Several updates and where issues are at. MPSEA supported in their quest to get rid of residency requirements in exchange for more co-pays on health insurance. Compton goes off about TIF for Danisco and airs dirty laundry, Cooley admits there is no gap and they don’t need the money. Financial reports at the end are of interest and there’s a few other things noted.
The agenda is here if you want to follow along. And, in case I didn’t note it, everything passed, no amendments were made to anything.
STIMULUS UPDATE
Not much to report. IT reported that they are interested in building a 30 square mile network for the wireless broadband. Also interested in applying for a grant to buy laptop computers for the schools so that people can have access to computers. It’s 18 months to build out. It’s very competititve, but there is $1.7 billion available. Targeting public safety and libraries and feel they have a strong proposal.
Clear asked about COPS grant. Police staff (Terry Genin) said they are rolling over the application for the FY10 funding.
Rhodes-Conway asked about construction and Davis-Bacon requirements. Pariano says she will do some homework and figure out who can answer the question.
MADCITY BROADBAND EXPANSION
If they are lucky we will get money to help make this happen, but if we don’t we won’t be paying for it. We’re just letting them site the system on our property. Passes.
GREATER MADISON CONVENTION AND VISITORS BUREAU
Deb Archer explains the handouts. In order to get this money, they have to have 75% of the meetings at Monona Terrace and they have to have a certain amount of hotel nights. Bruer asks how economy is affecting the business. Archer says that their industry will be the last to recover. This fund basically helps close the gap to make it possible to have their event here. Bruer asks about room tax. Archer says that hotel rates are down, 3rd quarter might be ok, but 4th quarter will be tough. Harder to predict how the business will go. She talks about employees and how it impacts them and talks about not terminating employees but keeping them on hold until they need them. She says that next 18 months will be tough. Report accepted.
REMOVING REQUIREMENT FOR PROFESSIONAL STAFF TO LIVE IN DANE COUNTY
They move the substitute. Mayor explains he asked for referral, thanks Schumacher. Says he met with MPSEA and says they came to an agreement. In exchange for this change, he will propose in 2010 budget to increase co-pay $5. $15 for singles and $20 for families. He says that is equivalent to the 1% penalty and he said he wouldn’t seek to increase co-pay for 3 years. He says he’ll discuss it with them before they move forward.
Lorri Wendorf reminds people that this is an equity issue. 80% of employees already have this. Not here to debate equity issue. She says Schumacher is supportive of the compromise.
Rhodes-Conway asks if MPSEA asks if she opposes residency on its face. Wendorf says it is really about equity. Rhodes-Conway asks about the waiver process. Wendorf says that some people don’t know you can get it waived, some people pay the 1% penalty others don’t and you have to reveal alot of personal information to get the waiver. $5 increase will be in the budget. Verveer votes no. It’s recorded as 3 -1 -1 so someone abstained, but I don’t know who.
PLASTIC BAG RECYCLING PROGRAM
Rhodes-Conway asks why they chose the option they chose. Schumacher says that 13 drop off sites are better than curb pick up. The sites will be geographically scattered throughout the City – Aldis & Marshalls are interested and they will use the 3 current sites. If the private sites fall through, they will use the parks.
2nd QUARTER POLICE OVERTIME REPORT
Davenport says that 3% decrease. He says that biggest change is in extraordinanry events. He says other big decrease is in hold over hours, which they think is due to hiring more. Says it more prevalent now due to resignations and injuries and they are mostly on one shift and they are making some shift changes.
Rhodes-Conway asks about increases in overtime for briefing and civilians. Davenport says it is just related to staffing. They’ve had some resignations on civilian side as well.
Verveer asks about resignations and impact on pay vs. time. Terri Genin says that people were taking pay but trended away, but people should be able to use their leave time more than pay. She said they want time and hope they can continue the trend.
Clear asks about the shift changes to 5 shifts and how that will impact overtime. Davenport says “its a good question”. He says that they will be looking at it. They are studying how many people they need.
Report accepted.
TIF FOR DANISCO
Bruer moved to place on file without prejudice.
