FRANKLIN - The city of Franklin will explore the possibility of using up to $7 million in tax incremental financing funds for a mixed-use development on 27th Street that would include a 180-unit apartment complex, commercial property and a repurposed Park Motel property.
When the project was first introduced to the city in August 2016, the developer stated that they would need some financial assistance from Tax Increment District 4, the district that includes this section of land.
Since then, the city's financial consultant, Ehlers and Associates, has examined the project, and determined that the project meets the required "but for" rule to be eligible for TID funding. The "but for" rule tests whether the development would be able to achieve a "reasonable rate of return" were it not for funding from the TID
In this case, Ehlers determined that Zilber would not make a reasonable profit unless they were to receive financial assistance from the TID. Per Ehler's report, the "preferred" financing option includes a $5 million grant from the TID.
The common council voted March 21 to pursue a development agreement with the developer, Zilber Ltd.
More money for motel
In addition, if the developer were to purchase and develop the Park Motel property adjacent to the development site, Ehler's suggested an additional $2 million contribution.
The additional $2 million could be constructed in a pay-as-you-go (PAYGO) format, which means the city would contribute funds toward developing the motel property as they are needed, and so would not necessarily contribute the full $2 million unless the full funding was shown to be necessary.
When the project was first presented last August, aldermen suggested that the developer include the motel property in order to improve the whole area, as the motel has been the source of crime issues and does not have a high tax value.
"I thought that the TIF – since the TIF is already there – the funding could help with buying the motel and the demolition of the motel," Alderwoman Kristen Wilhelm said at the March 21 meeting. "If you don’t use it for this type of thing and increasing the look of the area, I don’t know what really a TIF does to help the community other than something like this."
The proposed apartment complex would include 6 buildings with units priced at market rates, a club house, and commercial property along 27th Street.
Mike King, a Zilber Property Group representative, said that they have been working with a daycare facility who would be interested in the location, as it is close to Northwestern Mutual and could be useful to employees who work there.
Under the project plan, Zilber would also purchase the Little Cancun property right next to the motel. However, King said that they would keep the restaurant.
In total, the mixed-use development, once completed, is estimated to have a value of $24 million.
In 2016, the total property tax generated for the whole area involved in the project was just over $43,000. Ehlers estimated that once the project had been fully completed, the property would generate around $570,000 in property tax each year under the current rates.
School tax issues
While this would be a substantial increase to Franklin's tax base, school taxes from the property would not go to the Franklin Public School (FPS) district.
The property sits inside the Oak Creek-Franklin school district, instead of FPS, meaning that the school taxes generated would benefit Oak Creek schools, rather than Franklin schools.
Alderman Dan Mayer, who was the only alderman to vote against pursuing an agreement with the developer, saw this as an issue for funding the project.
"Oak Creek will be benefitting double," Mayer said. "And we're left behind taking care of the police issues and the fire issues and the street issues and the snow issues and everything else while Oak Creek benefits twice as much as we do."
Mayer also stated he was against using TID funds for apartments and that he was worried that too many apartments are being built in the city, and soon there will be no demand for apartments.
"A good transition"
Wilhelm, whose district the property is in, believed this is an acceptable option for the land and that apartments would be much better than other developments that may come along.
“I think that this is a really good transition for the residents. What I could see here, and what could come here instead, could be a lot of trucks,” said Wilhelm. “From the other areas of my district that have these types of things right next to residential, we get the beeping all night long, trucks coming in and out. I like the fact that this is a nice transition for the neighborhood.”
Alderman Steve Taylor also voiced support of the project, saying that the value per acre is particularly high. According to Director of Economic Development Aaron Hertzberg, the value per acre in the 18-acre site, once the project is completed, would be approximately $1.33 million.
“Yes, you could wait for something that’s a different use," Taylor said. "But it’s not going to be this value. We have to look at what we can bring in terms of property taxes."
The project, and the financing plan, will still have to be approved by the common council.
King says that Zilber would, ideally, like to break ground in 2017, finishing the project and opening as soon as summer 2018. However, this timeline would only be possible if the city approves the development within the next few months.