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The city of Portage will dip into its contingency fund to create a new tax increment financing district at the site of the long-vacant Kmart store.

But members of Common Council’s Finance and Administration Committee agreed Monday that it would be $20,000 well spent, if the move results in attracting new retail businesses to the city’s north side.

The panel voted unanimously Monday to recommend the Common Council approve a predevelopment agreement for what city officials envision as a “pay as you go” TIF district — with the city collecting all the extra tax revenue that may result from an increase in the property’s value, then giving some of the revenue back to the developer, Richard Lynn, owner of Lynn Holdings LLC.

The $20,000 — which City Administrator Shawn Murphy said would come from the city’s contingency fund, since it’s not in the 2018 budget — would be the only upfront expenditure the city would undertake related to the district’s creation. Of that, $15,000 would go to Ehlers, an independent financial advisory firm based on Waukesha, for services related to creating the district. The remaining $5,000 would be used for state and legal fees related to the district’s creation.

At a recent Portage Plan Commission meeting, Lynn and his business partner, Jason Adamany, outlined their plans for the area along New Pinery Road.

Those plans entail refurbishing both the former Kmart building and the nearby structure that used to house the Fashion Bug store and Pets of Portage, and construction of a new building on the site.

Artists’ conceptions of the development, which were included in the Finance and Administration Committee’s meeting packet, showed multiple retail businesses (including one with a drive-thru window) located in the former Kmart building, multiple businesses in the former Fashion Bug building and a new structure, south of the Aldi grocery store, that looks like a fast-food restaurant complete with drive-thru window.

Lynn and Adamany told the Plan Commission that none of this can happen without the creation of a TIF district to help pay for constructing the new building, bringing the old buildings up to code and improving the parking lot.

But under the predevelopment agreement, the city would not give the developer any of the revenue from the property unless the property shows an increase in value, as a result of development that Lynn Holdings initially would pay for.

Murphy said the area qualifies as a “blighted” zone, because the structures have lost value as a result of being vacant for so long. The Fashion Bug closed in 2013 and Kmart closed in 2014.

The Common Council would have to finalize the creation of the TIF district — which would be the city’s 10th — by the end of October, for the district to take effect at the beginning of 2019.

At that time, Murphy said, the district’s base value would be established. Any future increases or decreases would be measured against that base value.

For example, he said, if the district had a base value of $1 million (a random number, for hypothetical discussion only), and it increased in value to $2 million as a result of development, the city would collect 100 percent of the revenue resulting from the increased valuation. Even if the value went down in a subsequent year to, say, $1.8 million, there would still be increased revenue for the city, because $1.8 million would still be greater than the base value of $1 million, Murphy explained.

According to the most recent Columbia County land records, the former Kmart property at 2935 New Pinery Road and the former Fashion Bug property at 2951 New Pinery Road have a total value of $1.4 million.

How much of the increased revenue would go back to the developer, Murphy said, would be decided when a development agreement between the city and Lynn Holdings is drafted.

Committee member Bill Kutzke asked what might happen if the developer did something other than the plans laid out in the packet — for example, tearing down one of the buildings to make way for more parking.

If the development doesn’t increase the property’s value, then the city and the developer would get nothing, Murphy said.

“As long as there is a positive increment,” he said, “there would be tax revenue.”

Committee member Mark Hahn — who in 2016 defeated Lynn, a one-term incumbent, for the District 2 Common Council seat — raised concern about whether Lynn would, in fact, proceed with his proposed development.

“I want to make sure the city isn’t on the hook,” Hahn said.

The initial $20,000 would be the city’s only upfront cost, Murphy said.

Committee member Martin Havlovic said it would be good to see the area developed again.

“It would be huge to get development in that area,” added committee chairman Dennis Nachreiner. “Huge.”

Follow Lyn Jerde on Twitter @LynJerde


Portage Daily Register Reporter

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