While most of the reporters, especially television reporters were covering the 5 minutes the Council spent on the pink flamingos or the time they didn’t spend on the plastic bag ordinance . . . they all missed a much more important discussion about the future of how we decide who gets TIF money. So, I feel bad, and have been significantly scolded for not getting this up sooner. And, I humbly apologize to my fan club for making you wait for this post! 🙂
MOTION
Bruer says the motion is to place on file without prejudice. [Lots of people ask me what “place on file” means it means to deny/toss in file 13/reject/ignore. “Without prejudice” means that the issue can be brought back up without waiting. It essentially says they’ll consider it again if there are different circumstances. For some issues you can only reconsider after a certain amount of time passes. In this case, I’m not aware of TIF requests having any bars on reapplying for money. I think it was just “comfort language”] Verveer seconds.
Compton moves a substitute – adoption of item.
I don’t know why the Mayor thought it was out of order, but he asked Attorney May to look at it.
Meanwhile, Compton says she is going to speak in favor or her motion or against placing it on file.
May interrupts and says it is in order, Canre seconds it.
QUESTIONS (It’s Lady’s Night as they were the only one’s asking questions.)
Compton asks Tim Cooley to give a synopsis and says Board of Estimates didn’t get a presentation and they didn’t get the memo from Cooley. She also asks why results of Economic Development Commission are not in the file.
Witzel-Behl (City Clerk – Deputy Clerk Adam Gallagher was filing in for Tammy Peters that is the usual clerk at the meetings.) says she’ll looks into why notes not in the packet.[Probably because they weren’t done.]
Cooley says that packet has the is memo from the 24th that has the analysis requested by the Economic Development Commission. He says he could read pieces of it. And does . . . you can read it here . .. . says 179 jobs and 370 with the multiplier affect.
Compton asked what the goal is?
Cooley says Danisco is an anchor, could be much more of an attractant with expansion. It could provide good positioning for the park. They can be a resource for other companies that would move there. They would make their facilities available for companies that need special equipment. They fit perfectly in with the model that we are trying to accomplish for this area.
Compton asks if this is an investment in the city, not Danisco.
Cooley says “correct” and then repeats what she said.
Compton asks if they were ever threatened that if we didn’t do this they would pick up and leave or was it because they bought property in Rochester.
Cooley says there was never a threat to move, that they were very pragmatic and they were looking at other locations. They decided to have another operation elsewhere based on an internal analysis that it couldn’t happen quick enough in the city. They have been very cooperative. No coercion at all.
Compton ask bout department recommendation?
Cooley says yes, they recommend it.
Kerr asks if they submitted a TIF application? But not sufficient information to underwrite it? They can’t find a financial ‘but for” so how did you get 179 direct jobs?
Cooley says that it includes existing jobs they have here and the expansion phases jobs. More analysis was done by the Wis Dept of Workforce Development to look at Dane County multiplier. 154 jobs right now. New jobs is 20 – 30 jobs. It will be done in phases over the years.
Kerr asks if the is a job guarantee.
Cooley says no.
Kerr asks what the additional investment is?
Cooley says they have three new phases planned. Could be here or elsewhere.
Kerr asks if they are weighing Madison and Rochester? Is Rochester offering anything?
Cooley says they don’t know. They have heard the costs are lower elsewhere.
Kerr asks if this is $43 – 52M for three phases, what is the economic impact for this phase?
Cooley says $13M investment.
Kerr asks what they want for the other phases – was that part of the TIF application?
Cooley says they did not apply for the other part. This will create 20 – 25 jobs.
Kerr asks how they will guarantee the jobs?
Gromacki says policy makes it optional.
Rummel asked differences between blight and industrial TIDs. She says she doesn’t understand the comment about if this is an investment in the infrastructure or company.
Gromacki says infrastructure is pipes in the ground, etc. He says he think it is economic infrastructure – as opposed to a road. We did do a road for about $200,000 a couple years back.
Rummel says that gets to the 50/50 policy. So they have invested in roads in the past.
Gromacki says TID 24 spent $7M in all the infrastructure, $4M for Marsh Road Bridge, it was pure increment they spent. In the new district they are committing $6.9M more investment in the area – committing a great deal of resources.
Rummel asks about industrial and blight TIDs – when do they decide to do an industrial tid?
Gromacki says an industrial TID has to be 50% zoned and suitable as manufacturing. That’s it. Blighted TIDs need 50% of land area to be blighted as determined by a blight study.
