
8) Contains a statement of a proposed method for the relocation of any person to be
displaced.
9) Indicates how the creation of TID No. 22 promotes the orderly development of the
City.
10) Contains an opinion of the City Attorney that the Plan complies with Section
66.1105(4)(f), Wis. Stats.
and
WHEREAS, the Plan Commission has held a public hearing on the creation of TID
No. 22 and the proposed boundaries thereof and has notified the Chief Executive Officers
of all local government entities having the power to levy taxes on property within the
District, including the School Board of any school district which includes property within the
District pursuant to Section 66.1105, Wis. Stats.; and
OCTOBER 28, 2008 08 -412 RESOLUTION
CONT'D
WHEREAS, the City of Oshkosh Plan Commission affirms the following per the TID
No. 22 Project Plan:
➢ The district is a mixed -use TID;
➢ Not less than 50% of the real property within the district is suitable for a mixed -use
development within the meaning of Section 66.1105(2)(cm), Wisconsin Statutes;
➢ Development of the area will have a significant positive impact on the value of all
real property in the district;
➢ Were it not for the financing mechanisms provided through Tax Increment Law,
planned redevelopment of this district would in all likelihood not occur;
➢ The Project Plan is feasible and is in conformity with the City's Comprehensive
Plan;
➢ Improvement of the area is likely to enhance significantly the value of substantially
all of the other property in the district;
➢ The project costs identified in the Project Plan relate directly to eliminating blight
and rehabilitating the area;
➢ The equalized value of taxable property within the district plus the value increment
of all existing districts within the city does not exceed 12 percent of the total
equalized value of taxable property within the City. The 2008 value increment of
TID's within the City is 7.36 %.
➢ Retail business is estimated to be 85.64% of the TID area at the end of the 20 year
expenditure period. 2.68% will be residential and 11.68% will be public
utility /facility.
➢ Newly platted residential development that is part of the TID project plan will be
developed at 7 units per acre and will not exceed 35% of the district area.
NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of
Oshkosh that the Project Plan is feasible and in conformity with the City's Comprehensive
Plan and hereby approves of the Project Plan for Tax Increment District No. 22 Fair Acres
Development Area, pursuant to the provisions of Section 66.1105, Wis. Stats.
BE IT FURTHER RESOLVED that the Common Council of the City of Oshkosh
hereby designates the boundaries of TID No. 22 as described in the attached "Exhibit A ".
BE IT FURTHER RESOLVED that the Common Council of the City of Oshkosh
hereby approves creation of Tax Increment District No. 22 Fair Acres Development Area.
BE IT FURTHER RESOLVED that the improvements contemplated in TID No. 22
Fair Acres Development Area will have a significant positive impact on the value of all real
property in the District and is in keeping with the goals and objectives of the
Comprehensive Plan.
BE IT FURTHER RESOLVED that the equalized value of taxable property within the
District plus the value increment of all existing Districts within the City does not exceed
12% of the total equalized value of taxable property within the City.
"EXHIBIT A"
TAX INCREMENT DISTRICT 22
FAIR ACRES DEVELOPMENT
An area including part of Lots 1 and 2 of Certified Survey Map No. 2091, all of Lot 1 of
Certified Survey Map No. 5463, all of Lot 1 of Certified Survey Map No. 5815, and part of
rights -of -way of Jackson Street, Viola Avenue, N. Main Street and W. Murdock Avenue, all
located in the S.W. Y4 of the S.W. Y4 of Section 12, T18N, R16E, 15 Ward, City of
Oshkosh, Winnebago County, Wisconsin, bounded and described as follows;
Commencing at the Southwest Corner of said Section 12; thence N90 0 00'00 "E, 300.21 feet
along south line of said Section 12 to the point of beginning of the area to be described;
thence N00 °00'00 "E, 43.00 feet to the south right -of -way line of West Murdock Avenue;
thence N00 0 23'01 "E, 163.36 feet to the northeast corner of Lot 1 of Certified Survey Map
No. 2090 (Doc. No. 732254 Winnebago County Register of Deeds); thence N89 0 36'59 "W,
260.00 feet along the north line of Lot 1 of said Certified Survey Map No. 2090 to a point
on the east right -of -way line of Jackson Street (STH 76) also being the northwest corner of
Lot 1 of said Certified Survey Map No. 2090; thence continuing N89 0 36'59 "W, 40.03 feet to
a point on the west line of said Section 12; thence N00 0 23'01 "E, 780.21 feet along the
west line of said Section 12 to a point on the centerline of Viola Avenue; thence
S89 0 59'52 "E 909.17 feet along the centerline of Viola Avenue; thence S00 0 24'45 "W,
30.00 feet to the south right -of -way line of Viola Avenue, also being a northeast corner of
Lot 1 of Certified Survey Map No. 5815 (Doc. No. 1374931 Winnebago County Register of
Deeds); thence continuing S00 0 24'45 "W, 130.82 feet along a easterly line of said Lot 1 of
Certified Survey Map 5815 to a southwest corner of said Lot 1 of Certified Survey Map
5815; thence S89 0 59'25 "E, 368.46 feet along a north line of said Lot 1 of Certified Survey
Map 5815 to a northeast corner of said Lot 1 of Certified Survey Map 5815, also being a
point of the west right -of -way line of N. Main Street; thence continuing S89 0 59'25 "E, 33.00
feet to the centerline of N. Main Street; thence S00 0 16'52 "W, 548.62 feet along the
centerline of N. Main Street; thence N89 0 39'30 "W, 33.00 feet to a point on the west right -
of -way line of N. Main Street, also being the southeast corner of said Lot 1 of Certified
Survey Map No. 5815; thence continuing N89 0 39'30 "W, 317.83 feet along the south line of
said Lot 1 of Certified Survey Map No. 5815 to the northeast corner of Lot 1 of Certified
Survey Map No. 5463 (Doc. No. 1304641 Winnebago County Register of Deeds); thence
S00 0 19'36 "W 236.60 feet along the east line of said Lot 1 of Certified Survey Map No.
5463 to the southeast corner of said Certified Survey Map No. 5463, also being a point on
the north right -of -way line of W. Murdock Avenue; thence continuing S00 9 43.32
feet to a point on the south line of said Section 12; thence S90 0 00'00 "W, 457.51 feet along
the south line of said Section 12; thence N00 0 19'19 "E 43.16 feet to a point on the north
right -of -way line of W. Murdock Avenue, also being the southwest corner of said Lot 1 of
Certified Survey Map No. 5463; thence continuing N00 0 19'19 "E 239.47 feet along the
west line to the northwest corner of said Lot 1 of Certified Survey Map No. 5463; thence
continuing N00 0 19'19 "E, 9.50 feet; thence S89 0 58'49 "W, 142.92 feet; thence
S00 0 19'19 "W 9.50 feet to the northwest corner of Lot 2, Certified Survey Map No. 2090;
thence continuing S00 0 19'19 "W 240.44 feet along the west line of said Lot 2 of Certified
Survey Map 2090 to a point on the north right -of -way line of W. Murdock Avenue; thence
continuing S00 0 19'19 "W 43.10 feet to a point on the south line of said Section 12; thence
S90 0 00'00 "W 60.04 feet along the south line of said Section 12 to the point of beginning.
Described area contains approximately 1,028,682.02 square feet or 23.62 acres more or
less.
