A financial analysis of a Janesville Street affordable housing project has concluded the development needs government assistance.
The Village of Oregon is considering spending $2.75 million in taxpayer funding to help Lakestone Properties get the project off the ground. An analysis from the village’s financial consultant, Minnesota-based Ehlers Inc., states the developer’s plan would not be able to come through without the tax-increment financing.
Lakestone Properties is seeking to construct a mix of family and senior living apartment buildings with rents below market rate at 917, 919 and 947 Janesville St., according to its general development plan. The plan includes three buildings 153 units, serving people earning 50% to 70% of the area median income, which is subsidized by Wisconsin Economic Development Authority Tax Credits. Of the 153 units, 41 are likely to house the seniors, the plan states. Construction is expected to begin in 2021.
To help that along, the Village Board authorized its financial consultant to conduct the analysis of Lakestone’s TIF request in October. Trusteeis discussed that request without taking any action at their Monday, Nov. 16, meeting. Lakestone Properties was also present, but representatives and trustees determined they needed to further evaluate the analysis before a final vote. They will likely revisit at a later date, village administrator Mike Gracz told the Observer.
TIF is a public financing tool that allows a municipality to collect increased taxes on new or improved developments from multiple taxing jurisdictions. It can be used to clear or renew aging or neglected property, to make an area of a municipality competitive or to close a gap in financing capability.
The Lakestone Properties TIF request is structured as a pay-as-you-go, meaning the developer would receive incentives in the form of a rebate after it has paid taxes, rather than up front.
The Ehlers analysis concluded the request satisfies the “but for” test required of any TIF project — that is, the project wouldn’t happen “but for” the funding assistance.
It looked at three scenarios for how much developer is to be reimbursed on the TIF funding it receives, and how much money the village would retain. Lakestone originally requested the TIF district return 100% of that increment over the first few years, but the village suggested retaining 25% for other projects inside the TIF district.
Ehlers found that if the village were to retain 25% of the incremental taxes generated in the district, along with a 4% interest rate, it would not be able to fulfil the developer’s request.
So in its first scenario, Ehlers deleted the interest rate, which put Lakestone’s TIF request at $2.24 million. For the second, Ehlers kept the 4% interest rate and had the village retaining 5% of the increment. In the third, the village would keep 10%, putting the developer’s request at $2.7 million, “just shy” of it, the analysis document states.
Both trustees and the developer appeared to lean toward scenarios 2 and 3, or they might have the consultant come up with a hybrid of both.