Rejecting a proposed $7 million affordable housing development in West Racine leaves the city with $195,000 in debt service on the TIF district.
The city spent $2 million in 1996 tearing down old buildings on the site to make way for new development. But the demolition came right as the construction economy tanked, and resulted in few suitors for the land coming forward.
Heather Hammond, of the Seattle-based HammondLand, found the parcel last year and teamed up with the North Carolina-based Landmark Group to propose a 55-unit mixed use development on the site. That project was turned down by the Plan Commission Monday and likely will be rejected by the City Council tonight.
The repercussion of the deal is the city is sitting on a $2 million loan with no source of revenue to pay it back. The TIF district allows the city to collect all tax dollars on any development to pay back the loan, but with no development, there's nothing to collect on.
If the city agreed to the affordable housing development it would have made about $150,000 a year in property taxes to pay down the debt. This year's payment requires $75,000 to be paid on the principal and $120,625 to be paid in interest.
Critics may say the city shouldn't have spent the money to tear down the buildings in the first place. But the real tradeoff is between leaving up decrepit structures with little hope of development, or spending the money to knock them down and attracting a developer to pay off the loan. In 1996, demolition was a good idea. In today's economy, there's not much of a market for even prime real estate (see Pointe Blue).
So the city likely will wait out the down economy and hope an acceptable development comes along. But that may be a tough task in a well-organized neighborhood that is demanding a park. It's up to officials to convince residents the city has already spent $2 million to create that space, and it needs to collect its money back.