Mayor Confident in AIG

Posted March 6, 2008

Mayor confident in AIG deal

City plans to take out bond to finance project

Stevens Point will pay about $8.1 million in the next 20 years to keep AIG-Travel Guard within the city limits, but the city could end up making money on the deal, Mayor Andrew Halverson said.

The city wants to take out a $5.2 million bond for 20 years that will cost an additional $2.9 million in interest to finance the project. Using current tax rate projections, the city will collect at least $8.5 million in property taxes from the insurance company, Halverson said.

"There won't be a dime of general tax levy money that will go into subsidizing this project," Halverson said. "And the spinoff development will more than make up for the money (the city) doesn't get upfront."

AIG-Travel Guard will open its new $20 million headquarters in the Portage County Business Park in 2009. To facilitate the deal, the city agreed to create a tax increment finance district. TIFs are tax incentive packages municipalities commonly use to spur development. A public hearing on the TIF is set for March 31. A board of review made up of county, city, school district and Mid-State Technical College representatives needs to approve the formation of the TIF before the Common Council can vote on it at the April meeting.

Not everyone is sold on the development deal the mayor is proposing. In a letter to the plan commission, District 5 Alderwoman Amy Heart outlined some of her concerns.

"When neighboring communities compete with TIFs, it is the taxpayers who gamble while the businesses get money upfront," Heart wrote. "I as a citizen of Stevens Point have no interest in supporting the bottom line of the 10th most profitable corporation in America only to have bragging rights over my friends in Plover."

Stevens Point will buy 21 acres in the Portage County Business Park, at the intersection of Interstate 39 and Highway HH, for about $2.7 million, and sell it to Milwaukee-based TOLD Development for $1.

TOLD will in turn lease the 175,000-square-foot building to AIG. The city will pay AIG a $1 million incentive to build in the business park.

In order to make the deal work, TOLD and St. Michael's Hospital had to agree to a land swap. The hospital plans to construct a 30,000-square-foot administrative building in the business park. St. Michael's agreed to move its location in the park after the city pledged to pay a $100,000 incentive.

The city also will need to come up with about $500,000 to do roadwork in the park and to extend sewer and water utilities to the AIG building. The city, the county and the village of Plover will share the costs of constructing a pedestrian crossing under the interstate exit ramp to allow AIG employees to get to Crossroads Commons on their lunch breaks and before and after work.

"We will not be stretched at all with this deal," Halverson said. "Even with the worst-case scenario, the city is still coming out ahead."

Source:

(Below is District 5 Alderperson Amy Heart’s letter to the Stevens Point Plan Commission regarding a proposed tax increment finance district for the new AIG-Travel Guard headquarters.)

I want to start by thanking those of you who worked to keep AIG Travel Guard in the community. Mayor Halverson, John Gardner, John Noel, David McHone, Portage County and Plover officials all deserve our thanks for the hard work and negotiations. Foremost I would like to thank the employees of Travel Guard who have worked hard to grow the company into what it is today.

Prior to this meeting I struggled with what is the best time to begin discussing the impact of this TIF proposal. Frankly I have the old fashioned notion that corporations should be proud to help support the communities in which their employees reside. However, after further study of this issue I have begun to appreciate that an increasing number of highly successful corporations fail to share my sentiment.

I have read many stories about cities forced to provide very generous incentive packages to convince business to keep jobs within their city limits under the threat of relocation. It is with this knowledge that I know inevitably this issue would come in front of the city council because we face a highly competitive development climate far beyond the borders of Portage County.

That said, this specific TIF fundamentally changes how the city cooperates with businesses. It is for this reason that I have decided to begin a dialog about the new fiscal precedent that this TIF represents. I will help our local news outlets, elected officials and our citizens engage in this complex issue in anyway that I possibly can. For I feel that our citizens need to understand the risks and rewards that tax incremental financing represent.

During the AIG development process, many of you will recall that Mayor Halverson accused Plover of using TIF districts irresponsibly in courting AIG Travel Guard; and yet a few weeks later he brought a TIF proposal forward as part of the city’s incentive package. This example makes it perfectly clear that we can no longer wait for regional cooperation to just happen. When neighboring communities compete with TIFs, it is the taxpayers who gamble while the businesses get money up front. I as a citizen of Stevens Point have no interest in supporting the bottom line of the 10th most profitable corporation in America only to have bragging rights over my friends in Plover.

We need to start discussing priorities and potential development goals with surrounding municipalities, Portage County and the school district. We’ll need to consider ideas such as a non-compete agreement between municipalities, and sharing guidelines for TIF districts. I know we’re competing between communities in this area, around the state, and out of state. It may be a difficult process, but is essential to our future sustainable development in an increasingly competitive climate.

In this specific TIF proposal, the developer’s agreement will be with TOLD. From my discussions with AIG and TOLD representatives, it appears AIG is currently only willing to sign a 10-year lease for the building. Yet, they are asking the city for a 20-year TIF.

A further financial clarification is needed. According to the current proposal, if TOLD and AIG pay off the TIF costs prior to the end of the 20-year TIF (lets say in 15 years), they pay no taxes for the remaining five years.

What would normally render the TIF closed, with the city, school, and county receiving the full tax assessment on the property, would not occur in this case. Essentially a tax bill would be sent to the property owner, a check would be sent to the city; and an incentive check, equal to the tax bill, would be mailed right back to the property owner.

Let us make no mistake that the City of Stevens Point is enacting a policy that relieves the TOLD/ AIG parcel of all property taxes for the next 20 years. Regardless of the fact that AIG will only sign a 10-year lease.

The questions that are before us include:
What do we say to other businesses who wish to move or expand in the future? How can the city support our businesses in a fair and transparent manner? How will this impact the financial health of the city, county, and schools? We will need to deal with these fundamental questions as we move forward.

Thank you for your time tonight. I would like the plan commissioners and city council to consider the seriousness of the proposed incentive, and potential assurances we may want to include in the agreement. When public dollars are used for a private development, the city council needs to ensure the investment is made wisely, with a clear plan and a sense of responsibility and feasibility.

My hope is as we all seriously consider the long-term ramifications of this TIF district, we will begin an open dialogue about true regional cooperation.

Source: Stevens Point Journal, March 6, 2008.

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