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Consultants tell Janesville council a $1 billion data center in TID 42 could change levy capacity and property-tax outcomes
Summary
At a Feb. 23 workshop, an Ehlers consultant and city staff outlined how a proposed $1 billion data center captured in TID 42 could produce roughly $4.8 million in new tax revenue, shift tax-rate mechanics and present choices on whether to use growth to reduce debt, invest in capital or hold capacity in reserve.
Janesville — At a Feb. 23 city council workshop, a consultant and city staff laid out how a proposed $1 billion data center inside Tax Increment District 42 could affect the city’s levy capacity, property-tax rate and budget choices.
Todd, a consultant with Ehlers, told the council that levy limits prevent the city from increasing its general operating levy by more than the percentage of net new construction certified annually by the Department of Revenue. "Levy limits means that the city cannot increase its general operating levy over the prior year by more than a percentage equal to your net new construction," he said, adding that general-obligation debt service is exempt from that limit.
City staff presented an illustrative fiscal scenario tied to the prospective project. Mr. Godek said a project that added $1,000,000,000 in assessed value would represent about a 13% increase in the city's assessed value, would concentrate roughly 11.5% of taxable value in that single project, and could generate approximately $4,800,000 in additional tax revenue while reducing the residential share of assessed value from about 70% to 61.7%.
Why it matters: Large developments captured inside a TID do not automatically produce straightforward property-tax relief for all taxpayers; the council must choose how to use incremental capacity. Todd explained three broadly different outcomes: (1) the city could take the available net new construction each year (increasing levy capacity but potentially raising the property-tax rate outside the TID), (2) defer use and roll some capacity forward under the five-year carry-forward provision, or (3) rely on a one-time closure adjustment when a TID is closed.
Council members asked about practical options for using new revenue. Questions focused on whether to reduce debt, place money in sinking funds, invest in community-development projects or retain capacity for future budgets. Mr. Godek said the city already uses some tax revenue to reduce borrowing for capital items such as police vehicles and recommended considering reductions in long-term debt where appropriate.
Valuation and timing: Staff said assessors would most likely use a cost-of-construction approach for a data center — because comparable-sales and income approaches are less reliable for that asset class — and that assessed value would appear incrementally as buildings and systems are completed. "We expect to build out the project that Veridian is recommending over six years," Mr. Godek said, noting the full $1 billion would not appear on the tax roll on day one.
Risk and downside: Council members also pressed staff on downside risk if the project does not occur or if the city were left holding the site and borrowing to remediate it. Using a rough example, staff said $30,000,000 in new debt could translate to about $845 for the median assessed home under the illustrative assumptions.
No policy vote was taken at the workshop. Council member Cass moved to adjourn; Council member Williams seconded, and the meeting ended by voice vote.
The council and staff said the numbers were illustrative and that staff would return with more precise figures and background analysis as the proposal advances through future budget and TID decisions.