"EXHIBIT A"
TAX INCREMENT DISTRICT 22
FAIR ACRES DEVELOPMENT
An area including part of Lots 1 _and.2 of Certified Survey * Map No. 2091, all of Lot 1 of
Certified Survey Map No. 5463, all of Lot 1 of Certified Survey Map No. 5815, and part of
rights -of -way of Jackson Street, Viola Avenue, N. Main Street and W. Murdock Avenue, all
located in the S.W. % of the S.W. '/ of Section 12, T18N, R16E, 15 Ward, City of
Oshkosh, Winnebago County, Wisconsin, bounded and described as follows;
Commencing at the Southwest Corner of said Section 12; thence N90 0 00'00 "E, 300.21 feet
along south line of said Section 12 to the point of beginning of the area to be described;
thence N00 °00'00 "E, 43.00 feet to the south right -of -way line of West Murdock Avenue;
thence N00 0 23'01 "E, 163.36 feet to the northeast corner of Lot 1 of Certified Survey Map
No. 2090 (Doc. No. 732254 Winnebago County Register of Deeds); thence N89 °36'59 "W,
260.00 feet along the north line of Lot 1 of said Certified Survey Map No. 2090 to a point
on the east right -of -way line of Jackson Street (STH 76) also being the northwest corner of
Lot 1 of said Certified Survey Map No. 2090; thence continuing N89 0 36'59 "W, 40.03 feet to
a point on the west line of said Section 12; thence N00 0 23'01 "E, 780.21 feet along the west
line of said Section 12 to a point on the centerline of Viola Avenue; thence S89 °59'52 "E,
909.17 feet along the centerline of Viola Avenue; thence S00 °24'45 "W, 30.00 feet to the
south right -of -way line of Viola Avenue, also being a northeast corner of Lot 1 of Certified
Survey Map No. 5815 (Doc. No. 1374931 Winnebago County Register of Deeds); thence
continuing S00 0 24'45 "W, 130.82 feet along a easterly line of said Lot 1 of Certified Survey
Map 5815 to a southwest corner of said Lot 1 of Certified Survey Map 5815; thence
S89 °59'25 "E, 368.46 feet along a north line of said Lot 1 of Certified Survey Map 5815 to a
northeast corner of said Lot 1 of Certified Survey Map 5815, also being a point of the west
right -of -way line of N. Main Street; thence continuing S89 °59'25 "E, 33.00 feet to the
centerline of N. Main Street; thence S00 °16'52 "W, 548.62 feet along the centerline of N.
Main Street; thence N89 °39'30 "W, 33.00 feet to a point on the west right -of -way line of N.
Main Street, also being the southeast corner of said Lot 1 of Certified Survey Map No.
5815; thence continuing N89 °39'30 "W, 317.83 feet along the south line of said Lot 1 of
Certified Survey Map No. 5815 to the northeast corner of Lot 1 of Certified Survey Map No.
5463 (Doc. No. 1304641 Winnebago County Register of Deeds); thence S00 0 19'36 "W,
236.60 feet along the east line of said Lot 1 of Certified Survey Map No. 5463 to the
southeast corner of said Certified Survey Map No. 5463, also being a point on the north
right -of -way line of W. Murdock Avenue; thence continuing S00'1 9'36"W, 43.32 feet to a
point on the south line of said Section 12; thence S90 °00'00 "W, 457.51 feet along the
south line of said Section 12; thence N00 0 19'19 "E, 43.16 feet to a point on the north right -
of -way line of W. Murdock Avenue, also being the southwest corner of said Lot 1 of
Certified Survey Map No. 5463; thence continuing N00 0 19'19 "E, 239.47 feet along the west
line to the northwest corner of said Lot 1 of Certified Survey Map No. 5463; thence
continuing N00 0 19'19 "E, 9.50 feet; thence S89 0 58'49 "W, 142.92 feet; thence
S00 °19'19 "W, 9.50 feet to the northwest corner of Lot 2, Certified Survey Map No. 2090;
thence continuing S00 0 19'19 "W, 240.44 feet along the west line of said Lot 2 of Certified
Survey Map 2090 to a point on the north right -of -way line of W. Murdock Avenue; thence
continuing S00 °19'19 "W, 43.10 feet to a point on the south line of said Section 12; thence
S90 °00'00 "W, 60.04 feet along the south line of said Section 12 to the point of beginning.
Described area contains approximately 1,028,682.02 square feet or 23.62 acres more or
less.
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1S - IV UN30
TAX INCREMENT DISTRICT #22
FAIR ACRES
DEVELOPMENT AREA
PROJECT PLAN
Schedule:
Plan Commission October 7, 2008
Common Council October 28, 2008 (Pending)
Joint Review Board (Pending)
Department of Community Development
TAX INCREMENT DISTRICT #22
PROJECT PLAN
CITY OF OSHKOSH
PLAN COMMISSION
October 07, 2008
COMMON COUNCIL
October 28, 2008 (Pending)
JOINT REVIEW BOARD
Pending
PREPARED BY:
DEPARTMENT OF COMMUNITY DEVELOPMENT
October, 2008
Table of Contents
Plan Summary .............................................................................................................. ..............................1
Introduction................................................................................................................. ..............................2
Purpose......................................................................................................................... ..............................
Boundaries/Legal Description .................................................................................... ..............................3
Nameof District ........................................................................................................... ..............................4
CreationDate ............................................................................................................... ..............................4
Project Costs and Improvements ............................................................................... ..............................4
Methodof Financing ................................................................................................... ..............................5
Master Plan, Zoning, Building and Other Code Considerations ............................ ..............................5
Economic Feasibility/Expectation for Development ................................................ ..............................5
Promotionof Orderly Development .......................................................................... ..............................6
ProposedUses and Existing Conditions .................................................................... ..............................6
Non - Project Costs ........................................................................................................ ..............................6
Relocation.. ..................................... — .... o ..................................... o .............................. o ............................... 6
Findings........................................................................................................................ ..............................
SupplementalData ...................................................................................................... ..............................8
Attorney's Opinion ...................................................................................................... ..............................9
Appendix A —Maps
# 1 Boundaries ..................................................................................... .............................10
# 2 Existing Land Use ......................................................................... .............................11
# 3 Proposed Land Use ....................................................................... .............................12
# 4 Zoning ............................................................................................ .............................13
# 5 Proposed Improvements .............................................................. .............................14
# 6 Parcel Identification ..................................................................... .............................15
Appendix B Request for Paygo Assistance ............................................................. .............................16
Plan Summary
City of Oshkosh
Tax Increment District #22 Project Plan
District Name: City of Oshkosh Tax Increment District #22 Fair Acres Development Area
Location: Fair Acres Shopping Center; generally located, north of West Murdock
Avenue, west of North Main Street, south of Viola Avenue and East of Jackson
Street.
Size: Approximately 23.62 acres
Parcels: 3
Estimated District
Base Value: $8,385,500
Purpose: Support revitalization and development to ensure a vital and healthy tax base.
The primary purpose of the Fair Acres TID is to provide for the development
of a needed general merchandise retailer to service this area of the community,
which is currently severely underserved in this regard. .
Proposed Costs: $3.5 million for costs related primarily to the provision of a development
assistant grant. Costs may also include administrative costs related to the
creation and implementation of this project plan as well as future streetscaping
and landscaping improvements.
Project Financing: Paygo financing from tax increment generated from new development in a
portion of the district and will be capped through a development agreement
with the City.
Economic
Feasibility: Economic feasibility is based on the development of a 54,000 square foot
Shopko store, a 15,000 square foot mid -box store, a 5,000 square foot
restaurant, and four duplex dwelling units. Estimated tax increment value at
stabilization is expected to range from $8.3 -$9.3 million for the new
development.