Rummel asks about policies.
Gromacki says job creation is the top objective, and that the job creation guarantee is optional. Beyond that, revitalization of high need areas is a top priority which can also involve job creation. Points out the E Washington Capital Gateway corridor could also do job creation.
Rummel asks what we supported in TID 24?
Gromacki says that there were private investments of 9 or 10 loans. The first was the World Dairy Center that we assisted with storm water detention ponds. He says in TIF 22 we assisted the corporate center (golds gym), $4.5M in that district also storm water detention. We’ve put $12 – 14M into this area. $3M in Rayovac project, purchase land to get them to stay (1984).
Rummel asks how to do due diligence if we stop using financial gap analysis. How would we look at competitive factor, what standards would you use?
Gromacki says he has been doing gap analysis for 20 years and its the only thing he knows is defensible. Has been brought before DA with a complaint, nice to have the files to show that we have the same standards. City attorney recommends that as defensible. Competitive factor is not finite and defensible. The memo he just saw today uses “maybe” and other wiggle words. We don’t know what Rochester is offering, we are leaving ourselves at the mercy of unknown facts and it is a very difficult decision to make by subjective factors.
Rummel asks about city attorney opinion and yellow light. Other communities don’t use but for – what happens in other areas of the state. Who else uses but for the same way we do.
Gromacki says Milwaukee does, their process if different, the comptroller does independent analysis and weighs the two analysis. Other communities are not as sophisticated, many will hire a consultant and every project that comes in gets a green light. Seen in recent days that July 10 article in the Milwaukee paper that a plethora of TIF districts in smaller communities are not performing and districts are failing, dollars aren’t there. Legislature has been asked by lobbying interests to do 40 year TIF districts. Very few are actually using the test besides ourselves. Part of decision is not just to establish need but also analyze feasibility.
Rummel asks about amending a TID and changing the budget because we already gave money to BioAg Gateway – asks about fiscal note.
Gromacki says no increment has been accumulated and we are using future increment for this.
Cnare asks May about competitive factors.
May recommends that we change the policy.
Cnare asks how long would that take, is there language we can adopt from other place?
May says it would be extensive, may be a special committee to look at it.
Cnare asks Cooley if there was a policy change, could Danisco wait for us.
Cooley says no, would have to be an exception.
Cnare asks if state is doing anything.
Cooley says they are talking to Department of Commerce on tax credits but he doesn’t know if the tax credits would equal $300,000.
Cnare asks if it is a finite negotiated process, could they use that process to ensure that Danisco would stay.
Cooley says there are no guarantees.
Anare asks if there is anything else we can offer to keep them here?
Cooley says we have very few tools in the economic development quiver.
Cnare asks Gromacki what he learned that wasn’t in the application – is application complete?
Gromacki says he didn’t look very far after looking at the bottom line, they made $35M net in a recession. If use 1.5 for each dollar of profit you can easily borrow $13M, so no “but for”, because there is no need, no gap so staff doesn’t go any further after that. Financially doesn’t meet the gap analysis standard.
Compton asks Gromacki about what she thinks are disparities – at BOE she asked how many industrial TID loans we have.
Gromacki says he said 5 – 6 is current.
Compton asks how many residential?
Gromacki says they have $95M invested, 68 total projects throughout the city.
Compton asks about money we spent on infrastructure and how much was left in the TIF when I closed. [At this point, she was really rude to Gromacki – it seemed because she wasn’t getting the answers she wanted.] Compton says there was $6.7M when it closed, with cash in the TID how much debt did the city have to have.
Brasser says in early years we did borrow money to begin infrastructure – a lot of growth over time and as a result, we were using increment to make the improvements. Transportation and road extensions to open it up for additional development.
Compton asks Cooley a question Rummel asked Gromacki – feels the question was misdirected. Asks about creating jobs in non-industrial TID vs. industrial TID, how is it different than a hotel or Starbucks.
Cooley says multiplier effect is determined by the type of job created. Hotel might have 1.4 or .4 jobs created in addition to job in hotel. Tech jobs can be 1.8 to 3 or 4. Interesting cuz seldom understood. 2.8 vs. 1.6 is actually 3 or 4 times better – so .6 to 1.8 is three times greater impact of that job. Danisco is researchers to blue collar and administrative. 2.1 multiplier on the jobs.
