There’s a meeting at noon on Thursday, and new information (not previously attached) came out yesterday. I’m not sure how much most of the information is worth, I find much of it unsatisfying, leaving me with even more questions. This information all came out in a rush in the last push to pass the project and I don’t think it really got much attention. So, here it all is again, in case you need a refresher about the TIF for this project. It kind of all stinks.
Memo on the Condos
Personally, I find this memo very unsatisfying. What if they build the condos and make money on them, and the gap is reduced because of the extra profit. Shouldn’t the city be somehow compensated for that? Do you really believe that the condos will be built for exactly what they sell for, with no profit at all?
Costs for the “Public” Space
Another unsatisfying memo. The use of the word “probable” throughout is disturbing. And I’m wondering why some of these costs are “public” costs. Who determined which costs are for the hotel and which ones help the “public”. Why is it “public space” for shoring up the parking structure? ($150,000) Or lead paint and asbestos removal? ($200,000) Deconstruction of the ballroom? ($1.2M) Relocation of the mechanicals? ($200,000) The car drop off area or “autocourt” ($1.75M)? More mechanicals relocation? ($200,000) More “shoring up” of the building? ($900,000) Strengthening the current ballroom floor? (500,000) Closing off the current parking entry/exit? ($100,000) Cutting a hole in the wall for parking ($800,000), etc etc etc etc Are these really public costs, or costs for the hotel . . . check out the list. Of the first 11.1M, I think only $3.75M is legit. And the $2.45 also seems legit. You could throw in another 900,000 for the waterfront improvements. But that doesn’t add up to $18M in my mind. I think we’re being ripped off. The “public improvements” seem to mostly benefit the hotel. Seriously, look at the list yourself.
The other issue with this memo is that in 4 of the 6 categories, the consultant found that the TIF request was way off from actual costs. In one area the TIF request was $1.3M and the consultant found it should only cost $300,000.
Projections on when the TID would close
Of course, these projections are all wrong at this point, since the project is not starting. So, also, unsatisfying.
The TIF report to the Board of Estimates
Much of this is irrelevant to the committee, including the violations of the TIF policies. But, they bear repeating anyways, so here they are.
The Project also requires three exceptions to TIF Policies: 4.1 (8) the 50% Rule; 4.1 (10) the Self-Supporting Rule and 4.1 (12) Personal Guaranty. They apply as follows to the Project:
1. Policy 4.1 (8) 50% Rule—No more than 50% of the tax increment generated by a project may be made available to that project as TIF assistance. The incremental value of the Project, as estimated by the City Assessor’s Office, would generate sufficient tax increment to support a TIF Loan of approximately $3,300,000 if the 50% Rule was applied. The proposed loan amount significantly exceeds the limit of this policy. Approval of an exception to policy that allows 100% of the tax increment generated by the Project would support approximately $6,600,000 of the $16,000,000 TIF Loan.
2. Policy 4.1 (10) Self-Supporting Rule—This rule prohibits using tax increment from other property with in a TID to supplement a particular project. In this case, excess tax increments generated by other properties within the existing and amended TID #32 boundary would support the remaining $9,400,000 of the TIF Loan. TID #32 is currently generating sufficient tax increment, estimated at $1,500,000 per year. Combined with an estimated $900,000 of increment generated by the Project, staff forecasts that tax increments will be sufficient to repay the entire $16,000,000 TIF Loan by approximately 2019. The City has previously utilized a similar repayment structure for both the Block 89 and Marcus Hilton at Monona Terrace projects.
3. Policy 4.1 (12) Personal Guaranty—TIF Policy requires that a principal of Developer provide a Personal Guaranty in the total amount of the loan to guaranty that all the conditions of the Development Agreement are met. In the case of a default, the City could take action to receive full repayment of its loan. This is not to be confused with the Tax Increment Guaranty, which requires full repayment each year of the TIF Loan. A Personal Guaranty places an individual in charge to address defaults such as not keeping the building in good working order or changing the use function or use of the building so that it would violate the declared public purpose of the loan (i.e. changing from a hotel to an amusement park).
The interesting thing about those exceptions are that they are not some silly policy changes we made tinkering with priorities and goals . . . they are long standing core principles of TIF. Here’s the rationale for the exceptions.
The Project demonstrates the following public policy reasons to grant the exceptions outlined herein:
1) The Project restores public access, with some limitation, to the lakefront that currently does not exist in the current development at no cost or liability to the City for its maintenance, repair or operation.
2) The Project proposes to create 230 to 240 full-time equivalent jobs.
3) The Project renovates and modernizes a historic structure while preserving its architectural character.
4) The project retains an historic Downtown business.
5) The Project adds approximately $45 million of new tax base.
6) A similar precedent was established with the $12.7 million TIF Loan to Marcus Hilton at Monona Terrace loan in 1998. The Marcus Hilton project also provided a public access linkage to the $60 million Monona Terrace project and lakefront. TID 25 increment and donor increment from TIDs 6 and 14 helped to repay a TIF loan that is still outstanding. The $30 million TIF Loan to Block 89 was also the recipient of increment from TID 25 and donor increment from TIDs 6 and 14 and 15 toward the public purposes of developing downtown parking and retaining jobs. It is unlikely that a similar project in future could claim precedent for this policy exception—i.e. a historic hotel, located on the lakefront, restoring access to the lakefront, retaining a Downtown business and creating 230 to 240 full-time equivalent jobs.
7) The positive growth in TID 32 and the tax increments generated will repay the Project debt and close the TID by 2019, a nine-year payback that is considerably shorter than two other major projects granted these exceptions. Barring no further major expenditures in TID #32, the district could close in 2019 with a lifespan of about 16 years. Comparatively, the Marcus Hilton and Block 89 Projects, located in TID 25, are on a much longer repayment schedule (approximately 27 years), resulting in TID 25 being open for its full 27-year life.
What really matters
In the end, all the above information only matters if it fits into the criteria listed in the memo. The only things the board can consider are these:
“The board shall base its decision to approve or deny a proposal on the following criteria:
a. Whether the development expected in the tax incremental district would occur without the use of tax incremental financing.
b. Whether the economic benefits of the tax incremental district as measured by increased employment, business and personal income and property value, are insufficient to compensate for the cost of the improvements.
c. Whether the benefits of the proposal outweigh the anticipated tax increments to be paid by the owners of property in the overlying taxing districts.”
More to come, I’m sure. Thursday I believe the Joint Review Board will get a presentation on the project and will get a chance to ask their questions. They aren’t expecting much testimony from the public, but if you missed the first meeting, you can testify. It will be interesting to see how the County and School Board members react to the responses to their many questions. I think they are very skeptical and I think they too, will end up unsatisfied.