1
Introduction
Wisconsin's Tax Incremental Financing law provides a mechanism that enables cities and villages to
rehabilitate blighted areas, improve business areas, create mixed -use development, and/or develop
industrial sites. The intent is to defray the cost of public improvements in a designated Tax
Incremental District (TID) by using tax revenues or increments generated from new development to
pay for project improvements in the district. The value increment is the difference between the
certified base value of the TID at the time of creation and the increased value of the property in
subsequent years until the TID is dissolved. It is the value increment generated from new
development that is used to retire the debt incurred by the City in implementation of project activities.
Under Tax Incremental Financing, the tax increment generated from private investment in a TID is
applied entirely to the retirement of debt incurred by the municipality in order to make the area
attractive to investment or reinvestment. When the cost of improvements have been recovered and the
debt service attributable to the district has been retired, the TID is dissolved and all taxing
jurisdictions benefit on the same shared basis as before the creation of the TID. If the TID has been
successful, each of the taxing jurisdictions should receive a much larger share of the property taxes
from the new development that came about as a direct result of the creation of the TID.
Tax incremental financing laws provide benefits to all taxing entities, city, county, public schools,
and technical college, by promoting development of new taxable value which otherwise would not
occur. It provides a tool for municipalities to make reasonable levels of investment using local
financing sources to meet identified needs and fill legitimate public purpose roles. The law also
recognizes that since municipalities do not share the investment risk with other tax entities, they are
entitled within a prescribed period of time, to receive all new tax revenues of the TID as the source of
paying off all public investment costs. All other taxing entities receive benefits in the future from the
increased tax base generated as a result of the city's investment in the TID.
Purpose
The purpose of this TID is to promote revitalization and mixed -use development in the Fair Acres
shopping center, involving the development of a 54,000 square foot Shopko general department store
and pharmacy, 15,000 mid -box retail store, a 5,000 square foot restaurant, and four duplex dwelling
units. TIF assistance will be used to offset development costs that the developer intends to pass
through via lesser per square footage rents to attract the big box , thereby making the project
economically and financially feasible. Tax increment generated by the new development will be
provided in the form of a development assistance grant that will be dispersed to the developer
annually to increase cash flow to a level that makes the project financially feasible and economically
viable. As this is a " Paygo" TIF, only positive tax increment generated by the development will be
paid to the developer and only to the extent that is necessary to allow the project(s) to move
forward/continue.
Other potential enhancements to occur within the district include public right -of -way improvements
related to lighting, signage, and vegetative buffering as well as public stormwater facility
enhancement. Funding for these potential improvements will be available only if positive tax
increment is generated by the development over and above what is necessary to address the Paygo
bond. This will be addressed through a development agreement between the City and developer.
2
Boundaries/Legal Description
An area including part of Lots 1 and 2 of Certified Survey Map No. 2091, all of Lot 1 of Certified
Survey Map No. 5463, all of Lot 1 of Certified Survey Map No. 5815, and part of rights -of -way of
Jackson Street, Viola Avenue, N. Main Street and W. Murdock Avenue, all located in the S.W. '/4 of
the S.W. 1 /4 of Section 12, T18N, R16E, 15` Ward, City of Oshkosh, Winnebago County, Wisconsin,
bounded and described as follows;
Commencing at the Southwest Corner of said Section 12; thence N90 °00'00 "E, 300.21 feet along
south line of said Section 12 to the point of beginning of the area to be described; thence
NOO °00'00 "E, 43.00 feet to the south right -of -way line of West Murdock Avenue; thence
N00 163.36 feet to the northeast corner of Lot 1 of Certified Survey Map No. 2090 (Doc.
No. 732254 Winnebago County Register of Deeds); thence N89 °36'59 "W, 260.00 feet along the
north line of Lot 1 of said Certified Survey Map No. 2090 to a point on the east right -of -way line of
Jackson Street (STH 76) also being the northwest corner of Lot 1 of said Certified Survey Map No.
2090; thence continuing N89 °36'59 "W, 40.03 feet to a point on the west line of said Section 12;
thence N00 780.21 feet along the west line of said Section 12 to a point on the centerline of
Viola Avenue; thence S89 °59'52 "E, 909.17 feet along the centerline of Viola Avenue; thence
S00 0 24'45 "W, 30.00 feet to the south right -of -way line of Viola Avenue, also being a northeast
corner of Lot 1 of Certified Survey Map No. 5815 (Doc. No. 1374931 Winnebago County Register of
Deeds); thence continuing S00 °24'45 "W, 130.82 feet along a easterly line of said Lot 1 of Certified
Survey Map 5815 to a southwest corner of said Lot 1 of Certified Survey Map 5815; thence
S89 0 59'25 "E, 368.46 feet along a north line of said Lot 1 of Certified Survey Map 5815 to a
northeast corner of said Lot 1 of Certified Survey Map 5815, also being a point of the west right -of-
way line of N. Main Street; thence continuing S89 0 59'25 "E, 33.00 feet to the centerline of N. Main
Street; thence S00° 16' 52 "W, 548.62 feet along the centerline of N. Main Street; thence
N89 0 39'30 "W, 33.00 feet to a point on the west right -of -way line of N. Main Street, also being the
southeast corner of said Lot l of Certified Survey Map No. 5815; thence continuing N89 °39'30 "W,
317.83 feet along the south line of said Lot 1 of Certified Survey Map No. 5815 to the northeast
corner of Lot 1 of Certified Survey Map No. 5463 (Doc. No. 1304641 Winnebago County Register of
Deeds); thence S00 0 19'36 "W, 236.60 feet along the east line of said Lot 1 of Certified Survey Map
No. 5463 to the southeast corner of said Certified Survey Map No. 5463, also being a point on the
north right -of -way line of W. Murdock Avenue; thence continuing S00 °19'36 11 W, 43.32 feet to a
point on the south line of said Section 12; thence S90 °00'00 "W, 457.51 feet along the south line of
said Section 12; thence NOO° 19'1 9"E, 43.16 feet to a point on the north right -of -way line of W.
Murdock Avenue, also being the southwest corner of said Lot 1 of Certified Survey Map No. 5463;
thence continuing N00° 19'l 9"E, 239.47 feet along the west line to the northwest corner of said Lot 1
of Certified Survey Map No. 5463; thence continuing N00 °19'1 9'T-, 9.50 feet; thence S89 °58'49 "W,
142.92 feet; thence S00° 19'l 9"W, 9.50 feet to the northwest corner of Lot 2, Certified Survey Map
No. 2090; thence continuing S00' 19'1 9"W, 240.44 feet along the west line of said Lot 2 of Certified
Survey Map 2090 to a point on the north right -of -way line of W. Murdock Avenue; thence continuing
S00 °19'19 "W, 43.10 feet to a point on the south line of said Section 12; thence S90 0 00'00 "W, 60.04
feet along the south line of said Section 12 to the point of beginning.
Described area contains approximately 1,028,682.02 square feet or 23.62 acres more or less.
3
Name of District
The district is identified as City of Oshkosh Tax Increment District #22 (TID #22) — Fair Acres
Development Area.
Creation Date
The date of creation for the capture of all new taxable value created within TID # 22 shall be January
1, 2009. The value established as of this date shall be used as the base for computing any increments
that will accrue in the tax base for the district.
Proiect Costs and Improvements
Proposed costs associated with implementing this project plan are estimated at approximately $3.5
million and involve payment of annual increment to the developer over the life of the TID. The
estimated net present value of these payments is approximately $2.15 million with a 4.5% discount
rate, which results in a finance /tax increment revenue bond cost of approximately $3.4 million over
the 20 year life cycle of this TID. Payments will be capped to a maximum, regardless of values
established, through a development agreement entered between the developer and the City.
