PrintWhile redevelopment of the Edgewater hotel remains stalled by a lawsuit from opponents, public funding for the project also faces an uncertain future.
A five-member TIF Joint Review Board must approve extending the State Street tax increment financing district to include the hotel property several blocks away at 666 Wisconsin Ave. The TIF district extension is crucial since it will allow the city to provide $16 million in public funds for the proposed $98 million redevelopment of the Art Moderne hotel on the shore of Lake Mendota.
The review board will hear a presentation from the Cieslwewicz administration on the district extension on Aug. 12, with a final vote expected in September.
The panel includes one member from each unit of government that shares in the local property tax and one member from the public at large. The current roster is city comptroller Dean Brasser, Madison Metropolitan School Board member Lucy Mathiak, MATC Vice President Roger Price and Dane County Treasurer Dave Worzala. Former Madison Ald. Gary Paulson is the public representative.
If the panel did reject the new boundaries it would be truly groundbreaking: The Joint Review Board has never turned down a TIF district request, according to city TIF coordinator Joe Gromacki.
"We usually get a 5-0 vote," he says.
But things might be different this time, with at least two review board members expressing reservations during recent interviews about extending the TIF district to benefit the Edgewater redevelopment.
Project backers have defended the amount of public assistance for the Edgewater, saying it will provide badly needed construction jobs in the short term and increased property tax revenues in the long term. The developer, the Brookfield-based Hammes Co., has said the project would not be feasible without TIF.
Critics counter that providing $16 million to the developer is inappropriate in a time of tight budgets and cutbacks in public services.
The Madison School Board has previously complained the city is putting too much land into TIF districts, depriving the school district of badly needed tax dollars at a time of diminished state funding for schools.
In fact, when the city proposed expanding TIF district 23 downtown, Mathiak, under directive from the full School Board, voted against it at the TIF review board meeting in November 2009.
Mathiak says the School Board was opposed because it delayed payments to the school district and instead used those funds to make aesthetic improvements to the Capitol Square ? including flower planters and granite curbs.
"Businesses whose properties benefit from the aesthetic improvements paid no part of the cost of those improvements," Mathiak says in explaining the board's opposition.
Dane County's representative Worzala is also skeptical of expanding the TIF district to include the Edgewater, although he is waiting to hear the full pitch from city officials.
"I'm not interested in the size or look of the building," he says. "I'm concerned about protecting the county's interests."
Worzala says he's concerned about using property tax dollars to fund new development at a time when property values are stagnant or even falling. "What you're doing is digging a bigger hole," he says.
Depending on your spin, TIF is either a great tool to help redevelop blighted urban areas or a boondoggle giveaway to real estate moguls. In practice, it falls somewhere in between.
Established by the Wisconsin Legislature in 1975, tax increment financing allows municipalities to use projected new property tax revenue to fund new development. The city basically loans a developer money that is repaid with taxes generated by the new project.
But Madison often must borrow money to make such loans and incurs short-term borrowing and administrative costs. Also, other taxing entities such as the school district, county and MATC don't begin pocketing any of the new tax dollars until the TIF loan is paid off. And that can take years.
Still, the theory is that municipalities win out with the tax juggle because it's assumed the blighted area would not have been redeveloped without some public nudging.
Last week, the city Plan Commission voted 5-3 to approve new boundaries for the State Street TIF district to include the Edgewater property. It also added another five blocks of property in the Mansion Hill historic district at the urging of downtown Ald. Mike Verveer.
The current State Street TIF district is valued at about $384 million. The expansion would add another $190 million worth of properties.
In debate before the Plan Commission, Verveer lobbied for the expanded State Street TIF district ? even though he's opposed the Edgewater hotel project because of its size and impact on the adjoining neighborhood.
Verveer says the area is badly in need of some reinvestment and TIF can also be used for infrastructure improvements like new streets or sewers. "I know the magic of TIF," Verveer told the commission. "I've seen it used very wisely over many years."
But Plan Commission member and Vilas area Ald. Julia Kerr was not convinced, casting one of the three votes against the expanded district. "I don't support the TIF loan for the Edgewater," she says.
Currently, the State Street TIF district is projected to close in 2015, meaning all of the city money spent on improvements will have been recouped. University Square has been the main generator of new tax revenue in that district.
If expanded for the Edgewater, the district would not close until 2021. That means any new taxes generated by the district would not be available until that projected date.
Paulson says he never voted against a TIF district in his six years as an alder and his nearly five years on the Joint Review Board. Still, he's waiting to hear all the details on the Edgewater expansion.
"I have not made a decision on the State Street district," he says.
Same for MATC rep Price. Although the tech college is looking at a 9 percent tax hike for next year, Price says he needs more financial information to determine if the TIF expansion makes sense.
"It will be evaluated on the final financial information provided to the TIF board and measured against the ?but for' test and other legal considerations," says Price.
The "but for" test means the project would not be financially feasible but for the public assistance.
Posted in Local, Govt_and_politics on Tuesday, August 3, 2010 5:08 am Updated: 5:50 am.