Compton says she is upset with how this has gone down. She thinks that there are things that were aired here that have been to the detriment to the city. Compton has questions for staff. Gromacki, May, Cooley and Brasser. Comptom asks Gromacki how many Industrial TIF loans have defaulted. She asks about how many total loans are Industrial. He says they have a portfolio of about $95M and $6 – 7M over the last few years have been industrial TIF. She asks how many TIF loans have defaulted. Gromacki says none since he has been here. Compton asks about the application process is different from the original application that was made and approved. Compton says there was another application in 2005 that was approved. Gromacki says there was no application for that. Compton asks how many TIF loans are in arrears, he says none. Brasser says there are two projects that have been given some special circumstances – Alexander and Monroe St. (Trader Joes). Compton asks May about financial gap analysis. She asks about “yellow light” comment and says that some alders think they might be indicted if they approved the loan. Compton asks if they will get sued if they granted the TIF loan. May says that his memo talks about if they can use competitive factors to decide if they give out TIF. He says its not barred, but he has concerns about how you would prove “but for” because there is no test. He did point out the complaint filed with the District Attorney and how the financial analysis helped them prove that they treated the applicants equally. May says that Cooley has pointed out that without it, you are kinda of making a bet. Compton asks Cooley about EDC vote where it was 4 – 2. She asks why there is no statement from the Economic Development Department. She asks him about how important he feels this application is. Cooley says that they did an analysis that EDC asked them to do, and they came to the conclusion that this was the type of company they want to have here and that it would pave the way for additional phases of expansion. They felt it was a good investment for the city. He says that we don’t do this for the company, but for the city. He said the job multiplier would be 179 direct jobs and 370 total jobs according to the state. He said that $43M – 52M in additional investments and that they should try to get an exemption. Compton asks how important Danisco is as an anchor. He says very important because they are an international company and it might be a draw for other companies to this area. Compton is disturbed there is no presentation. Says there are people from Danisco expecting to see on. She says its an insult not to have the body hear from them. She says she knows what is going on, that she was cornered in the parking lot and that there is a big scuttle butt about this and that we are out to get someone and make problems with their job because we don’t believe that they should have denied TIF money to Danisco. She says there is no doubt staff did their job and they followed the TIF policy. She says that changing the policy is not what they should be looking at. She says that they should be looking at if they should set aside the TIF policy and follow state law and invest in Danisco. Compton rants about why Danisco is important and goes off on the $106,000 of CDBG money. She says that is one job per year as opposed to 370 jobs. [Wow, that was a little bit of an exaggeration]. Compton says that this is a good deal, we are making a loan with the 3 other taxing entity. She says Madison needs entry level jobs [Which this won’t be]. She talks about how many people need free lunch and how we are losing residents. Says not matter what the personal or political arguments, we cannot afford to deny such a powerful possibility. Then she says that they will probably expand here anyways. She says this wasn’t a bidding war. She says she had never met Mr. Zimmerman, that she was just introduced. She says this is an up and coming company that is moving fast. She says we need to invest in them. She asks them to put small minded, whining, political arguments aside and look at it for what it is. It is an anchor and creator of jobs. This isn’t a job at a coffee shop, these are big jobs that you go to every day that pay your bills in an area that we hope to develop. They can be a small entity or a major entity. Change your mind, don’t vote to place on file (without prejudice).
Clear asks if this still goes to the council. They say yes. Clear asks Cooley to make the case for filling such a small gap, its less than 2.5% of the project. Why would someone put themselves through this process. Is TIF the financing of last resort or are there other reasons for the financing. Cooley says, “first of all, I don’t think there is any gap”. They are an international company and don’t need the money. He said this money levels the playing field. Madison is a higher cost area, from a financial perspective, not time and effort. And they are looking at what would level the playing field compared to lower cost areas. They are looking at Waukesha and Rochester NY. They see strategic value in being here, it still might be more expensive even with the TIF money. He says it leverages their current investment of buying another company and the equipment they have put in. Also, a strategic position in the BioAg company. They had been buying other companies, but now they want to grow organically. He hopes we can convince them that this is the place to locate because Madison has alot of value to their workers. He says financial gap is not the issue here.
Clear asks why a loan levels the playing field. He said the Monona Terrace Booking fund makes sense to give discounts to get business to come here. How does TIF level the playing field. Cooley says that decisions are made in Europe – who may be making decisions based on existing operations, managements wishes, financial and city willingness to work with them. He says in this case there may be a cost differential between here and elsewhere. By making the money available, may send a strong message to help them get the expansion here. It helps them make the case to the ultimate decision makers. Shows city willingness to help with infrastructure on their property. He babbles a bunch of buzz words and says that we need to realign the tools that we have and use them in the most directive and leverageable way possible. [And there you have it, that’s what this is about . . . TIF as a tool]
Clear says he supports TIF as a tool, but doesn’t get this. Why is this the first time that doesn’t appear to meet the “but for” policy. He says that we have accepted our policy as statute. We have some wiggle room. The public policy has been set by the state. He talks about the statute being an economic development tool and that we have few tools. He says that we can plant some seeds now, with the tools we have, that might act to attract other businesses. We can reinforce the whole cluster dynamic that we and THRIVE have identified.