Cooley says the other point is that we normally look at “but for” – inadvertently only allows us to invest in weak projects – ones that can’t do it without us. [I found this argument to be fascinating, instead of using TIF for projects that wouldn’t otherwise happen, we should be giving money to projects that already have enough money . . . why? Why would we give them money? For what?]From an economic development perspective, would rather invest in strong companies – to be able to grow and expand. Evening out the playing field, they can afford to be here or anywhere else, but they want to level the playing field and allow them to make an easy decision to stay in Madison. $300,000 is the finite negotiation – this is the amount that fits within our policy for the 50% of the increment. Cooley says that some assessments have been changing here, good time to make an investment – not only additional increment from assessed value but also growth of property values as a whole. Some of smaller communities is a dramatic misuse of TIF, they have been too aggressive, we’re not doing that. The timing is critical, all property values have fallen – some other TIFs were overextended. We have a large base in Madison – same article that was alluded to id’d problems in smaller communities but pointed out that larger communities are not using TIF enough.
Compton asks about the email to Alder Rummel to move around money to cover Bioag.
Cooley doesn’t answer.
Gromacki says there was $2M for Biolink, $1.7M for Femrite Road extension. $3.7M has to come from somewhere – this district has not proposed any new generators beyond Biolink, so needed to cover the costs not in the additional plan, so deleted some costs for now until the increment catches up and then can add it back in. Increment at the time has dropped from projection because economic conditions and reformulation by Department of Revenue.
Kerr asks about guarantee to complete the project? Is there a guarantee to complete the expansion.
Cooley not aware of any, not going to write a check until they know they are going ahead with the project. It could have a completion bond. Cooley says could be done in the agreement.
Kerr asks if that is what they do?
Cooley thinks we don’t give them the money up front and let them go but have them draw down. [Sadly, I believe he is guessing and doesn’t really know, but it didn’t stop him from talking anyways.]
DEBATE
Compton says that she is bothered by the Femrite project. TID 24 had cash left over, this is not something we are putting ourselves in the hole for. She gets angry when we start throwing words and money around, it makes you dizzy. We are investing in ourselves, these are real jobs – she says “god bless you mayor don’t mean to belittle you” but library jobs are only there til finish building. These are 25 real jobs with retirement packages – will be jobs for entry level homes. We don’t have entry level jobs, we don’t have enough to support our programs we want to see happen. This is industry and we need to have it. Danisco situation is central. She “loves Cooley and all but” she tells people to take a map and a pen and put pen on area it sits and it is central, it is an anchor and if they have a $13M expansion, we would be drawing all those businesses we want to see in the east quadrant. We should have them do as much expansion as we can. There is more at stake than $300,000. Injection of TIF money in an industrial TID is not a donation – it’s an investment in a building. [I missed some stuff here, my notes made no sense, but then maybe what was said made no sense in the first place – it was something about sidewalk assessments that I was confused about when she was talking.] She talks about the $106,000 grant[Ahem, half grant, half loan] in CDBG money. she says that was a business that is untried with owner that never did that business before. We put a restriction of one job for 6 years for $106,000. For three times that investment and you get ???. [She lost me again.] Compton says that this investment is shared by county and state. Dansico has been to the job center looking for employees and to see what financial help we have for them. They are from Denmark and they hear all kinds of things about what they can do to get a leg up. We need to change the way we think and this project is a good way to do that. $106,000 would normally go to nonprofits, we stepped away from our policy, written or verbal, and now we have a policy that says we can’t give $200,000 unless they really need it or jimmy their books to show us that they need it. Anyone can do that – jimmy the books. She is asking this body to invest in this city not in her district, in this city for the creation of real jobs, real entry level jobs. No one is knocking down the door and we don’t have to do it 10 or 15 times. This is centrally located, need injection to encourage others to move here, to do the type of business we want to see. They will probably go through with $14M and do a few more phases, but will they do the big thing that we would like to do, I don’t think so, they just bought land in Rochester NY to move $70m of this project, she wants that here.[I don’t know if it was just me, but she was arguing that we should give them money that they don’t need so that they can go build in Rochester anyways. She said they already are going elsewhere for the big project, so I don’t understand why we would give them money. It seems something was missing from her argument.] So, asking them to put faith in new Economic Development Director and step aside from the policy that may or may not be changed, no time to refer until changed. She says they step away from policy all the time.
Cnare offers an amendment. She says that this would be an interim approval and that they would come back with a negotiated document and that the $300,000 would be reduced by same amount that the state provides. She wants a half step forward – it was seconded. Cnare says it is a comfort resolution – contingent upon later approval of the negotiated document and that $300,000 be reduce by amount state might give. The Mayor describes it as a conditional approval, requiring them to come back to the council with agreement between city and Danisco. And that any financial assistance they get from the state will will reduce the amount we give.
