The city of Portage has nothing to lose — not even its $20,000 up-front costs — by creating a tax increment financing district in the hope that the former Kmart property will be redeveloped, the chairman of the Portage Common Council’s Finance and Administration Committee told the council on Thursday.
Before the council voted unanimously to approve a predevelopment agreement with Lynn Holdings LLC, Council member Dennis Nachreiner pointed out a clause in the agreement that calls for the developer, Richard Lynn, to reimburse the city for the costs of establishing the district, if development on the New Pinery Road property doesn’t happen in seven years.
The agreement also puts Lynn on the hook for the city’s costs, up to $20,000, if the TIF district is not established as the result of the developer not providing required information, or otherwise not cooperating with the city.
City Administrator Shawn Murphy said the proposed tax increment district is different from most others, in that it is being set up on a “pay as you go” basis.
Typically, Murphy said, establishing such a district entails the city loaning money to the developer, with property taxes resulting from the area’s increased value used to pay the city back.
In this case, however, the developer assumes all the costs of development, and gets nothing in return unless the development results in an increase in the property value.
At the recent Finance and Administration Committee meeting, Murphy said a development agreement, to be negotiated later, would call for the city to collect all the revenue resulting from increases in the property’s value, and then give some of that money back to the developer to help offset his costs.
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The council’s information packet for Thursday’s meeting included two artist’s conceptions of how the development might look, with the names of potential businesses obscured.
Plans call for fixing up the former Kmart building (vacant since 2014) and the nearby former Fashion Bug building (vacant since 2013), and renting each space to multiple businesses.
Lynn also has said he plans to build at least one new structure on the site — which is shown, in the conceptual drawings, as a fast-food restaurant, complete with drive-through lane.
The council on Thursday also agreed to hire the public finance firm Ehlers to spearhead the establishment of the tax increment district, which would be the city’s 10th.
The cost for the services of Ehlers is $15,000. The remaining $5,000 of the city’s costs would be for various fees related to the district’s establishment.
Time is of the essence, Murphy said.
By state law, the district has to be established no later than Oct. 30 to take effect in 2019. Before it can come to the Common Council for final approval, there are many entities that have to sign off on it, including the city’s Plan Commission.