Clear asks Gromacki about the rationale for the “but for” policy and how it protects the tax payers. Gromacki says that it makes it fair for the applicants to use the same standards. Attorney May mentioned that we can use this to demonstrate that we are fair when they go to the District Attorney. Also helps decision makers allocate resources effectively. A few years ago we had $50M of requests and we put in $6M because we determined what we needed, not what they wanted. He says that people forget that TIF is a finite resource and we have to test the viability of the project. Helps policy makers make informed discisions consistently.
Sanborn asks Brasser about this being a loan and he follows up about what is different about a TIF loan. Brasser says that it is a loan, but they don’t pay for it out of their profits, but instead, it is repaid by the taxpayers in the district. It is really a grant that is forgiven if they meet the conditions. Sanborn says that this is really kind of tax abatement. Brasser says tax abatement is illegal, but it is paid through the property taxes.
Clear says he’d like to hear from people from Danisco, even tho they didn’t register to speak. The plant manager and the manager for the Americas. Clear asked them why they put themselves through this. Why is this financing effective for this project. He says that it is a significant part of the funding. Show to the management that there is a strong relationship here in Madison which is supportive. Can help management make decisions. They say that Danisco has shifted its focus and they have ventures that would like to develop. It’s a globally competitive market. They could build anywhere. They would like to be where they are supported. They are looking for organic growth. He says that they are looking to support their investment here. He says they are developing a portfolio and this helps us rationalize how they make decisions. They are trying to gain competitive advantage within the company. He talks about various market.
Rhodes-Conway asks about the range of things that go on the list. She asks what besides TIF loans we could support. They say it could be training and relationship with the city. Financial support is important. Rhodes-Conway asks about intangibles – UW and BioAg Gateway. What else that we can control can we do? Zimmerman says that located in the Midwest is ideally located by dairies, Madison is on the interstates, public utility support, process support from the city, if you have hurdles that take time, that is critical to us. They look at design constraint. It’s a long list of things they look at.
Compton asks about the previous application for TIF. They say that they had a template to fill out. He wasn’t part of an original application.
Clear says this is challenging. Heart vs. head. Heart says this is exactly the kind of thing we should be doing, fits with the economic development plan. This is a quality project and why our participation makes sense case has been made. But, it doesn’t meet out guidelines that are in place for very good reasons and this is a slippery slope. Yes, we violate our guidelines frequently but this is fundamental. He says that he thinks we should look at the policy.
Compton says we violate our policy all the time. Uses CDBG policy of funding non-profits as an example. [Weak] She says that these loans are not different than CDBG [???] She says that this is an investment. She says that she thinks the design criteria are important. It is important that they are presentable on the corner. She says we may have just lost a major investor in the city [Marcus Theatres?], an industrial TIF shouldn’t be about who needs it to be a success. If you need $300,000 for a $13M project, then you won’t be a success. This isn’t a gamble like in housing and TIF. She says this is a poker game. . .. . babble . . . She says our city is failing, businesses are leaving us and we need to change that practice and it should be that we change our policy. We should step away from our policy as we have done many times. We should show preference to one business over another. We’re not setting precedent here. This is the seed that if done properly will help the development. We have not had a nice division in the past – economic development. We hired this person for his expertise. We need his leadership to make us a viable community that has jobs for people who want to live here. If we don’t have these entry level jobs then we will have to figure out what we are going to do with “those people”. They might not want to drive to Verona. We need to think with our head and change the policy. [I swear she was saying these were good (high paying) jobs and then she called them entry level jobs for those people and I’m wondering after all this, what kind of jobs these were going to be.]
Verveer says this seems quite unorthodox, but in most other cases, we have closed session meetings even before an application is made. Usually the process is different and so he asks why the process was different. Is this a new open government. [Wow, that was quite the statement!] He says that with the comments at this meeting, we are almost encouraging them not to invest here.
Mayor says no one raised the issue so he never thought about it. [Gotta admire his honesty] He says normally a closed session is for when you talk about a “different number” and since this was being placed on file it wasn’t necessary.
Verveer says usually we have a closed session prior to an application being made. We are encouraging applications prior to talking to policy makers and that doesn’t make sense to make them pay an application fee if we are going to reject it.
