The Wisconsin Supreme Court heard oral arguments Friday in a lawsuit challenging a common tool cities use to spur development.
A group of taxpayers is challenging Eau Claire’s use of tax incremental financing (TIF) districts to provide a cash payment to the developer of a $45 million public-private downtown redevelopment known as the Confluence Project. They argue the $1.5 million cash payment to the developer violates the state constitution’s uniformity clause, which requires all property within a taxing jurisdiction to be treated the same.
Attorney General Brad Schimel is backing the city in the case, saying if the challenge is successful it could affect the $10 billion Foxconn project in Racine County where the village of Mount Pleasant has approved a $764 million TIF district for the Taiwanese manufacturer.
Both conservative and liberal justices on the court grilled Rick Esenberg, president of the conservative Wisconsin Institute for Law and Liberty, which is representing the Eau Claire taxpayers.
Esenberg argued the city didn’t follow state law, which requires a TIF district be used to remedy blighted areas of a city that wouldn’t otherwise be developed. But Justice Ann Walsh Bradley challenged Esenberg for downplaying the part of the statute that allows city officials to use their judgment in determining whether an area is blighted and underdeveloped.
Justice Michael Gableman suggested the cash payments serve more as a cash advance on the development project, which in the Eau Claire case was backed up with a personal guarantee from the developer.
“Typically the taxpayer gets its money back one way or the other,” Gableman said.
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TIF districts are typically blighted, industrial or mixed commercial/residential areas designated by a municipality as undevelopable without some form of public assistance. The municipality issues bonds to pay for infrastructure or part of the development. The bonds are repaid over a set number of years with property taxes generated by the increased value of the property.
The city of Madison uses TIF districts, but unlike other municipalities does not offer cash payments to developers.
Talking to reporters after the hearing, Esenberg declined to speculate on which direction the court was leaning given how unpredictable the court has been in the past. He expects a decision by June or July.
The Wisconsin Supreme Court has previously upheld the constitutionality of TIF districts. The circuit court and court of appeals both upheld Eau Claire’s decision.
The Supreme Court could decide to uphold the constitutionality of cash payments, but still send the case back to a lower court to review whether the city followed state law in determining that the area was blighted.
Eau Claire assistant city attorney Doug Hoffer said he was confident the law was on the city’s side heading into the oral arguments, but was even more confident afterward.