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Blugold Real Estate Foundation is suing the city of Eau Claire over taxes on Aspenson Mogensen Hall, 222 Water St. The nonprofit Blugold Real Estate claims the off-campus student housing should be tax exempt.

Eau Claire is facing a new lawsuit from two groups that have previously challenged the city’s use of a tool intended to spur redevelopment.

Milwaukee-based Wisconsin Institute for Law & Liberty filed a lawsuit Wednesday morning on behalf of Eau Claire group Voters With Facts in opposition to the city’s tax increment financing district in the Water Street area.

“The Water Street TIF district is the second district the city has created in two years in an area where development was in progress. It appears that this kind of abuse will continue unless we citizens take action,” Cyndi Burton, a Voters With Facts member, said in a news release.

In TIF districts, property taxes on new buildings go toward paying for nearby public projects that cities believe will contribute toward the area’s redevelopment. After the projects are paid off, the value of the new buildings goes on the general tax rolls to pay for city and county government, K-12 schools and the local technical college.

In the new lawsuit, WILL and Voters With Facts point out that the city created TIF District No. 12 in mid-September 2017, but is using tax revenue from a $14 million building that was already complete.

“This is the biggest abuse of it we’ve ever seen — that a city is claiming an already-built building qualified,” said Tom Kamenick, deputy counsel for WILL.

The four-story building at 222 Water St. known as Aspenson Mogensen Hall began housing about 200 UW-Eau Claire students in August 2017.

City Attorney Stephen Nick said similar disputes over recently completed buildings included in TIFs have already been decided by Wisconsin courts. He cited a 2001 appeals court case involving a Walmart in a Baraboo TIF, which came out in that city’s favor.

“It’s not about any one site or project within a district,” Nick said. “The fact that an element was under construction already does not make the district illegal.”

Coming in before an annual state-set deadline of Sept. 30 — TIF No. 12 was finalized on Sept. 15, 2017 — also allowed the city to use the Aspenson Mogensen building’s value for the TIF district, Nick said in a previous Leader-Telegram article.

The lawsuit contends the city violated state law by including the new building in the TIF and wants to see TIF No. 12 voided.

“The whole point of TIF law is to encourage new development in areas,” Kamenick said. “This TIF was not being used to spur new development.”

But Nick defended procedures followed by the city and a panel of city, county, school and technical college representatives used to create the new TIF.

“We are happy to defend the correctness of the policy decisions of the City Council and Joint Review Board,” he said.

TIF No. 12 includes 87 parcels of land — primarily businesses along five blocks of Water Street, but also numerous nearby houses close to the Chippewa River, according to the plan approved for the district.

The $9.65 million in public projects envisioned for that area include expanding a public parking lot at Fourth Avenue and Chippewa Street, creating a new riverfront park, reconstructing existing recreational trail sections, adding lighting and aiding the revitalization of the Randall Park neighborhood.

Including $14 million for Aspenson Mogensen Hall, the city anticipates $46 million in private development will happen by 2022 within the TIF area. When the public projects are paid for — September 2036 at the latest — the TIF will dissolve and the new development will go on the regular tax rolls.

This isn’t the first time the city has faced a legal challenge from the two groups over its use of tax increment financing.

In a different case that went all the way to the state Supreme Court, WILL and Voters With Facts contended that Eau Claire had misused Wisconsin’s TIF laws to provide developer incentives for the downtown Confluence Project. The state court sided with the city in a 5-2 decision in June 2018.

But part of that case, which began in 2015, did get sent back to Eau Claire County Court and is still pending. That remaining dispute involves having the court review records to check that the city followed laws and procedures properly to create the downtown TIF districts.

WILL filed a brief earlier this month in the case attacking the city’s determination of “blight” for downtown properties that were cited as justification for creating downtown TIFs. The city will be filing a response brief soon in that case, Nick said.

Contact: 715-833-9204, andrew.dowd@ecpc.com, @ADowd_LT on Twitter