Mayor says that it is certainly unlike anything he has seen in his six years.
Cooley comes to the table and says that this is something we’re going to have to get used to. This isn’t like real estate development where you have years of planning. Business decisions are made much quicker.
Compton says that the applicant has never played the bidding game, they simply had ween working on an application when TID 24 closed. They called, they came in and made their presentation and they were denied at that point. I don’t know why it wasn’t in closed session. This may have been unorthodox on her part. If you wanted to refer this to closed session that would be ok. She recommended that they didn’t come, but they did and they are here.
Staff explained that this wasn’t notified for closed session last time. She says that you haven’t had the resolution previously, last time it was just to discuss the policy.
Bruer says that with Cooley in his new position, and that they are challenging how we respond to the business community. He says we have some well thought out policy and we know why we have the policies we do, and makes reference to city attorney. He says that our vetting process is important, and this is a struggle between two philosophies of economic development and at what point do we protect the interests of the tax payer. He says we have other tools to use to show our commitment to the business. He says we have other tools available. TIF is a small piece, but not always appropriate. This could put us in a precarious legal position. he feels this could be a very slippery slope. But, we should work to get resources available and work with the state and others to do that. We should try other tools, lets aggressively pursue those other tools. We need to have ties to the state (Governor, WHEDA, UW) that can help us help the companies.
Mayor says strength of our current TIF policy is that is it quantifiable, it comes down to a number and that makes it defensible. [Ha! Then why do you need to go into closed session to get to a different number? Doh!] We can show we are fair. The weakness is that is works for real estate deals, but not much else. Tim Cooley’s job is to challenge us and ask questions about if we are using all the tools we have and if we should invent new tools. Appreciates the fact that he was doing that. Says Danisco is what we are looking for. He says the question is how do you decide if you don’t look at the financial gap. We don’t have a way to judge the businesses, we don’t know how to respond. We need something that is objective and there has to be a policy. We can’t just say this is a business we like. He says we need to err on the side of stepping back and put together a policy that addresses a company like Danisco. He’d like to see us develop that policy over the next few weeks or months. Then we can come up with a policy. He’s going to work on a policy with others.
Compton says they should just step away from the policy and give the money away. She is asking the committee to do “what we do all the time, with hundreds and hundreds and hundreds of thousands of dollars. We step away from our policy and give money away.” [Yikes – talk about brutal honesty!] She says you can call it a gift, and they can go into closed session if that is what people want. She says “I don’t like the I told you so dance.” She doesn’t want to lose Danisco. Being proud of our previous system is admirable, but this is not real estate. No one is going to stand in line and ask for money because we did it for Danisco. We only have one chance at this initial seed. We do need criteria. But step away from policy and grant this.
Unanimously placed on file. I guess we won’t be playing poker after all.
BURR OAKS SENIOR HOUSING PLAN
Rhodes-Conway asks for a brief explanation. Dan Rolfs points out the process explanation in the packet. He says that previous plans talked about need for senior housing and this site was identified. The 2009 capital budget there is $3M to buy the properties in the project area and use CDA powers to transfer the land to a private developer. Before the funds can be spent, the document before them is required. These are TID 28 funds. Archie Nicholette says that there was also a public process required. So, this is a conceptual drawing and the public process will continue, two more meetings. Rolfs says that if this is adopted, there will be a RFP will reference back to this plan.
Bruer thanks staff and everyone else under the sun and babbles without saying anything of consequence. He just does it for a really long time. Passes.
SOUTHWEST INDUSTRIAL TIF
No discussion, approved.
NORTHSIDE TIF DISTRICT
Clear asks about the lack of a generator. Gromacki says that we usually only amend a district or create one when there is a project imminent. He explains that we try to use TIF quickly and don’t want to stretch it out the 27 years allowed by statute. The other jurisdictions (MMMSD, County, Tech Schools) get impatient and want thier tax dollars. He also says that it lessens the risk of our investment. Clear asks about our success rate of the generators. Gromacki says that for Allied Drive they new there were projects that didn’t even need TIF. Also says in Broadway Simpson they could purchase a property off the tax rolls to on the tax rolls was a big jump. Some generators, Union Corners were imminent, but fall through. They want a project to be worth at least $3M. He says that TIF 28 had 5 generators, so there isn’t always one. Generators can also cut back on how much we have to borrow. Gromacki says that this is the best we can do in current conditions. It’s been discussed for a long time and it need attention. Its a commercial corridor that needs repari and this is what TIF was invented to address.