Administrative costs have been included to help offset costs involved in creating and annually
administering this TID and will only be taken from generated positive increment.
Table #1
Estimated Project Costs and Improvements
Activity
Cost
Year
Finance & Tax Increment Revenue Bond
$ 3,369,741
2010 -2029
Administration Related Expenses
Planning, Engineering Legal, etc.
$ 100,000
2010 -2029
Total
$ 3,469,741
*The size of actual development assistance grant is dependent on the timing of grant
dispersal and identified need for grant money.
All project activities, including the development assistance grant are proposed to be paid through tax
increment generated within the district itself. Project activities and costs identified in Table 1
represent the City's best estimate of costs associated with implementing the project at the current
time. The size of the annual development assistance grant will be determined by the actual value of
the development, as reflected on the City's property tax roles. The annual development assistance
grant amount will be capped to not exceed an agreed upon capitalization rate and net present value.
In order to buffer the adjacent housing, funds may be earmarked to provide a landscape buffer with
fencing along the north side of the retail center's loading areas and employee parking facilities.
Funding is also being provided for an enhancement of the regional stormwater detention facility
enhancement such as a pedestrian pathway, sitting benches, and landscaping. Miscellaneous right -of-
way improvements /modifications may involve modifications to the lighting, signage, public
transportation facilities and utility systems, depending on the extent of increment generated above
and beyond the development assistance grant amount.
Administration related expenses include an estimate for administrative, planning, professional,
organizational and legal costs. Components of these costs include cost of salaries and employee
benefits for City employees engaged in the planning, engineering, implementing and administering
activities in connection with the Tax Increment District, the cost of supplies and materials, contract
and outside consultant services, and those costs of City departments such as the City Attorney, Public
Works, Finance, Community Development, and Transportation. These costs will also be paid from
positive tax increment remaining after annual development assistance grant has been issued.
With regard to the Development Assistance Grant (DAG), the PUgo method is to be used to provide
financing and support planned development within this district.
Paygo: The City will issue a TIF Revenue Bond -to the developer in the amount of the DAG. No
funds would actually be disbursed to the developer with issuance of the bond document. With
issuance of the TIF Revenue Bond, the City will agree to appropriate funds to pay principal and
interest on the bonds from funds that become available in the City's TIF increment account (which
occurs when tax payments are made on completed components of the project). The developer would
be able to pledge the bond document as additional collateral when negotiating a construction loan and
long term financing for the project through the private marketplace. Because the revenue stream to
the developer would be realized at a later date with the Paygo method, payments made to the
developer may include a time value of money calculation.
It is possible that certain public improvements may be undertaken within the TID regardless of
progress on other planned projects within the TID. In that event, these projects may be funded with
other types of borrowing on either a temporary or long -term basis.
Method of Financing
Implementation of improvements in this project plan will be financed through positive tax increments
generated by new development occurring within the district, commonly referred to as Paygo
financing. In Paygo financing, the developer is paid only from positive increment paid to the City in
the form of increased property taxes. If estimates are off or if the income situation changes in the
district and the district value is reduced, the payment on the development assistance grant will be
correspondingly reduced. Additionally, if the value is higher than anticipated, a cap will be placed on
the amount of increment on the development assistance grant, which is addressed within the
development agreement.
Master Plan, Zoning, Building, and Other Code Considerations
The project elements proposed in the Project Plan conform to the objectives and conceptual
recommendations contained in the City's Comprehensive Plan, as approved by the Plan Commission
and Common Council. Additionally, project elements and zoning conform to the goals and _
objectives identified in an approved Conditional Use Permit/Planned Development. This is important
in that the inclusion of residential housing units would not be permitted within the underlying
commercial zoning designation but are permitted as an element of the Planned Development
approval. The zoning is shown on Map #3 in Appendix A.
5
Economic Feasibility/Expectations for Development
Economic feasibility of this district is predicated on development occurring as proposed by the
developer with TIF being used to offset overall development costs resulting in lesser lease rates to
attract the "big box" retailer to the site. At this time, development costs for this mixed -use
development are estimated in the range of $849 million, which is the estimate of the district's
increment value in the new development area of the site. As proposed the individual "hard costs" of
this development entail a $3.1 million 54,000 square foot Shopko "big box" retail store, a $1.4
million dollar 15,000 square foot mid -box retail store, a $625,000 - 5,000 square foot restaurant and
four housing units within two structures valued at approximately $780,000. Other potential
development to occur within the district involves public right -of -way improvements related to
improved lighting, signage, and access as well as public stormwater facility enhancement, which
helps to support the development's long -term feasibility.
Table I in the Supplemental Data section summarizes the anticipated value of new development in the
district and estimates the increment value of the district at $11.4 million in 2029 when the TID is
retired.
Promotion of Orderly Development
The development of underutilized properties within a planned development district as well as the
provision of needed amenities to the development area promotes orderly development by ensuring
that land is developed to its highest and best use in a manner consistent with appropriate local plans.
All development activity within TID #22 will be reviewed by the City's Plan Commission and/or the
Common Council to ensure compliance with the goals and objectives of various plans as they relate
to implementation of this Project Plan. As such, this Project Plan is consistent with the Conditional
Use Permit/Planned Development plan for this area and with the City's Comprehensive Plan.
Proposed Uses and Existing Conditions
The proposed uses in the district include general commercial and residential uses and are identified in
Map #4 in Appendix A. The district contains current commercial uses including a grocery store, gym
and other miscellaneous retail and restaurant uses as well as large areas of unused land. The entire
area had formerly been the Winnebago County Fair Grounds up to the early 1980s when the fair
grounds were relocated and this property became available for other development. Map # 3 in
Appendix A identifies existing conditions and land uses.
Proposed land use and zoning in the area is intended to be consistent with the goals and objectives of
the City's Comprehensive Plan and the Conditional Use/Development Plan. In that regard, the
districts existing zoning of C -2 PD General Commercial District with a Planned Development
Overlay allows commercial, retail, and residential uses with .Council approval, and is appropriate in
this area. The Planned Development Overlay District is appropriate, per Section 30 -33 of the Zoning
Ordinance, as this is a designated transitional, in -fill and large commercial area.
Non - Project Costs
It is anticipated there will be no non - project costs related to implementing this Project Plan.
Relocation
Relocation of individuals or businesses is not anticipated with this project but in the event it is
needed, it will be carried out in accordance with applicable relocation requirements set forth by the
State of Wisconsin and/or federal regulations.
Findings and Report to the Joint Review Board
• The district is a mixed -use TID;
• Not less than 50% of the real property within the district is suitable for a mixed -use development
within the meaning of Section 66.1105(2)(cm), Wisconsin Statutes;
• Development of the area will have a significant positive impact on the value of all real property in
the district;
• Were it not for the financing mechanisms provided through Tax Increment Law, planned
redevelopment of this district would in all likelihood not occur;
• The Project Plan is feasible and is in conformity with the City's Comprehensive Plan;
• Improvement of the area is likely to enhance significantly the value of substantially all of the
other property in the district;
• The project costs identified in the Project Plan relate directly to eliminating blight and
rehabilitating the area;
• The equalized value of taxable property within the district plus the value increment of all existing
districts within the City does not exceed 12 percent of the total equalized value of taxable
property within the City. The 2008 value increment of TID's within the City is 7.36 %.
• Retail business is estimated to be 85.64% of the TID area at the end of the 20 year expenditure
period. 2.68% will be residential and 11.68 % will be public utility /facility.
