School Board Decision on Edgewater TIF

Brief. I got the feeling they were threatened with a law suit or something by their lack of discussion. And, despite previous headlines, they voted unanimously against.

PUBLIC TESTIMONY
Peter Ostlind – He says he and David Mullenhoff put together a report they have. He can discuss anything in the report, he did review superintendents report and analysis by the consultant, and this is similar to the checkbook analysis that they have in their report, the average tax payer is 15 to 25 or more years until they make up the loss from holding the TIF open. The superintendents report analysis is based on objective saving of $46 per year if closes in 2021, but fully 50% of that is normal appreciation of other properties, the Edgewater only contributes $23 in savings to taxpayer and if do present value calculations, we start with a negative number and its worse than the consultant projects. We get the first $23 for doing nothing.

Gene Devitt, chairman of Mansion Hill, 28 E Gilman St, against the TID, wanted to talk about the blighted houses and the study done by the city. The First Church of Christ was restored a few years ago, the Mason building also restored, the buildings they pointed out have little repair to them if any, they have been restored, 28 E Gilman by National Guardian Life is his house, it looks like Adams Family house, that has been restored, he owns another mansion across the street, the Bashford mansion, it has also been restored, on the corner of W Gilman and Wisconsin Ave, Governor Schmedeman (?)’s house and the houses on W Gilman owned by Mohs, are also not blighted, if anyone thinks those houses are blighted I would challenge them, they have been restored. The report is wrong cuz they needed 50% blighted properties, he offers a walking tour to the board members, he can point out the houses in disrepair, recently 3 houses have been reclaimed as single family homes, this poor report is just get enough properties to be blighted. He lived downtown since 1975, it was in poor shape then, but neighborhoods are coming back strongly and it’s important to protect the historical areas.

Fred Mohs, the whole process has been different, its about getting to “yes” and it was put on a fast track. One of results is that information has not been gathered and processed, anything negative in the project has been rejected or put city staff in danger, that is unique to his experience in Madison. His example is the condominiums – there is $7M in costs listed, in the gap analysis and sales price is $7M. When they suggested 2 floors of condos can be removed, Bob Dunn said he’s really going to make $10M, that doesn’t show up in the city financing, they ignored it, if that is true, the gap goes from $16M to 6, but Joe Gromacki says they have to be conservative and not count it, by not counting his profit, we have a gift to the developer he is not entitled to. Just recently developer was claiming a very expensive masonry repair job, they were taking out construction tile that cost him $1M and now at UDC said it is just a tuck-point job, that doesn’t show up on the gap analysis, there’s a lot to question here.

Amy Supple, has same board she carries around. She says she is a representative of the developer of Edgewater, she wants to speak to benefits of the project, detractors of the project have put a lot out there, but the reality is without the TIF, the Edgewater won’t be developed, the Edgewater will provide a great public amenity in the downtown, beyond that it will significantly enhance the tax base, very few parcels can be redeveloped to show that growth, the Edgewater alone will increase the value of the district by 30% so she asks them to consider the long term benefits in terms of tax base and other taxing value. She realizes they won’t immediately benefit, but the hotel will create, sales, hotel and employement taxes and visitation and spending in downtown, so there will be significant benefit to the city. They put together an analysis that shows that there is a 39 year benefit, which is the useful life of the asset, it produces $52M for city, 14M for schools, $8.3M for Dane County and $4.7M for Madison College, that does not take into account additional tax growth the project will generate.

PRESENTATION BY CITY STAFF
They tabled this topic and waited for Board of Estimates to get over so Dean Brasser could join them.

Dan Nerad, Superintendent of Schools introduces the subject, says they will hear from Joe Gromacki (City of Madison TIF Coordinator) and Dean Brasser (City of Madison Comptroller) from the city and then they will go over their recommendations.

Gromacki says there are a few typos, on page three it should not be $78M but $87M and that affected some of the math, so he hopes they have the updated numbers.

Maya Cole, School Board President says they got them this evening.

Gromacki says this is the format they have been using, they have added some info, it has been vetted many times by committees in the City of Madison, they are here to present the information at their request so that they can instruct the school board member how to vote at the Jt Review Board. All the numbers are set forth on value of district, closure of the district, costs available and what is planned for remaining years. Gromacki says that originally they thought the district would would close in 2015, since they did the audit, that has changed to 2017 for the closure of existing TID. As a result of the amendment that would increase the when it would close to 2021. In early articles it was 2015 and 2019. He says he can answer questions.

QUESTIONS OF CITY STAFF
No comments or questions.

PRESENTATION BY SCHOOL STAFF
Nerad goes over the recommendations. He reads his entire statement. He says by way of context, the use of TIF by municipalities have been approved by this Board of Education and prior boards. He says that they realize that the program allows for increased growth in municipality and property tax base, when looking at the proposal put forth by the city of Madison, and in formulating the recommendation by staff, the recommendation conforms to the criteria the Joint Review Board has to use to approve or deny the project.

The criteria are
a) Whether the development expected would occur without TIF
b) Are the economic benefits of the TID, as measured by increased employment, business and personal income and property value, insufficient to compensate for the cost of improvements
c) Whether benefits outweigh the anticipated tax increments to be paid by property owners in overlying tax districts.

They outline the information in their packets in three areas
1. The but for standards are fundamental for the approved amendment but that fact alone does not cause a negative impact on the district.
2. In depth analysis was prepared by Robert W Baird, based on his request to have financial consultant look at data and provide a review, that is in a, b and c attachments. He says it would take a minimum of 17 years for an owner of the average priced home to be made whole with the amendment as opposed to it not being amended.
3. The expansion of the TID has a negative impact on the MMSD as they lose the ability to have access to property tax growth for an extended period of time, the issue is more important tin today’s economy where they are projected to under levy the authority for 2010 -2011 as they balance needs of school system and the community.

They looked at the time we are in and the ability to access the tax basis is critical for the school district, so for that reason, plus the reasons in the statute, they recommend that they direct their representative to vote against the TIF expansion. He says that Erik Kass is here to answer questions. This was a complex issue, that they examined and it was difficult. In the end it was critically important to have numbers from financial advisers and that the decision be guided by them.

Cole asks if there are questions.

QUESTIONS AND DISCUSSION
Arlene Silveira asks him to reiterate what is on page three for people watching.

Kass says that the statement is that to create or add to TIF district is budget neutral on the schools, the law used to be that as TIF comes in, they lose ability to raise revenue, now it is defined by revenue limits not tax base, so to some extent not losing revenue, but there is a direct correlation to not having enough revenue due to property values and it actually doesn’t have an impact on the levy but on the tax rate they can use, the last few months they have been very focused on the impact on average price home, doesn’t mean get a dollar more or less, but able to access more of our property tax levy as values increase.

There are no other questions or concerns.

Cole makes motion to instruct representative to vote against expansion of the TID as in MMD-3-20, seconded by Beth Moss

Student Jackson, votes aye, the Board unanimously votes aye, it passes 7 – 0.

Lucy Mathiak thanks the representatives from city, who put in longer hours than they can imagine and their willingness to answer questions is appreciated by everyone.