Rhodes-Conway adds that she knows of two properties where there has been significant investment since 2009, which the TID goes back to. And, she says there are three other properties that she knows is thinking about investing. They are not large projects, but she thinks that this is a relatively conservative district with small projects. Investments we will make will also be relatively small.
AFFORDABLE HOUSING TRUST FUND FOR SECITON 8
Place on file.
Rhodes-Conway asks about the gap of payments for August. Tom Conrad says there was a shortfall of $578,000 and they got $600,000 and they are recalculating September and since the $578,000 was an estimate and they need to crunch all the numbers before they go back and make people whole in August. Between now and October they will figure out if they can assist people with those payments for August. He said that they have to “use it or lose it”. HUD has been auditing them for a few days.
Sanborn asks what will happen in 2010. Conrad says that $18B instead of $17B is what Congress is looking at for next year. They don’t know how those funds will be distributed.
ANNUAL REPORT ON CITY’S FINANCIAL HEALTH
Comptroller handed out paper copies, available on-line.
This is the first year they have done this because of rule changes. It has been audited, has the annual financial statements and auditors reports, but this has a more extensive check list that hasn’t been included in the past.
Rhodes-Conway asked if there is anything that stands out or that we learned. Patty Brill says to look at the Management discussion analysis, a 15 page report. She also says the statistical section is also of interest.
Verveer asked how often there are GASB updates. Brill says in 1999 GAB 34 and since them it is GASB 52 so there have been alot of changes in the last 10 years. Brasser says communications and Enron rules and fraud detection measures have been put in place. He notes there are costs associated with that in that staff spends more time working on it. He notes investment reporting has also changed in the last 5 years.
Clear clarifies that everything is all in one report now. Yes. Report accepted.
They moved to approve 2nd QUARTER BUDGET REPORT and TREASURER’S BRIEFING ON INVESTMENTS
He talks about PILOT being up, room tax being down (expects to be $1.1M short), building permit revenue down but a little bit better than 1st quarter, ticket revenue up. He says that they are off by about $4M and they are controlling costs, but it won’t be enough to cover the losses in revenue and they will be short for the first time in years. The Mayor asks about hiring freezes and travel freezes. Brasser says that hasn’t been calculated. Sanborn asks about what we do, and Breasser says we would take the money out of the fund balance. We have a strong balance, we have 13 – 14% of our budget. However, usually we are underbudget and we use that money to apply to the next year. This year we won’t have that. Sanborn asks about state laws that might apply. Brasser says we have to have a balanced budget, but there are no over expenditures and Expenditure Restraint is ok and we won’t levy more taxes so levy restraint isn’t relevant.
Rhodes-Conway asks how we compare to other municipalities. Brasser says we are generally in pretty good shape when compared to cities and the county. Our property taxes are a stable funding base. The county has other issues where they bear the brunt for uncollected taxes and they rely on a sales tax. We have a reasonable fund balance and others don’t.
Dave Gawenda talks about the investments. He talks about the three buckets of money we have, the part that we need for cash, the second for short term investments and the final for longer term investments. The money we need to keep most liquid is the problem. He says the return is very low. He says that is what is hurting us the most. He says we just got the $120M of taxes from the county for the city and county, but that has to stay liquid. He says they are exploring options. The Mayor asks about the budget. Last year it was 6M, we budgeted $4M and it looks like we might end up more around $2M. Sanborn asks about Parking Utility Investments. Gawenda says that he invests in one lump and the comptroller determines what funds are used where. All the investments are pooled and they all collect the same interest. They use the average rate.
Clear asks about the overall health of the city. Brasser says because of our fund balance, we can absorb a couple million short fall and still be in good shape. From a national standpoint, we are doing better than many other areas of the United States and so we are looked upon favorably. Clear asks if our ratings are relative and Brasser says we’ve been AAA rated for some time and there is nothing to suggest there is any problem with that. We’ve always had positive budget balances at the end of the year. That won’t happen this year. We can’t continue like this for a few years, but we’re ok. Gawenda says the county only has a 2% rainy day fund. He says City of Madison is in a good place for having that kind of a reserve. Brasser says the School District lost the AAA rating a few years ago due to the revenue constraints, they have used up every reserve that they could and they don’t have reserves. That isn’t a reflection on them, its the revenue constraints in state statute. Clear asks if this has an impact on this year’s budget. Brasser says this is part of the numbers they are crunching.
Reports accepted.
