On 03/09/2022 the Community and Economic Development Committee received the 2021 Growth Report for the City of Appleton.
The city’s Economic Development Specialist Matt Rehbein reviewed the report with the committee He told them that they put the growth report together annually and its purpose “is to ensure that the city of Appleton is capturing its fair share of new development.”
They use a number of measures to look at the context of that development.
- Building permits
- Equalized Value
- Net new construction.
Regarding building permits he said, “We’ve kind of pulled away from looking at a lot of the building permit data simply because we found it can be inconsistent depending how a permit is characterized.” For example, electrical work might be built into the general permit, or it might be separated into an electrical permit, or it might be double counted. Everything was based on what a contractor reports when they take out a permit which could lead to some inconsistencies. Similarly, a project may be considered commercial but have some residential within it. So, it was difficult to measure growth based strictly on permit data.
For the purposes of the growth report, they focused more on equalized value and net new construction. Those numbers are defined by the state of Wisconsin and reported by the Department of Revenue which has some very specific parameters regarding what is included.
In 2021, the equalized value in the state of Wisconsin was 6.8%. The City of Appleton saw its equalized value increased by 7.87%. A lot of that was calculated by the Department of Revenue as it equalized assessed values across all municipalities within the state.
Appleton’s net new construction in 2021 was 1.25% which was a little lower than the average across the Fox Cities and the rest of the state. Matt stated that net new construction was a difficult number for city staff to impact directly. Some projects start with the city preparing land for development or selling land in the industrial park, but they don’t come to fruition until 10 years down the road, but the steps the city took today lead to the net new construction numbers in the future.
Additionally, he noted, “These numbers are also difficult for a larger municipality that’s well built out to impact.” If they took the equalized value of a city the size of Appleton versus a neighboring municipality that was smaller, a $10 million project would move that percentage a lot more in the smaller community.
He thought that the fact that Appleton was a little bit lower in terms of percentage wasn’t necessarily a bad thing. “As you know, we’ve had a lot of lot of really good development in the city over the past few years and particularly in ’21 we’ve seen quite a bit come along online.”
Some other things they needed to take into consideration was Appleton’s competitiveness and how well it was poised to capture new construction and get a new development in the city. They did that by looking at both employment and unemployment.
Appleton’s largest employment sector had been in manufacturing for many years.
Our unemployment numbers were, as everywhere, very low. “On average in 2021, our unemployment rate was 3.1%. Actually, in December we closed out the month at 1.5% ” He commented that everyone could see and feel the impact of this and gave the example of coffee shops pairing down their hours or restaurants not opening for breakfast. “There just aren’t a lot of people in the work force right now relative to the jobs that are out there.”
He moved on to discussing the city’s Tax Incremental Financing Districts (abbreviated as either TIF or TID) and noted that they had included trendlines and scatter graphs when reporting that information because there was a great deal of variability in the number from one year to the next.
Some things that went into a TIFs valuation was whether a project was fully taxable in 2021 or whether a project came online or was partially completed.
Another part of the calculation regarding TIFs came from the Department of Revenue which made its own adjustments. “Actually, they had an error in one of their formulas in 2020 which overstated the TIF values, and then they made that correction in 2021, so a number of those values came down.”
The trendline for the valuation of a majority of the TIF districts was growing with the exception of TIFs 9 and 10.
He highlighted a couple statistics from the report that stood out to him.
(1) The unemployment numbers were low not only in Appleton but everywhere and that posed a lot of challenges for Appleton, the Fox Cities, and the country.
(2) In 2021 the city issued 98 single family residential building permits as compared to 80 in 2020. They also approved 105 permits for multi-family units. 58 of the 229 units brought to market in 2021 were for low to moderate income residents which he thought was notable.
(3) In terms of net new construction and equalized value, the City of Appleton comprised about 28.48% of the Fox Cities’ equalized value and captured just over 21% of net new construction. He reminded the committee that it’s a little bit more challenging for a city of Appleton’s size to capture that.
He offered to answer any questions the committee members had.
Alderperson Matt Reed (District 8 ) said that there seemed to be a big spike in property values in 2021. He wondered if inflation was a factor in that.
Matt answered that the number was calculated purely based on the cost of the new construction and didn’t include the price of the land, just the improvements.
Community And Economic Development Director Karen Harkness pointed out that those figures did capture inflation because the cost of the permits show what the cost of the materials and labor is. Construction prices had gone up about 22 – 24% compared to a year ago and they continued to increase.
Alderperson Reed said that he had figured that had to be a factor based on the sudden increase in 2021 of new home values illustrated by the graph in the report.
Alderperson Brad Firkus (District 3) appreciated the work that went into compiling the report and thought the report gave a good idea of where things stood right now and where they were going. He wondered if staff had been considering or talking about anything that Council could be doing in the future regarding city growth.
Matt didn’t think there was anything specific to net new construction, but the city could work to attract development by being a community that had a reputation for being good to work with, being quick to respond when someone submitted an offer, and being aware of the needs of developers. He thought that could set Appleton apart as a municipality and help us be poised to capture these projects.
Director Harkness pointed out that when talking about net new construction, equalized value was a link to net new construction across the state of Wisconsin. When they looked at municipalities like Wrightstown, Howard, Greenville, Hortonville, and Clayton “because they’re less densely developed than we are, their net new construction is higher. So, it’s easier for those municipalities that are under-developed or less developed to have those higher net new constructions.”
Alderperson Kristine Alfheim (District 11) said she would love the hear how the potential of a city rebranding related to growth opportunity.
Matt answered that branding was certainly a component of marketing and part of what the city could do to impact growth was by marketing the city. However, the elements of what the city has to offer were still there regardless of how it was branded. The city’s ability to act and its willingness to look at what was important in any particular transaction was still there regardless of what the city’s logo looked like. Rebranding the city would certainly give him something new to talk about as he went out and talked to developers, other communities, and investors, and that would help, “But I think the value proposition is there either way.”
Alderperson Reed had one last question regarding the TIF districts. He wanted to know if there were any districts that were not healthy long-term, or were they in pretty good shape?
Matt thought that was probably a better question for the Finance Director. Generally speaking, the two TIFs in decline were TIFs 9 and 10, but when looking at the actual dollar value of those declines, one or two projects could make those up. Both districts had quite a bit of life left on them and were not scheduled to close until close to 2040. He thought they still had some opportunity to bring some project in that could turn those districts positive.
Director Harkness added that TIF District 9 and 10 were both created at the same time and were both created for potential projects that ended up not occurring. In TIF 10, the shopping plaza was sold in a foreclosure, and the declines in both TIF 9 and 10 were due to the land values declining.
The committee members had no further questions.
View full meeting details and video here: https://cityofappleton.legistar.com/MeetingDetail.aspx?ID=924639&GUID=4A43F446-20C4-4828-9D70-4F4037E9A99A
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