Bruer is concerned about TIF policy issue – knows mayor’s office is bringing together a workgroup of alders from Board of Estimates, Common Council Organizaitonal Committee and Economic Development Commission. He says they will be developing policy, vetting it and looking at checks and balances. Says they are acting on the fly tonight and won’t this gut the TIF policy.
Gromacki doesn’t quite know how to answer this [and keep his job/not piss off his boss.]
Mayor interrupts and says that this is a policy decision.
Bruer redirects to city attorney – what kind of position does this put us in – are we compromising our standing if there is a challenge in court. Bruer says that if people vote for this they should know that is what we are doing. Otherwise, why are we creating a committee to look at this.
[I’m not sure why Bruer is asking questions now, they don’t seem to be new questions based on the amendment and the time for questions is over.]
May says that his advice is in the memorandum, if you go this way they should change the policy and establish standards and if approve these without doing that, then you are getting into a legally risky area.
Bruer says that Board of Estimates was unanimous based on based on legal counsel and the integrity of the TIF policy.
Rummel urges rejection – Compton said that the company will likely do the phase anyways, what do we tell our taxpayers? They have to pay this and the other taxing jurisdiction forego money of growth for years. Why should be well the school district and county that we are taking their money away. If she was on the joint review board she’d want to know why we would give money to a company that didn’t seek the money, but were encouraged to apply. She feels it was unfair to put the council in this position where they have to say no because the project doesn’t fit with the policy – they are being put in a very difficult position.
Bruer asks Gromacki how he would defend the city’s position if we go forward. [Again with the questions? Where the hell was he when everyone else was asking questions?]
Gromacki says that he had to go before DA and he was very glad that we had the defensible data that we could show them. He could show the need in project a and b and that they were using the same standard. If go to the other standards wouldn’t feel so comfortable. More subjective standards. No negotiated statement – no “but for”, instead it is all based on “maybes”. Hard to talk about what might or might not happen in Rochester, he would be concerned about trying to defend this.
Cnare says that we are looking for time to get the criteria to measure need in the competitive environment. This buys us time, also is public relations and it give Danisco a little green light that you are worth thinking about, sometime policy needs to be changed and sometimes it needs to be accepted. Will have a second kick at the can. Staff can think about these issues and we can look at the policy change. Support it to give us time to make a decision.
Compton supports the amendment. Sees it as a step in the right direction. Message to Danisco is that we support them. But asks Gromacki, after noting she has been an expert witness in two different fields, she asks him to come up with defensible requirements for any policy that we might come up with. That isn’t an argument – not having defensible data. The fear of a lawsuit is not a defensible argument to place on file. We can be sued for anything anytime and it’s a ridiculous notion. She says the amendment is friendly. No objection to making it friendly.
Compton speaks on . . . she says his is her 6th term – so many times we have stood away from policy. She brings up the names of previous alders like Gary Poulson, Steve Holtzman, Ken Golden and then mentions Bruer and says they have heard this is not good, don’t step away from policy and don’t do it again. We don’t have time to wait, now is the time to step away from policy. Don’t have time to say “I wish” we had stepped away from policy. She wants to act in good faith with Danisco. She says she is too old to do I told you so dance. So asks again, step away, make the vote and with Alder Cnare’s protections – you can do something good for the community.
Clear appreciates what Alder Cnare is doing, but doesn’t affect his vote, that’s why didn’t object – underlying issue is the TIF loan and it doesn’t impact that. Supports concept of expanding use of TIF, and supports subcommittee to look at the issue to make better use of the tool and align it better with our economic development plan – but until we do that, they are walking down a dangerous road. Yes, they do violate their policies from time to time – but this is too fundamental, it is a violation of core principals of the policy. If we had a new policy in place, would like to support this project, but not until that is in place. Does support place on file without prejudice to give us time. If we can make the policy changes in a reasonable amount of time, they can apply again.
Bruer takes the chair, Mayor steps down.