• Newly platted residential development that is part of the TID project plan will be developed at 7
units per acre and will not exceed 35% of the district area.
Supplemental Data
The project plan contains a listing of project costs and statement that increment will be generated as
development occurs within the district. The benefits received at the end of the TID timeframe will be
the revitalization and development in the area and increased property tax values. Additionally, a
needed general merchandise retailer will be available to service this area of the community.
The share of tax increments paid by property owners within the district, based on the estimated
increment from the anticipated development discussed in the Economic Feasibility section of this
document is listed below:
7
Table 1
2009
$
8,493,810.80
$
186,864
$
64,057
$
45,520
$
61,889
$
13,959
2010
$
8,621,217.96
$
189,667
$
65,018
$
46,203
$
62,818
$
14,168
2011
$
8,750,536.23
$
192,512
$
65,993
$
46,896
$
63,760
$
14,381
2012
$
8,881,794.27
$
195,399
$
66,983
$
47,599
$
64,716
$
14,596
2013
$
9,015,021.19
$
198,330
$
67,988
$
48,313
$
65,687
$
14,815
2014
$
9,150,246.51
$
201,305
$
69,007
$
49,038
$
66,672
$
15,038
2015
$
9,287,500.20
$
204,325
$
70,043
$
49,774
$
67,672
$
15,263
2016
$
9,426,812.71
$
207,390
$
71,093
$
50,520
$
68,688
$
15,492
2017
$
9,568,214.90
$
210,501
$
72
$
51,278
$
69,718
$
15,724
2018
$
9,711,738.12
$
213,658
$
73,242
$
52,047
$
70,764
$
15,960
2019
$
9,857,414.19
$
216,863
$
74,341
$
52,828
$
71,825
$
16,200
2020
$
10,005,275.41
$
220,116
$
75,456
$
53,620
$
72,902
$
16,443
2021
$
10,155,354.54
$
223,418
$
76,588
$
54,425
$
73,996
$
16,689
2022
$
10,307,684.86
$
226,769
$
77,736
$
55,241
$
75,106
$
16,940
2023
$
10,462,300.13
$
230,171
$
78,902
$
56,070
$
76,233
$
17,194
2024
$
10,619,234.63
$
233,623
$
80,086
$
56,911
$
77,376
$
17,452
2025
$
10,778,523.15
$
237,128
$
81,287
$
57,764
$
78,537
$
17,713
2026
$
10,940,201.00
$
240,684
$
82,507
$
58,631
$
79,715
$
17,979
2027
$
11,104,304.01
$
244,295
$
83,744
$
59,510
$
80,910
$
18,249
2028
$
11,270,868.57
$
247,959
$
85,000
$
60,403
$
82,124
$
18,523
2029
$
11,439,931.60
$
251,678
$
86,275
$
61,309
$
83,356
$
18,800
Estimated Value of
Project w 1.5% Appreciation
$4,572,656
$1,567,506
$1,113,899
$1,514,464
$341,577
CITY HALL
215 Church Avenue
P.O. Box 1130
Oshkosh, 54903-1130 City of Oshkosh
—
QlHKOlH
City Attorney's Office
Phone: (920) 236 -5115
Fax: (920) 236 -5106
http;/1www.c1.oshkosh.w1.us
October 1, 2008
Darryn Burtch
Director of Planning Services
City of Oshkosh
215 Church Avenue
Oshkosh, WI 54903 -1130
Dear Darryn:
I have reviewed the project plan for City of Oshkosh Tax Increment District # 22 — Fair Acres
Development Area, pursuant to Section 66.1105(4)(f) of Wisconsin Statutes. I find that the plan includes
a statement listing the kind, number and location of proposed public improvements. It also shows an
economic feasibility study, a detailed list of estimated project costs, and a description of the method of
financing all estimated project costs and the time when the costs are to be incurred. The plan also has a
map of existing uses of the real property in the district and map showing proposed improvements in the
district and which also indicates the zoning of the district. The plan further shows how the district will
promote the orderly development of the City.
Upon adoption by the Plan Commission of the project plan and its submission to the City Council, all
requirements of Section 66.1105(4)(0, Wisconsin Statutes, shall be complete and it is, therefore, my
opinion that the project plan attached hereto is complete and complies with Sec. 66.1105, Wis. Stats.
Sincerely,
CITY jjf�\Jj OSHKOSH
. v
A Lorenson ,
City orney
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APPENDIX B
City of Oshkosh - Department of Community Development 7HK0IH
ON THE WATER
215 Church Avenue Oshkosh, WI 54901 (920) 236 -5055 (920) 236 -5053 fax
MEMORANDUM
TO: Mark Rohloff, City Manager
Oshkosh Common Council
Plan Commission
Joint Review Board
FROM: Jackson Kinn /
Director of Co unit
Darryn B
Planning
DATE: September 25, 2008
RE: Proposed Shopko at Fairacres/Request for "Pay Go" Tax Increment Revenue Bond
Assistance
The City has received a request to create a Tax Increment District and provide a "Pay Go" Tax
Increment Revenue Bond to enable a Shopko Department Store to be developed at Fairacres Shopping
Center on Murdock Avenue.
The request for TIF assistance has been made by 1900 Jackson Street, LLC (a group led by Andy
Dumke).
Upon being approached by the Dumke group the Department asked Ehlers & Associates of Brookfield
to review the project and evaluate financial information and proformas in order to make a
determination as to whether TIF assistance was justified. Attached to this Memo is a September 23`
communication from Mike Harrigan of Ehlers, where Mr. Harrigan provides an analysis of the request.
In his review Mr. Harrigan stated:
"As a result of our examination of the preliminary proformas provided by the developer, we
have determined that based upon the levels of return generally required for a project of this
type, the project would not be feasible for this developer without the use of an appropriate level
of TIF participation. If the City believes that the project is in the public interest from a land use
and overall community impact perspective, TIF participation would appear warranted."
Clr.
The conclusion that TIF assistance is warranted is based on what is commonly identified as the "cap
rate" or capitalization rate and relates to what a developer expects in a return on investment, to make a
project financially feasible. Cap rate is simply the ratio between what a project produces in.net
operating income (i.e. rents) over the cost of constructing and operating the project. In this case the
resulting cap rate without TIF assistance is approximately 7% and the developer needs 10% to achieve
a financially viable project commensurate with the risk for a use of this type in this area of the
community.
As a result of Ehlers' analysis, we believe the "But For" test for creation and provision of TIF
assistance can be met. Without the TIF assistance, the desired cap rate will not be achieved and the
project will not move forward.
Pay Go Tax Increment Revenue Bond
The proposed Pay Go Tax Increment Revenue Bond would be in the amount of $2,150,000. The City
has issued 2 "Pay Go" TIF Bonds to date — one for the Bella Vista project at the old Mercy Hospital,
and the second for the Burns Development Project on the former Miles Kimball Block in the South
Shore Redevelopment Area.
In a Pay Go Bond the City does not provide upfront dollars to a developer. Instead the Pay Go Bond is
similar to a promissory note. For Pay Go Bonds the City only makes payments on the bond once
property tax increments are generated from completion of project activities. As a result, this type of
bond does not require typical guarantee measures, since the City has no obligation to make payments
unless improvements are in fact made and generating increment.
The Project Plan for the Shopko Project will propose a Mixed -Use TIF District for the Fairacres
property. The existing property tax base for the overall site (which includes land and building values)
would be frozen with creation of the TIF District, and property taxes generated from the existing tax
base would continue to go, to the various taxing jurisdictions (City, County, School District and
FVTC). Increased property tax payments that would occur from improvements to the property would
be considered tax increments that would then be available to make payments on the Pay Go Bond.
