Portage Council OKs new tax district for former Kmart property

October 13, 2018

The 27-year life of Portage’s 10th tax increment financing district starts now.

The “blighted” district, encompassing the New Pinery Road property where the defunct Kmart and Fashion Bug stores once stood, garnered unanimous approval Thursday from the Portage Common Council.

The district isn’t a done deal yet. It still requires approval from the Joint Review Board, composed of representatives of taxing bodies within the Portage city limits, and from state officials.

But Jon Cameron, senior municipal adviser for the Waukesha-based consulting firm Ehlers, said the 27-year maximum lifespan established by state law for “blighted” tax increment districts starts on the day the Common Council says yes to the district’s creation.

The lifespan may be a moot issue, because the construction of two new buildings and the renovation and occupation of the former Kmart and Fashion Bug structures will likely pay off by 2030, Cameron said.

Developer Richard Lynn and his business partner, Jason Adamany, have said they have tenants lined up for the buildings and it’s likely that the public will know who those tenants are by early next year.

Both Lynn and Steve Sobiek, the city’s director of business development and planning, have said the 86,000-square-foot former Kmart building, vacant since the 2014, is expected to have one retail occupant, while the structure, where the women’s clothing store has been closed since 2013, will have more than one tenant.

Unlike the city’s previous tax increment districts, this one will be a “pay as you go” district, Cameron said. That means the developer gets no money until an actual increase in valuation is realized as a result of development.

The agreement with Lynn Holdings sets milestones that must be met before the developer can receive a portion of the increased revenue, to help cover some upfront costs for the development.

The development is expected to add $4.3 million to the area’s taxable value, Cameron said.

“It pays off relatively quickly,” he said. “The obligation is for the developer to produce.”

Council Member Dennis Nachreiner asked whether state officials have confirmed that the area qualifies as “blighted.”

City Administrator Shawn Murphy said it’s the job of Ehlers, as the consulting firm working with the city on the district’s creation, to ensure that it meets the criteria, which requires that at least 50 percent of the district has experienced a significant and enduring drop in property valuation. In this district, Murphy said, all of the property meets that definition.

Nachreiner asked if additional land be added to the district later?

Only if the land is contiguous, Cameron said. Contiguous land that is not “blighted” can be added to the district if the district’s total area is 50 percent or more blighted.

Murphy noted, however, that Tax Increment District 9 – a mixed-use district just off the Interstate 39 exit in northern Portage, created about a year ago – is close to the new district, but is not contiguous. Therefore, the two districts could not be combined.

In response to a question from Council Member William Kutzke, Murphy said the council’s approval of the resolution to create the new tax district also entails approval of the project plan for the area.

The Joint Review Board is expected to cast a final yes-or-no vote on the district’s creation Oct. 29, and state approval is still required.

In a related matter, Sobiek reported to the council that negotiations continue for an anchor business, a new hotel, for Tax Increment District 9. but site work in three of the lots in the district could start within weeks.

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