The owner of the former Kmart property in Portage says he’s confident empty storefronts on the lot, and a new building he plans, will be filled by the end of next year.
Richard Lynn’s declaration came within an hour after the Portage Common Council’s Finance and Administration Committee on Monday approved some tweaks in the pre-development agreement between the city and Lynn Holdings Inc., as part of an effort to declare the vacant Kmart and Fashion Bug sites as the city’s newest tax increment financing district.
Lynn was not at Monday’s meeting, but acknowledged his request for clarification of the pre-development agreement, which the Common Council has approved. The council also would have to sign off on the clarifications that the Finance and Administration Committee approved.
Steve Sobiek, the city’s director of business development and planning, said Lynn’s forecast for the buildings’ occupancy is on target.
“I think the bottom line is, Portage is going to be a very lucrative market for these business entities,” he said.
Sobiek said Lynn and city officials have worked aggressively to recruit businesses to the former Kmart and Fashion Bug property.
From what Sobiek understands, the sprawling building that until 2014 housed the discount store Kmart most likely would be filled by one business, and the nearby structure on the same property that housed Fashion Bug until 2013 would house another.
A third facility would be built on the property. Lynn said that likely would house a fast-food restaurant, though he is not yet ready to say which businesses are likely to occupy any of the buildings.
Lynn offered strong assurances that, if the “pay as you go” tax district is implemented, he’d make it worth the council’s while.
City Administrator Shawn Murphy said a typical tax increment district involves the city borrowing money against an anticipated increase in property value once the property is developed, and investing that money in things like roads and other infrastructure required for development.
But in the proposed district, the developer would get no money upfront. Rather, he would be entitled to a portion of the tax revenues stemming from the property’s increased value, after the value actually increases as a result of development. The revenue would reimburse some of his upfront costs, such as bringing the buildings up to code.
Murphy said the principal clarifications Lynn seeks are:
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- Specific delineation of what property within the proposed district is considered “blighted.”
- Clarification that Lynn would not have to repay the city for its costs of creating the district if it should turn out that the proposed area does not meet the state’s definition of “blighted.”
State criteria for “blighted” property require that at least 51 percent of the property in the proposed tax increment district can be described as “deteriorated” and experiencing declining property values, Murphy said.
That’s true of virtually all the property, he said.
The Kmart building has been vacant since 2014, and the Fashion Bug storefront has been empty since 2013. The loss of property valuation in both has been well documented, Murphy said.
According to Sobiek, Mayor Rick Dodd was on target when, at a recent Joint Review Board meeting, he estimated the property’s value as about $3 million when the stores were in business.
The estimated value now is $897,800.
The Joint Review Board — an entity that oversees tax increment districts in the city — also heard that the property’s value could increase almost sixfold if businesses should move in there. Some members questioned the optimistic prediction, but Dodd suggested it could be on target.
Sobiek said he believes the proposed tax increment district meets the state’s requirement that “but for” the district’s creation, it would not be developed.
In the event that state officials, the Common Council or the city’s consultant determine that the area is not blighted, the proposed tweaks in the pre-development agreement would relieve Lynn Holdings of the requirement to repay the city about $20,000 in upfront costs associated with creating the district, including fees to the city’s tax increment district consulting firm, Ehlers, based in Waukesha.
Finance and Administration Committee Chairman Dennis Nachreiner said Lynn still would be required to repay the city’s costs if the property is not developed.
By state law, city officials have until the end of October to finalize the tax increment district for it to be in effect by Jan. 1.