Wisconsin’s high court affirms use of economic incentives

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By TODD RICHMOND
Associated Press

MADISON, Wis. (AP) — The state Supreme Court affirmed on Wednesday that local governments can extend cash grants to developers in a case bolsters tax-increment financing, which local officials have relied on for years to boost projects like Foxconn Technology Group’s new southeastern Wisconsin campus.

The case centered on work to construct the $85 million Confluence Arts Center in downtown Eau Claire. The city set up various tax-increment financing districts to help pay for the development.

Local governments often use TIF districts to help renovate blighted areas. The districts provide grants to developers and help pay for roads and other infrastructure. The money comes from property tax revenue generated within the districts.

Eau Claire city officials have offered nearly $6 million worth of TIF grants to the owner-developer of the Confluence project.

The conservative law firm Wisconsin Institute for Law and Liberty filed a lawsuit in 2015 on behalf of taxpayers challenging the Confluence districts’ creation and the proposed issuance of the cash grants. The firm argued the city hadn’t justified the districts’ creation and that the areas were the districts were established weren’t in fact blighted.

The firm argued the cash grants amounted to a tax rebate, violating a state constitutional provision say that property taxes must be levied uniformly.

The lawsuit raised doubts about the validity of TIF cash grants throughout Wisconsin, including grants proposed to help build Foxconn’s planned $10 billion campus in Mount Pleasant. Eau Claire County Circuit Judge Paul Lenz dismissed the case, finding that it would require a great deal of speculation to determine if any harm would result from the districts.

The Supreme Court upheld that decision in a 5-2 ruling Wednesday, finding that the taxpayers had failed to show the grants were intended or used to pay the owner-developer’s property taxes. They also failed to state claims for which relief could be granted.

“Big win for the city of Eau Claire, a big win for economic development in the city of Eau Claire and statewide,” Doug Hoffner, Eau Claire assistant city attorney, said in a telephone interview. “(The grants are) an incredibly important economic development tool. This decision impacts billions of dollars of economic development statewide.”

The Supreme Court did grant the Wisconsin Institute for Law and Liberty’s request to order a lower court to review whether the city could, without creating the districts, show the site was truly blighted and development was impossible there. However, the legal standard for review calls for presuming the city’s decisions were correct, which means the law firm faced an uphill battle.

“I don’t see a scenario where the court does anything more than dispose of what’s left of the case,” Hoffner said.

Rick Esenberg, president of the Wisconsin Institute for Law and Liberty, said he was disappointed with the decision.

He said local governments are abusing TIF districts and private developers are getting too much public money.

“They’ve been creating districts whenever they want to, for whatever reason they want,” he said. “It’s time for the Legislature to take a close look at these districts and see if they’ve gotten out hand.”