Editor’s Note: The following commentary has been submitted by Whitewater City Manager John Weidl in response to a letter to the editor submitted to WhitewaterWise by a member of the Whitewater Community Development Authority (CDA) Jeff Knight.

Attached to this email are several documents related to the Slater/Kowalski multifamily development and tax increment financing, as well as a zip file containing the complete housing studies pertinent to our community. These documents provide a comprehensive and fact-based perspective on the need for this project. I respectfully encourage you to review these materials again, as you previously received them as a member of the CDA and as an attendee of the housing summit.

Additionally, there is no statutorily defined standard review process or checklist for the “but for” test, just as there is no standardized reporting method for ensuring that affordable housing money is spent and tracked properly. The key is to ensure we clearly and accurately account for our decision-making, which has been done in this case.

Specifically, I also want to address the recent concerns about the Slater/Kowalski multifamily development regarding its adherence to the “but for” test for tax increment financing (TIF). Here’s a detailed explanation of why this project meets the necessary criteria and why TIF support is essential. Also included is the link to the Wisconsin TIF manual, found here: tif-manual.pdf (wi.gov).  Information on the But/For Test starts on page 33.

The “but for” test is a critical evaluation that determines whether a proposed development would proceed without the financial assistance provided by TIF. Essentially, it asks: “But for the TIF support, would this development occur?” The methodology typically involves:

1. Financial Analysis: Reviewing the project’s financial feasibility without TIF, including detailed cost and revenue projections.

2. Gap Analysis: Identifying any financial gaps that TIF is intended to fill.

3. Market Analysis: Assessing current market conditions and their impact on the project’s viability.

4. Third-Party Review: Engaging independent experts to validate the financial need for TIF support.

5. Documentation and Reporting: Compiling comprehensive reports to substantiate the need for TIF.

Financial Analysis, Gap Analysis and Pro Forma Review: We closely examined the development costs and pro forma provided by the developer. Our staff compared these against industry standards, best practices, and our own data on construction costs. The conclusion was clear: the project faces a significant financial gap without TIF assistance. The rise in interest rates since our last multifamily project would add an estimated $42,000 per month to financing costs. Additionally, construction hard costs have surged by 37% over the same period.

Market Analysis: Our team facilitated a comprehensive housing market analysis, using a grant from Jefferson County’s Thrive ED, which highlighted the significant lack of multifamily development in our community over the past two decades. The last major project, Tratt Street, focuses on student housing and does not address broader community needs. Recently, we further explored Whitewater’s specific housing demands and identified suitable development parcels.

Independent Third-Party Validation: To ensure an unbiased review, Kristen Fish-Peterson, a credentialed expert in economic development, thoroughly examined the financial projections. Kristen confirmed that without TIF support, the Slater project would not be feasible. This independent analysis was also reviewed by Ehlers, adding another layer of validation.

Documented Demand and Reporting: According to a recent rental housing study by Tracy Cross & Associates, there is a strong, documented demand for multifamily housing. Our market is projected to require 175 new rental units annually over the next five years. The Slater development, with its 128 units, aligns perfectly with these findings and is expected to achieve 95% occupancy within 18 months.

This project has been scrutinized at multiple levels:

– Reviewed by the Plan and Architectural Review Commission.

– Evaluated and recommended by the Community Development Authority (CDA).

– Presented to and approved by the Common Council.

Three separate reports — from myself, the economic development director, and our third-party consultant—have all endorsed the development proposal as fitting and necessary for our community.

The Slater project is poised to provide substantial benefits:

– Generating over $460,000 in tax increment annually by the project’s final year.

– Contributing significantly to the Affordable Housing Fund if the TID is extended – increment shown in years 2041-2042 of the proforma.

– Supporting 146 jobs through its economic impact.

– Enhancing the local tax base and providing modern housing options.

Strategic Need and Feasibility: Due to current economic conditions, including higher construction costs and interest rates, this development is not feasible without TIF support. Construction is set to begin in fall 2024, with the first phase ready for occupancy by late 2025.

I respectfully acknowledge the concerns raised regarding the credibility of tax increment financing for this development and the project itself. However, it is important to emphasize that the counterarguments rely on undisclosed sources, projects that are not comparable, and common misconceptions about the application and recapture of tax increment financing. These arguments do not match the documented evidence, research, studies, and analysis that have informed our decision-making and that of the Plan and Architectural Review Commission (PARC) during the conceptual review, as well as the CDA and City Council regarding the use of tax increment financing. Our goal is to act in the best interests of the entire community, guided by comprehensive data and documented needs. This development represents a significant positive step for our city, addressing the identified housing demands and utilizing all available tools to benefit Whitewater as a whole. The city manager’s office is committed to moving forward with this project, as directed, to ensure the continued growth and prosperity of our community.

Thank you for your time and continued engagement.

Links to supporting documentation are here: http://whitewaterwise.com/wp-content/uploads/2024/06/Slater-Kowalski-Ppty-Plans.pdf, http://whitewaterwise.com/wp-content/uploads/2024/06/Slater-Kowalksi-Memo.pdf, http://whitewaterwise.com/wp-content/uploads/2024/06/Memo-CDA-Multifamily-Development-May-2024.pdf, http://whitewaterwise.com/wp-content/uploads/2024/06/Kowalski-Apartments90.pdf, http://whitewaterwise.com/wp-content/uploads/2024/06/Round-Table-Materials.zip. 

John S. Weidl

Whitewater city manager