A Mixed Use TIF District requires a combination of commercial and residential development as part of
the District, with the maximum life of the District being 20 years (which is 7 years less than a blight -
based TIF District).
17
Shopko Department Store
The Shopko Department Store would be approximately 54,000 square feet with an estimated
construction cost of approximately $3.1 million. If the Shopko project is able to proceed, the
developers are also proposing to construct an adjacent hardware and/or mid -box retail store (estimated
construction cost of $1.4 million), and restaurant (estimated construction cost of $500,000).
Construction is proposed to start on December 1 with Shopko opening on June 1, 2009.
In addition, the developer is also proposing to construct four residential units in two duplexes along
Viola Avenue.
Also attached to this Memo is a site plan for the Fairacres Shopping Center showing the area where the
Shopko, mid box retail store and restaurant would be constructed, together with a south elevation of the
Shopko Department Store.
The Dumke group has indicated Shopko will maintain their store on the west side on Koeller Street, if
this new Shopko is constructed.
The new Shopko store would employee about 80 people according to the operations manager.
Community Impact
As noted in the letter from Mr. Dumke, construction of a new Shopko Department Store at Fairacres
Shopping Center will introduce a general merchandise/big box retailer on the City's north/northeast
side. Attached to this Memo is a map which identifies the location of existing general merchandise/big
box department stores in the City, which shows a concentration along the Highway 41 corridor and
reflects their preference to locate in heavily travelled commercial corridors, which is different from
large grocery stores which typically locate based on the amount of "rooftops" within a certain radius.
As can be seen from the attached map there are no general merchandise/big box department stores on
the north/northeast side of Oshkosh. Development of the Shopko Department Store at Fairacres would
provide for more convenient access to a general merchandise/big box department store for the
north/northeast side of the community, which is currently underserved in this regard.
Construction of a big box retailer in this area of the community represents somewhat of a change in
locational philosoph y from a heavily travelled commercial corridor to that of a neighborhood business
district and represents more risk to the retailer and developer, which is reflected in the lease rate and
rate of return the developer is willing to accept to move forward with the project.
IN
Construction of the Shopko, mid box retail store and restaurant would also enable completion of the
Fairacres Shopping Center. It has been many years since the County fairgrounds relocated from this
area, and the shopping center was developed to the west. Having the east side of the Fairacres site
remain vacant would continue the underutilization of this property, which can be seen as creating a
blighting condition that negatively impacts the general neighborhood.
The City's Comprehensive Plan listed as one of its goals (Economic Development Element) the need to
"Preserve and promote neighborhood business districts." Completion and improvement of Fairacres
Shopping Center will help the community achieve that stated goal.
Creating a stronger and more viable anchor shopping center in that area will also play a role in
enhancing the broader neighborhood business district and environment along Murdock and Jackson
Street. As neighborhood business districts are improved and offer a greater variety of goods and
services, residents in these areas benefit by travelling shorter distances, which saves on the cost of gas
and contributes to the quality of life in this area of the community by improving their access to these
goods and services.
TIF Project Plan /Schedule
As noted in Mr. Dumke's letter, Shopko is anxious to move forward with the project, and the Dumke
group is prepared to proceed with implementation of the project if the TIF assistance is approved.
The Department is in the process of preparing the Tax Increment District Project Plan and it will be
scheduled for review by the Plan Commission on October 7 A Joint Review Board meeting will also
be held on the 7 where the project will be initially discussed.
The Plan Commission will also consider a Conditional Use Permit/Development Plan Review for the
proposed project on October 7 th .
Action by Council and the Joint Review Board on the request would not occur until the end of
October.
If anyone has any questions on the proposed project, please contact either Darryn or myself.
Attachments
19
EHLERS
LEADERS IN PUBLIC FINANCE
September 23, 2008
Mr. Jackson Kinney, Director of Community Development
City of Oshkosh
Oshkosh, Wisconsin
RE: Evaluation of Fairacres / Shopko Development
Dear Jackson,
At your request we have received developer pro -forma information from Mssrs. Andrew
Dumke and Michael Goudreau who are two of the principals involved in the proposed
redevelopment of the Fairacres shopping area in the City.
Summary Recommendation
As a result of our examination of the preliminary proformas provided by the developer, we
have determined that based upon the levels of return generally required for a project of this
type, the project would not be feasible for this developer without the use of an appropriate
level of TIF participation. If the City believes that the project is in the public interest from a
land use and overall community impact perspective, TIF participation would appear warranted.
Project Summary & TID Request
The developer has proposed the redevelopment of this site with a combination of retail and
residential development. Specifically the following uses are contemplated:
Shopko Store
54,000 Sq Ft
Hardware Store
15,000 Sq Ft
Restarurant
5,000 Sq Ft
Duplex Units
4 Units
The development would sit on approximately 7.75 Acres of land acquired or to be acquired by
the developer.
The developer has proposed a PAYGO TIF participation in order to provide a capitalization
rate and internal rate of return commensurate with what they feel is necessary to make the
investment. Essentially the developer has proposed that the taxes be paid over to them over a
20 year period.
375 Bishops Way, Suite 225, Brookfield, WI 53005 -6202 262.785.1520 fax 262.785 -1810 www.ehlers- inc.com
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This developer says that they determine their willingness to participate in a project on the basis
of its capitalization rate or CAP rate. The capitalization rate is a measure of the ratio between
the cash flow produced by the property and its capital cost (the original price paid to buy or
build the asset) or alternatively its current market value. CAP rate = annual cash flow / cost.
For example, if a project costs $1,000,000 and it produces $100,000 in positive net cash flow
(the amount left over after fixed costs and variable costs are subtracted from gross lease
income) during one year, then:
$100,000 / $1,000,000 = 0.10 = 10% CAP Rate.
Based upon new construction vs. existing project acquisitions, the CAP rate levels in the
current market regionally are at a level of approximately 8 %. To provide a local recent basis
of comparability, an analysis done by Steven Schwower, the city's assessor, for a recently
completed project done by these developers without TIF within the City of Oshkosh showed a
resulting CAP rate of nearly 9 %.
Using the developers projections of revenues and expenses, if one assumes NO TIF
participation, a range of between 5.7 & 7.4 % would be projected for this project. This is less
than the 9% achieved on other non -TID projects and less than the 8% broader regional
standard.
Determination of Final TID Participation Level
The developer has requested that annual TID participation be provided in an amount necessary
to yield a CAP rate not to exceed 10 %.
Based upon our assessment of market conditions needed to justify an investment of this type
we believe that a 10% maximum is within the range that would be reasonable for this project,
however; we would also recommend that a maximum be placed upon the total dollar amount
of TID participation.
Based upon the proforma data provided and an estimate of project value, we believe that a
maximum Net Present Value of $2,150,000 of TID participation using a discount rate of 4.5%
should be considered as an additional limiting feature of your offer of participation. Once this
value is reached then there would be no further TIF support for the project.
21
In summary the deal conceptually would be as follows:
1.) TID participation to be provided by annual payments to the developer to the extent of
the tax increment generated by the developers project, less any administrative costs &
overhead and less any other direct obligations of the city generated by this
development.
2.) TID annual payments would be made until a net present value of $2.150 M were
achieved or the statutory termination of the TIF district, whichever occurred first. The
mechanics of the payment would occur through the City's issuance of a limited
obligation revenue bond to the developer in the principal amount of the $2.150 M with
an interest rate of 4.5 %. (Note the rate can be negotiable but because we are dealing
with a fixed revenue stream if the rate changes so would be principal amount base on
the Net Present Value formula.)