Rhodes-Conway appreciates Compton’s passion on the issue and advocating for her district as we all must do, but she can’t support this. Appreciates Cnare trying to make us more comfortable – doesn’t want to vote on basis of good PR. Wants to vote on good policy. We can do other things and not turn policy upside down. She asked what Danisco took into account when they make siting decision – it’s a long list – some of which we can influence on a short notice. Given the list it is probably more important to invest in transportation, strong neighborhoods, vibrant downtown – the kinds of things that make cities attractive – those are long term. Short term a small amount of cash violates the policy. Long list of other resources – if want to build good relationship lets help them take advantage of those, rather than trying to change policy tonight. Does agree that we should have conversation about industrial TIF policy. If going to use it more for job creation, we should have a conversation about how different rules apply and we can’t have that tonight. May very well support having a different standard or test, but not able to do it without the discussion and reviewing the options. We need to make a decision based on x y and z. When she had public meeting about TIF 40 and stood there and listened to the constituents –she thought that all she was going to hear about was that their properties were blighted. What they heard was concerns that the city would give away money to large corporations and they did not want TIF dollars to be a handout for corporate welfare. Comfortable that she is representing her constituents when she votes no. They don’t want us to give money to companies with no justification. If we had an analysis, vetting or process to look at application on some standards, then she could sell it to her constituents. She could say they vetted it and they compared it and it is good and it meets the policy. And can tell another company that they don’t meet the policy on this basis. They don’t have something to turn to when talking to constituents about tax dollars – they need a consistent policy from proposal to proposal. Place it on file and join her in the discussion.
Kerr not voting for it, even tho supported the BioAg Gateway. She has a couple observations that make her concerned. Appreciates Cnare’s amendment but doesn’t help because loan should be tied to jobs and reinvestment. This is a multinational company – and if we can’t come to an agreement on number of jobs or completion then where are we, we are deeper in an uncomfortable place. She wonders why $300,000 and what is the real bottom line. Gromacki can’t run a sufficient analysis as is. Wants to know the bottom line – she’s not into policy and committees, fine with being more aggressive with TIF, but too many question marks with this application.
Cnare knows that it boils down to policy. We are not turning it over, we are making an exception and it is a measured exception. We can vote no later if we don’t feel that we have enough of a guarantee. Sometimes exceptions need to be made – she gives the example of Capital West and the Multicultural Catholic Center – we did those because it was the right thing to do.
Solomon [He’s kneeling at Schmidt’s chair because his microphone doesn’t work.]. He says it is a good discussion and he’s struggling with it. Cnare’s friendly amendment has convinced him, this is an exception, not a complete rewrite. All we are doing is saying it is important – if we had a policy to allow competitive factors we’d approve it. Let’s give ourselves the time and we can develop the policy to look at the competitive factors – and come back three months from now and look at it again. If we realize that the fears we have are mitigated, we can support it but if we don’t, we can vote against it. We all know we need to look at TIF differently. We have a project staring us in the face – can always vote no later.
Clear – says that it was 4 – 2 to recommend adoption at the Economic Development Commission and this is a 15 vote item to amend the budget. However it is an 11 vote item to place on file.
Compton asks if it is 15 votes with cnare amendment.
May says that if you want to strike all the language that amends the budget could be 11 votes.
Compton declines.
Mayor says there is alot to admire in our current TIF policy. He says we have the tightest TIF policy in the state. He says that it is as objective as you can be, the gap analysis comes down to a number. He says that with the recent changes to make job creation and economic development a top priority – we couldn’t have meant that we would only do real estate deals. In light of the changes we made, we need to look at how else we would do it. Cooley’s job is to rattle the china, [Wow, that’s kind of amazing, he basically just gave staff carte blanche to put the council in awkward situations and to make them look anti-business in order to make a point.] appropriate he did that, but a significant change in how we do TIF and carries with it some perils. Mistake to pass it tonight for this project without the policy change that is defensible so we can point to the policy. He talked to council leadership – he will appoint a committee that is a subcommittee of EDC, BOE and CCOC and they will craft a policy to address issues like Danisco. We need to think about why we want to help Danisco and distill from that the principles that we can apply to other in similar circumstances 0r we might find there is no way to draft such a policy. We owe it to ourselves, the Economic Development Director and companies to explore the issue. Need a policy to apply to circumstances equally.
ROLL CALL
AYE: Cnare, Compton, Maniaci, King, Palm, Pham-Remmele, Solomon
NO: Eagon, Kerr, Rhodes-Conway, Rummel, Sanborn, Schmidt, Schumacher, Skidmore, Verveer, Bidar-Sielaff, Bruer, Claussius, Clear
Fails, 7 – 13.
They go back to the main motion to place on file without prejudice, it passes with only Compton audibly voting no.
