Marathon utility agrees to help bail out TID 2
By Kevin O’Brien
With one of Marathon City’s TIF districts struggling to recoup its development costs, members of the village’s utility commission agreed last week to advance the district thousands of dollars over the next six years.
Following a lengthy explanation by village administrator Steve Cherek, the utility commission approved a resolution Oct. 30 authorizing the utility to cover half the annual deficit in tax-incremental district (TID) 2 through the year 2030, with the village’s general fund covering the other half. The village board also approved the resolution at a special meeting the same night.
According to the resolution, TID 2 recorded a $671,493 deficit at the end of 2023, and by 2030, that deficit is projected to grow to as much as $922,827. The village’s general fund is already being used to cover TID 2’s existing shortfall, but the fund balance is at risk of going negative, so village officials approached the utility commission to help shoulder the financial burden.
Created in 2016, TID 2 is centered around the 400 block and also encompasses a portion of Marathon Cheese, which expanded in recent years after purchasing an old ball diamond from the village. Although TID 2 has paid to demolish old buildings and reroute utility lines to accommodate new growth, a proposed grocery store and other potential developments have failed to materialize.
“It seems like it’s been disappointing us for a long time,” commissioner Bruce Bohr said, referring to TID 2. “I’m wondering, what are the odds that it will continue to disappoint us?”
Cherek said he’s been getting some leads on possible developments on the 400 block, with two businesses expressing interest.
“I feel like we’re going to see some growth,” he said. “It’s just taking a little bit longer than what everyone has anticipated.”
TIF districts work by using the property taxes generated by any new developments to pay back debt incurred by public infrastructure projects, land acquisitions and other development incentives. However, if new growth does not occur like expected, TIDs can run deficits.
As of the end of 2023, Cherek said the general fund balance had been drawn down to a little over $394,000. That amount includes the proceeds from selling a ball diamond to Marathon Cheese, which will eventually need to be transferred to a separate fund for the village’s new ballpark. If the full amount of those proceeds (about $475,000) was transferred, the general fund balance would drop below zero, he said, which would negatively impact the village’s ability to borrow money in the future.
The utility’s fund balance, on the other hand, is projected to be $1.4 million at the end of this year, and after six years of advancements to TID 2, it will drop to an estimated $935,000 by 2030.
As currently projected, TID 2 won’t be able to start paying back the general fund or the utility fund until after 2030, Cherek said. That’s assuming some additional revenue coming in as of 2028 due to anticipated growth on the 400 block.
TID 2 is scheduled to close in 2037, but Cherek said it’s eligible for a three-year extension. If the village and utility commission decide not to charge interest on the money being lent to TID 2, the money would be paid off by 2038. The final payback would stretch to 2040 if a 2.25 interest rate was charged.
In the event that a new business is built within TID 2 or property values rise substantially, Cherek said the amount of money that needs to be borrowed would decrease and so would the payback period, Cherek said.
If the utility did not agree to split the yearly advances, the general fund balance was projected to drop to $8,000 by the end of this year, Cherek said. The general fund is also going to provide advances for the next two years to TID 1, which encompasses the north end of the village, including the newly established business park north on STH 29.
“That’s going to get paid back as well,” he said. “We’re just at that point where we have a lot of capital improvements going on in TID 1, and the growth is happening. We have development agreements to get it there.”
Besides the lack of new developments in TID 2, the district also suffered a $1.5 million loss in value this year due to the state assessor marking down the value of Marathon Cheese based on recent sales of similar properties. Cherek told the village board in September that the devaluation will result in a $32,000 drop in revenues for TID 2 for 2025.
On the expense side, Cherek said TID 2 isn’t spending any more money on projects at this point, but it does have a significant debt payment to make every year, which ends in 2030.
If the utility commission had decided not to advance money to TID 2, Cherek said the village would have the option of increasing its debt levy, which would result in local residents paying substantially more in property taxes in order to cover the debt payments.
Trustee Connie Ruplinger also told the utility commission that refusing to advance the money to TID 2 would negatively impact the village’s ability to borrow money at a lower interest rate for utility projects, including a proposed new well that could cost as much as $3 million.
“The village board has to borrow the money, not the utility department,” she noted.
However, if the expected growth in TID 2 doesn’t come to be, Bohr questioned whether the utility would be forced to raise water and sewer rates in the future to make up for the financial loss. Cherek said the likelihood of that happening is “very low,” noting that utility rates are meant to cover the operational costs of water and sewer services, which should not change due to the TID 2 advance.
Andy Berens, chairman of the utility commission, reminded commissioners that the utility is part of the village and it benefits from TIF-funded projects that expand water and sewer lines to areas like the north business park. However, he also suggested that the utility commission have more input on future TIF expenditures.
“I just hope that we really watch those expenses going forward,” he said.
Village president Kurt Handrick, a member of the commission, said the village is willing to entertain more development opportunities for the 400 block beyond what was originally envisioned. Fellow commissioner John Telford agreed that expectations need to change.
“Since that project first came up down there on the 400 block, we’ve been pushing really hard to get a grocery store in town,” he said. “I think people have come to realize that that’s just never going to happen, especially now with Kwik Trip coming in.”
The commission approved the resolution 3-0, with Bohr abstaining.
Village board signs off
Before signing off on the same resolution as the utility commission, the village board discussed whether interest should be charged to TID 2 and what the impact would be if the money was not advanced to the district.
Cherek said the village and utility funds could charge TID 2 a 2.5 percent interest rate, but it would likely extend the final payoff by two years. The interest payments would be a way of compensating the general fund and utility for money it could have gained interest on.
“I would not be in favor of charging interest,” said trustee Keith Paul. “It’s like we’re gaining interest off ourselves. We’re just moving money.”
The resolution adopted by the board mentions possible interest, but it does not specifically say a rate will be charged, so Cherek said the board could discuss that in the future.
When asked would happen if the resolution were not approved, Cherek said the village could increase the amount of taxes it collects for its debt levy, from the current $50,000 per year up to a maximum of $276,700, raising taxes by 28 percent.
“We’d probably have a lot of people here with pitchforks after us,” he said.
As of right now, Cherek said the village’s 2025 tax levy is projected to actually decrease because of a new state law that exempts personal property from taxation and provides additional aid to compensate for the lost revenue.
Other business
■ After meeting in closed session, the village board voted to appoint Darrin Hall as the new chief of the Marathon City Fire Department, as of Jan. 1, 2025.
■ The board accepted a low bid of $5.85 per cubic ton from Earth, Inc. for crushing the village’s concrete and asphalt pile into gravel for future projects. The village has budgeted $50,000 for asphalt crushing.
■ Commissioners recommended the appointment of Dan Seiler to fill a vacancy on the commission, which will need to be approved by the village board .
TOUGH DECISION- Village officials and members of the Marathon City Utility Commission last Wednesday discussed a proposal to advance money to the village’s TID 2. From left to right are utility operator Ken Bloome, village clerk Anita Krautkramer, village administrator Steve Cherek, village president Kurt Handrick and commissioners Andy Berens and Bruce Bohr. STAFF PHOTO/KEVIN O’BRIEN