3.) Upon project completion & occupancy, a full accounting would be provided verifying
actual final costs and revenues. Annually the cap rate would be calculated and to the
extent that the actual cap rate exceeded 10 %, the developer would rebate 50% of the
dollar amount in excess of the 10% cap rate to the City. The "look back" cap rate
calculation would occur annually through the period of the TID or until the NPV
number were reached, an the provisions would remain in effect in the event of a sale of
the project to a P party.
A final development agreement could be negotiated which would incorporate these concepts
and should include an agreed upon spreadsheet that would detail the basis for a future "look
back" computation as referred to above.
Very Truly Yours,
EHLER & ASSOCIATES, Inc.
Michael C. Harrigan, CIPFA
Chairman / Senior Financial Advisor
22
1900 Jackson Drive, LLC
Dear Jackson:
On behalf of 1900 Jackson Street, LLC I am asking that the City create a Tax
Increment District at the Fairacres Shopping Center and provide a "Pay Go" TIF
Bond in support of the proposed development of a new Shopko Department
Store that our group is proposing to construct, together with a mid -box
hardware /retail store and a restaurant. This project would create a great retail
opportunity on the north side of the community, and it would help to complete the
development of the former fairgrounds site.
While we are extremely excited about this opportunity, we will not be able to get it
done without receiving TIF support from the City. We have had difficulty
marketing this site at rates that make it feasible to build the project. This inner
city location does not warranty the same level of rents as the Highway 41
corridor. As a result we have had very little interest from a big box retailer. In
order to attract Shopko to this location we had to market it at a lower per sq ft
rent amount. Per your request, we forwarded information to the City's
independent outside financial advisor, Ehlers & Associates, who evaluated
proformas for the project and confirmed TIF support is needed in order for this
project to work from a financial standpoint.
Shopko has run many Performa's on this location and market. Based on their
projections we are proposing to Shopko a rent schedule that will put them in a
position to be successful. Without these rents they will not move forward on the
northeast side of Oshkosh. Based on our preliminary agreement with Shopko
they have indicated a desire to move ahead as soon as possible. We would like
to commence construction on December 1, 2008, and deliver the store to Shopko
by May 1, 2009 so Shopko can open by June 1, 2009. In order to meet
Shopko's needs we are asking the City to take steps to have this request
considered and the TID created so we can proceed with this project.
We appreciate the consideration you've given in assisting our group with the
proposed project.
Sincerely,
Andy Dumke
1900 Jackson Street, LLC
222 Ohio Street, Oshkosh, WI 54902
920 -379 -1645
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TO: Honorable Mayor and Members of the Common Council
FROM: Jackson Kinne l[ t"'
Director of Com ity Development
DATE: October 23, 2008
RE: Approval of Tax Increment District # 22 Project Plan; Designate Tax Incremental
District No. 22 Boundaries; Create Tax Incremental District No. 22 Fair Acres
Development Project (Plan Commission recommends approval)
BACKGROUND
On October 28 Council will be asked to consider approving Tax Increment District (TID) #22
Fair Acres Development Area Project Plan and district boundaries. The TID is proposed in the
area generally identified as the Fair Acres Shopping Center. The TID will provide for
completion of development at the center by construction of an additional anchor store at the
center, which includes a 54,000 square foot Shopko Department Store and other planned retail
development. The main purpose of the TID is to offset development costs that will result in a
rate of return (cash flow from rents) to make the project economically feasible.
ANALYSIS
Without TIF assistance, the project will not proceed as proposed and the site will in all likelihood
remain in its current state for the foreseeable future due in part to lease restrictions imposed on
the land through the lease with Pick N Save. These lease restrictions restrict expansion on the
property to larger uses by requiring at least 40,000 square feet of leasable space, in at least
15,000 square foot increments, before any smaller uses can be created. The intent of the lease
restrictions is to provide for a large customer draw to the center for the benefit of the existing
operations at the center.
The Department of Community Development moved forward with the TID plan based on a
request by the Dumke group to consider creating the district and developing a "Pay Go Bond"
financing approach to fund the development. The Pay Go Bond approach was proposed as it
results in the least amount of risk to the City and places all initial financial burdens and risk on
the developer. When the Department was initially approached by the Dumke group to consider
the TID, the Department determined that such a request could be eligible as a mixed -use TID
under the statutes and asked the group to work with the City's financial advisor, Ehlers, to
analyze project proformas and to provide a recommendation as to whether TIF is necessary to
allow the project to move forward and meet the "but for" test required by the TIF statutes.
Ehlers analysis of the proformas, which looked at construction costs and resulting capitalization
rates, with and without TIF assistance, indicate that the TIF assistance is warranted based on the
developers desire to achieve a 10% capitalization rate and internal rate of return on cash invested
in the project. Without TIF assistance, the cap rate is in the range of 6 -7% which is less than the
broader regional standard of 8% and less than the 9% achieved in the adjacent Pick N Save
development that was acquired by the Dumke group for a stabilized project. The 10% is desired
by the developer for this project due to the increased risk associated with developing the center
in this area of the community. The Ehlers analysis concluded that the "but for" test can be met
based on their analysis, and they provided recommendations as to the estimated value of the Pay
Go bond and provisions for a proposed development agreement that would follow approval of
the TID.
The resulting cash flow from the Shopko development reflects the developer's more attractive
lease rate as an incentive to have Shopko locate in this area of the community, which per the
Shopko Vice President of Real Estate Greg Polacheck, is a smaller "submarket" store than the
regional market that the Koeller Street store serves. This is the reason for the proposed size of
the store at 54,000 square feet versus the 90,500 square foot Koeller store. The proposed lease
rate is illustrative of the risk Shopko is assuming by proposing a store location in a smaller
submarket area of the community.
A lesser lease rate results in lesser cash flow and a lesser capitalization rate while construction
costs remain constant. Lesser capitalization rates return less investment to the developer making
the project less financially feasible. In this case without TIF the capitalization rate is between 6-
7% and the developer can instead invest that money into other projects with less risk and higher
return rates such as with the adjacent Pick N Save development where an approximate 9% rate
was achieved. Additionally, funds that are tied up in investments with lower rates of return are
funds that cannot be used in other projects and also count as part of the developer's overall credit
rating impacting on the ability to do other projects in the future.
When the Department was approached and asked to consider whether or not a TID was possible
in this location, staff not only reviewed whether the project could be done under the TIF statutes,
which staff determined that it could be eligible, but also looked at the broader neighborhood
impacts and needs that such a project would serve to meet. This area of the community is
underserved by a general merchandise retailer as illustrated on the City map showing the location
of other similar retailers in the community, all of which are clustered along Highway 41.
Residents living in this area of the community must drive to the west side to shop at such
retailers or for those living more to the north in the Snell Road and CTH "Y" areas drive to
Neenah to shop at such stores and taking those dollars out of the community. Drive times vary
depending on location but it is clear that a store in this area of the community would reduce drive
times. This would also reinforce efforts to reduce consumption of gasoline and the resulting
production of carbon. Additionally, more jobs will be created as a result of this development,
and although most are retail type jobs, they will provide another option for part time employment
for residents of the neighborhood that don't want to commute to the other side of town. The
Shopko Department Store alone will employ about 80 people, adding another mid size retailer
and restaurant should add another 40 jobs to the area.
Completion of development in the Fair Acres Shopping Center will also eliminate what is
perceived by many in the neighborhood as a blighting influence with a half developed shopping
center where the subject site has sat vacant since the County Fairgrounds vacated in the 80's.
