The City’s Economic Development Commission Abandons Job Creation

This may get a little wonky, but it’s not that complicated, hang in there! Check out the memo below where the Economic Development Commission explains why they don’t think businesses and builders should be accountable for creating the jobs they claim they will create and shouldn’t pay the city back if they make more money than they said they could, thereby negating the need for the use of TIF in the first place. And then limit what TIF can be used for, remove public processes and oversight and actively work against themselves by eliminating Pay-As-You-Go financing.

TO: Tax Incremental Financing Policy Ad Hoc Committee

FROM: Economic Development Commission (EDC)
Drafted by: Matthew B. Mikolajewski, Office of Business Resources Manager

SUBJECT: EDC TIF Policy Recommendations

DATE: December 8, 2008

The following memo outlines the recommendation of the EDC to the Tax Incremental Financing Policy Ad Hoc Committee regarding the amendment of the TIF Policy (Legistar # 11531).

1. In lieu of adopting the August 19, 2008 version forwarded to the EDC, the Sub-Committee recommends adopting the more streamlined “Perfect World” version (dated July 8, 2008) prepared by Mr. Joe Gromacki, TIF Coordinator, with the additional edits as follows in this memo.

Rationale:
A. The EDC focused its discussion on insuring a TIF policy that is simple, flexible, robust, and competitive.
B. The EDC therefore supports Mr. Gromacki’s efforts to streamline the policy.

2. Remove the job creation guaranty language as outlined in Section 3.1 (5).

Rationale:
A. Creating and retaining jobs should be an important goal of all city economic development policies. It should not be considered unique to the TIF Policy.
B. Removing this requirement does not negate the City’s ability to select and fund TIF projects that create jobs.
C. The distinction between new jobs and jobs that are transferred from other locations in Madison or other communities can be somewhat arbitrary.
D. TIF should be seen as an investment in a business or development that will deliver direct and indirect community benefits, which may include jobs. While the city can insist on guarantees on certain aspects of the TIF project (number of square feet to be built, location, etc.) other elements (jobs creation, pace of leasing, etc.) are subject to the realities of the market and economy. The TIF loan agreements, tailored to each project, already protect taxpayers by providing appropriate project guarantees.
E. TIF should be seen as an inducement for a business or development to locate in Madison rather than somewhere else. This is important given the added complexity of urban in-fill development compared with development in neighboring suburban and rural areas.
F. This requirement would add another layer of risk for businesses and developers. Other communities, local and Statewide, do not require this.
G. This language has the effect of making Madison less competitive due to the “guarantee” nature of the requirement.
H. All projects must be underwritten on the merit and need of the project at the time of application. If the project does not appear to warrant a City investment of TIF funds, the City is not compelled to make an investment.

3. Remove the equity participation payment language as outlined in Section 5.1 (9).

Rationale:
A. TIF is an economic development tool to encourage business and development that would not have occurred “if but for” the TIF investment.
B. Although an opportunity may exist for a developer to make additional profit, so does the reality that the developer may ultimately lose money on the project. If the city does not share in the loss, it should not try to share in the extra profit.
C. TIF is an investment not a contract. City staff make their best judgment as to the nature of the investment. The market conditions that affect the investment over time can’t be perfectly predicted.

4. Remove all references to a requirement for jobs with an identifiable “career ladder,” such as is found in Goal 1.1 (2).

Rationale:
A. Career ladders are a workforce development concept that is being promoted nationally and regionally.
B. They are not universally accepted as yet and should not be mandated or seen as a barrier to what would otherwise be a desirable development for the community.
C. There is no generally accepted way to define or measure a career ladder.
D. Career ladders are not necessarily in place when a company first opens.

5. Replace references of “Neighborhood Plans” with the City’s “Comprehensive Plan.”
Rationale:

A. The Comprehensive Plan is the controlling plan for the City of Madison and includes adopted Neighborhood Plans.

6. Consider recommendations submitted by individuals and organizations such as Downtown Madison Inc.

Rationale:
A. The EDC received a variety of comments and suggestions during its deliberations. The EDC found them generally well thought out and useful. Some were textual errors and editing issues in the “Perfect World” version of the policy. Some were more substantial. As these are valuable ideas worth the Committee’s consideration, the EDC has posted them on Legistar # 11531

So, we should just hand out TIF and not care if the people we give it to do what they say they were going to do or if they really even needed it?

In addition to that insanity, the committee wanted to “simplify” the policy by taking all kinds of things out of the policy that need to be there (the “Perfect World” document). They wanted to remove:

• Encouraging use of TIF for historic renovations and higher building standards. Without this language, developers could not get TIF to do that work due to financing and they could forego these activities.
• Encouraging developments that enhance the streetscape and pedestrian experience, mixed use buildings and the use of Transportation Demand Management programs. Again, TIF might not be used to accomplish these things.
• Eliminate the public process for determining TIF priorities annually. This is important because otherwise developers drive the TIF priorities for the city when they propose projects.
• Eliminating the interested parties registry that informs people when new TIF districts are being created.
• Eliminating the requirement that developers pay for mailings for neighborhood meetings required to create a TIF district.
• Eliminating language that allows non-profit developers to access TIF funds, treating them similar to for profit developers.
• Eliminate the annual TIF report to the Common Council.
• Eliminate the ability for the City to use Pay-As-You-Go. (This one blows my mind as they were the ones to get this in there.)

I have to wonder, did members of the EDC, beyond Vicky Selkowe, actually read the “Perfect World” document they wholeheartedly supported? Did they, and their supporters – the Chamber of Commerce, Downtown Madison, Inc. and Smart Growth Madison, think through the consequences of what they were recommending? Did they really mean to work against themselves?