City Finance Committee Backs 10th TID

This drawing depicts a 1,294-square-foot home that Joe and Paul Shefchik of J&P, LLC have proposed building as one of six options to develop a workforce-housing subdivision on city-owned property fronting South Hudson Avenue. Submitted.

Sturgeon Bay may soon be managing yet another tax incremental district (TID). 

The city’s Finance/Purchasing and Building Committee on Tuesday recommended that the city hire R.W. Baird as a financial consultant to pursue creating a 10th TID in the city. This one would be aimed at developing a workforce-housing subdivision on city-owned property fronting South Hudson Avenue.

Community development director Marty Olejniczak said the purpose of the TID is for the city to cover the costs of infrastructure for single-family homes planned on the 5.5-acre parcel at an estimated cost of about $1 million.

Olejniczak said the city has various funding sources available to pay those costs, such as remaining American Rescue Plan Act (ARPA) dollars and affordable-housing funds generated by extending the life of TID #1 in the industrial park for another year, but creating a new TID to finance at least a portion of the project costs would free up funds for other development and housing projects.

He said that because the proposed housing project may not, under state law, be more than 35% of the area in the TID, the initial proposal for the TID calls for including Schartner Implement, as well as the properties where a new Starbucks and Kwik Trip will be located.

In addition to meeting statutory rules, the district could take advantage of the recent and ongoing development to increase the amount of tax increment available, according to Olejniczak. However, he said, to be able to include the new development of Kwik Trip, the district must be created by Sept. 30 to be retroactive to the first of the year.

Property taxes generated from development (i.e., tax-increment revenue) in a TID, once it is created, are able to go directly to infrastructure improvements rather than being split among the various taxing entities where a TID is located.

Olejniczak said the committee’s recommendation to hire R.W. Baird to prepare the project plan and pro formas – and charge $7,000 – would have no fiscal impact on the city if the TID is successfully implemented because the fee would be collected from future tax increments. However, if the TID is not created, money from the general fund would cover the fee.

Housing Project

In a related motion, the committee recommended approving a development agreement with Joe and Paul Shefchik of J&P, LLC to develop new single-family homes on the site, subject to review by the city attorney.

The Shefchiks’ plan for building new houses on the site calls for having new homes with a price range of about $270,000-$305,000, with the city providing financial assistance for the required infrastructure.

Olejniczak said that based on 24 lots, the total cost for subdividing, engineering and providing infrastructure is about $40,000 per lot.

As drafted, the development agreement calls for the infrastructure costs to become a deferred special assessment that would be forgiven over six years or would become due if a home is subsequently sold prior to the six years. Olejniczak said that provision is included in the agreement to limit homebuyers from gaining a windfall by “flipping” a home shortly after purchasing it.

The agreement also limits the developers to building homes based on the approved home designs and agreed-upon prices. The six plans for single-family homes on the site range from $269,900 for a 1,069-square-foot, three-bedroom, one-bathroom house with a 480-square-foot garage; to $304,900 for a 1,194-square-foot, three-bedroom, two-bathroom house with a 533-square-foot garage.

The agreement would also commit the city to designing the subdivision and paying for the installation of infrastructure at an estimated cost of about $970,000.

If ARPA, TID #1 affordable housing or new TID funds are used, it would not affect the city’s general fund, Olejniczak said.

He said the development of 24 homes on the site would create about $7.2 million in assessed property value, with the city’s portion of the property taxes generated from that value being about $62,500 annually.

The committee’s two motions are being forwarded to the Common Council for action during its July 18 meeting.