The City has often received complaints about the deteriorated and undeveloped state of the
property and this project will address that by completing the development.
With the proposal for the new Shopko, a question was raised as to Shopko's intentions for the
west side store on Koeller Street. According to Peter Vandenhouten, Senior vice President and
General Counsel for Shopko, Shopko has no intention of closing the other Oshkosh store, and as
evidence of that he confirmed that Shopko recently (in 2006) signed a new 20 year lease for the
west side store.
FISCAL IMPACT
The Project Pan does not propose any borrowing or issuance of general obligation bonds to
finance proposed improvements in this district. The Project Plan proposes that a Pay Go bond in
the amount of approximately $2.15 million (net present value) be issued by the City and paid to
the developers through tax increment and subsequent increased tax revenues ftom the
development. The developers will only be reimbursed once taxes have been collected from the
development.
If Council approves the creation of TID #22, the proposal will then be forwarded to the Joint
Review Board for action. If that approval is given, the Council will then be asked to approve the
issuance of the Taxable Tax Increment "Pay Go" Bond and authorize the City to enter into a
Development Agreement associated with the project. The developers have indicated that they
would begin construction on or about the beginning of December with completion scheduled for
June, 2009.
RECOMMENDATION
The Plan Commission approved the Project Plan and proposed boundaries at its October 7, 2008
meeting.
Approved,
City Manager
ITEM: TAX INCREMENT DISTRICT #22 FAIR ACRES DEVELOPMENT
PROJECT
Plan Commission meeting of October 7, 2008
PROPOSAL/ANALYSIS
The Department of Community Development requests approval of Tax Increment District # 22 Fair
Acres Development Project Plan and district boundaries. The TID is being created for the purpose
of completing development of the Fair Acres Shopping Center by attracting a "big box" retailer to
the site, which in this case is Shopko. The subject property was the former site of the county
fairgrounds that relocated in the 80's. The grocery store and associated retail uses were
subsequently developed in 1989. Included with this staff report is the proposed TID # 22 project
plan. Additionally, a CUP/PD review has been requested for the proposed development that will be
addressed as a separate agenda item.
The Shopko store is proposed to be approximately 54,000 square feet with an estimated hard
construction cost of approximately $3.1 million and would employ approximately 80 people. If the
Shopko project is able to proceed, the developers are also proposing to construct an adjacent
hardware and /or mid -box retail store (estimated construction cost of $1.4 million), and restaurant
(estimated construction cost of $500,000). In addition, the developer is proposing to construct four
residential units in two duplexes along Viola Avenue. Should the TID be approved, construction of
the Shopko element is expected to commence on December 1, with Shopko opening on June 1,
2009.
Construction of a big box retailer in this area of the community represents somewhat of a change in
geographic philosophy from the heavily travelled commercial corridor to a neighborhood business
district and represents more risk to the retailer and developer than typical, which is reflected in the
lease rate and rate of return the developer is willing to accept to move forward with the project.
Completion of development of the east side of the Fair Acres site will remove what can be
considered an underutilized blighted property in this area of the community, that negatively impacts
the general neighborhood.
Creating a stronger and more viable anchor shopping center in this area of the community will also
play a role in enhancing the broader neighborhood business district and environment along
Murdock and Jackson Street. The City's Comprehensive Plan listed as one of its goals in the
Economic Development Element the need to "Preserve and promote neighborhood business
districts." As neighborhood business districts are improved and offer a greater variety of good and
services (as proposed with this development), residents in these neighborhood areas benefit by
travelling shorter distances, saving on the cost of gas and contributes to the quality of life in this
area of the community by improving their access to these goods and services.
TIF is proposed to be used as a development incentive in this case to allow the developer to offer an
acceptable lease rate to attract Shopko to an area that is currently underserved in this regard (see
attached map showing similar "big box" retailers in the City). By offering a more reasonable lease
rate than what could be commanded in the Highway 41 corridor, the developer's capitalization rate
is impacted and drops to a level economically unacceptable to make the investment without TIF
assistance. In this case, the capitalization rate (cash flow /costs) without TIF is approximately 7%
and the developer requires a 10% cap rate to make the investment (see memo to the Plan
Commission and others attached to this staff report dated September 25, 2008 for more
information).
The project plan identifies improvements that are proposed and how projects will be financed. In
this case, development assistance is proposed in the form of "Pay Go" financing in which the
developer will only be reimbursed from value created at the site and from taxes paid to the City.
Terms of the reimbursement will be addressed through a separate development agreement.
RECOMMENDATIONS
The Department of Community Development requests approval of the boundaries of TID # 22 and
the TID # 22 Project Plan, and recommends approval of the TID boundaries and Project Plan to the
Common Council.
The Plan Commission approved of the boundaries and project plan for TID #22 as requested. The
following is the Plan Commission's discussion on this item.
Mr. Burich explained the use of the TIF district and reasons the department was recommending it.
He reviewed the district boundaries, zoning map, uses in the designated areas, streetscaping areas,
existing conditions on the site, proposed project, and a map displaying the locations of other big box
retailers in the city.
Commission members discussed appropriate use of TIF financing and the challenge involved with
developing this location and the current state of the site. It was determined that TIF financing is not
utilized for more viable sites, however it is necessary to spur development in more challenging
locations.
Mr. Dell'Antonia stated that a letter was received from Susan Anderson, 1854 Cliffview Court, in
support of the Shopko development and the use of TIF financing to assist in supporting this project.
Copies were distributed to Commission members for review.
Mr. Dumke and Mr.Goudreau discussed the financing issues with the TIF funding and explained
that they are offering Shopko a very good rental rate to locate to this area and the increase in taxes
for the project will come back to the developer to offset their costs. It is a risk -free TIF for the city
and in the developer's agreement; anything over the 10% cap would be shared with the city. The
site has been marketed for 25 years without success and they felt they needed to be creative to find a
solution to successfully marketing the site. Retailer projections show that this area is under served.
Item -TID 922 Fair Acres Dev 2
They continued to discuss retail and TIF projects and explained the open book concept of their
development which would involve outside sources reviewing their expenses and determining the
amount of money the developer is making on the project. No developer's fees are being charged
and there is a cap on the amount that can be obtained. They discussed some of their other projects
which were developed without TIF assistance and the abandoned Copp's building which was
brought up as an option for the Shopko store, however they do not own this site and Shopko
expressed their desired to be in the mall by Pick N Save. There would be no risk to the city if the
development failed and it would create 80 new jobs in the community. Further discussion followed
on the cap rates and how they determine what rate should be applied to a project.
Mr. Dell'Antonia commented that if the TIF district was not approved by the Plan Commission, it
will not be forwarded to the Council for review.
Mr. Burich explained that the project plan and boundaries of the district are the only items being
approved at this time. Other details are defined in the developer's agreement.
Streetscaping details were discussed which would become part of the CIP program. Concerns with
the project plan and economic development plan were discussed and questions were raised as to
why a representative from Shopko was not present at the meeting. Questions were also raised on
why the plan should be subsidized and the competition Shopko would create with other local
businesses. Commission members commended the Dumke's on the development proposal and
determined that the TIF district should be approved in order to enable it to proceed to the Council as
this is a concept that should be reviewed by Council members with community input.
Motion by Propp to approve the tax increment district #22 Fair Acres Development project
as requested.
Seconded by Bowen. Motion carried 5 -1. Ayes- Bowen / Fojtik /Propp/Mattox/Dell'Antonia.
Nays - Borsuk.
Item -TID 422 Fair Acres Dev