TIF “Discussion” – Live blog kinda.

Oh boy – I got here a little late . . . and the room is packed, they are taking more public testimony – I’m on the floor in the hallway . . . again. Can’t see the committee, but can hear . . . . kinda.

PUBLIC TESTIMONY
So far, a brief summary of public testimony that I heard was:
– Pete Ostlind with very detailed information that I didn’t quite all catch, there may have been others before him. Will link it here if I can get
– Susan Schmitz spoke in support on behalf of DMI.
– Brian Standing, a county employee/citizen not opposed to Edgewater, but opposed to the TIF funding for it. Concerned about how it will affect the taxing jurisdictions as a county employee because they have had to take cuts in pay.
– Called someone in support, did not wish to speak.
– Tom Ziarnick, says the TIF proforma are calculated wrong, its off by $2M NOI (Net Operating Income), puzzled about why condos are in the project, why not include them for the true value.
– Called on someone in support, did not wish to speak.
– Adam Plotkin, talks about how the new generator will take 25 years to pay for itself, the project doesn’t pay for itself. Assessment is out of sync with other hotels in the area and other cities. Job creation estimates are questionable. TIF policy is violated, the self supported policy of the City and therefore it is insufficient to compensate for the cost of improvements.
– David Badger talks about how the average citizen looks at this and they don’t understand why we are doing this and if you tell them its about development, then they have to look at if the project would go forward without the money. He talks about how the numbers have been kicked around a lot and no one knows what to believe. But, he says its worth it, hotels bring in people and conventions, they go out and spend money. He talks about current TIF policy, council took a swing at it and they decided that even with heir policy, there is a benefit for the community. The local elected officials voted for it, please don’t stop it.
– John Jacobs spoke in opposition. Obvious mayor willing to turn city upside down for the Edgewater early on. City accepted the rosy hotel rate, but don’t also didn’t take his word on the condos. A conservative approach would let the taxpayers share in the profits. One way would be the equity participation, but the devleoper got a deal like no one else. City is accepting worthless conservation easements. City is giving $8M in real money for worthless easements that are already in place with 1965 ordinance (amended) and the PUD. Then I missed the rest.
– Another in opposition.

EXPLANATION OF THE PROCESS
Gary explains won’t decide today, BOE meets on Monday, council takes up at first meeting in September and they decide after. Also says if they want they can petition the State to do an audit of the numbers if they don’t believe them but he doesn’t know if anyone has ever done that.

GROMACKI’S EXPLANATION
He goes over what documents they have. I’ll link them again here later, after the meeting. Says they got some questions from members. I can’t hear his answers, people talking in the hallway and in the room.

BRASSER’S EXPLANATION OF WHEN THE TID WOULD CLOSE
Dean Brasser says that there is a set of cash flow scenarios for TID 32 for alternative courses of action. He says the first one is if they just stopped and said we were done, no more expenditures in the district. No growth or diminution in values due to economy. It would close next year, it has been successful. No big outstanding liabilities.

Brasser says the next scenario is the public improvements already scheduled and planned for, that adds several million to public infrastructure costs. That shows that if the cost estimates are accurate, ti would close in 2015.

David Worzala says that if you look at 2010 out, is it correct to say that parks and State St infrastructure is already in the current amendment.

Brasser says it includes everything budgeted.

Worzala says that the small cap TIF is already in there, but by expanding the area, it would be new places it could be spent.

Brasser says he didn’t find the small cap TIF to be a significant impact.

Roger? (can’t see) asks something I couldn’t hear. (Awesome, eh?)

Brasser says that the plan would allow the council to approve additional expenses that would expand it our for a longer period of time.

Roger? (MATC representative) asks if that would require their approval and Brasser says yes.

Brasser says the third scenario was an amendment for additional area, there was $155M but is is either $146 or $158, it was intended to reflect the smaller boundary, but the value they used is different because the value of the properties changed. That showed that if the amended the boundaries and didn’t do Edgewater, it would still be expected to close in 2015, but there would be more money left over.

Brasser says with the fourth scenario is $8M in 2010 and 2011 and city would borrow and pay it over time and add the expenses for the debt service to the TID, then it would close in 2019.

David Worzala (county representative) says that if add $155M you get no increment in 2011, some in 2012 $63,000, that’s just the growth.

Brasser says the 5th one is not a TID 32 scenario, but something discussed by many, it looks at the Edgewater project by itself and if it would pay itself back in its remaining life. It shows that unrecovered costs at the end of the period if the project was there on its own. Growth in larger TID 32 is what makes it work.

Roger? asks for additional information. Brasser says he has the debt service schedules, but when they do their TIF projections, the use a 2% growth in value on a annual basis. Over the last few decades, commercial averages 2% and residential is faster. We have years that it goes up and down, but that is the assumption that they use.

Gary Poulson asks if that changes with the economy.

Brasser says that the values have dropped and they are getting the information in now, its a bit of a mystery about how long it will take have them come back. Brasser says some projections for some districts keep property values the same. He says that because we grow, tax rates tend to go down, so by using the 2% and factoring in the tax levy we usually see a reduction.

Lucy Mathiak (school board representative) asks how confident Dean is in the numbers given other projections that have been off.

Brasser says very confident. He thinks that the district will be able to close in its full legal remaining life and he was very careful to be conservative in his estimates. He says that he has increment going out over future years, no additional development in the campus area and he thinks those were conservative assumptions. They are getting numbers from state in last month, some of our TIFs are seeing less increment, he has gone through those and looked at what if the increment comes in at a lower value and it could mean that this district and the others close a couple years later, using the most conservative set of assumptions. Of course, we don’t know and we won’t know until those years are behind us. His first concern is if the district will close by 2030, and he has absolutely no concern. We see the estimates could be off by a couple years one way or the other and with the reductions in property values it could close a few years later.

Mathiak asks if they could see those projections with those assumptions.

Brasser says that he wouldn’t characterize this as the “good” model, but he can run whatever numbers they want, but they have to tell him what the assumptions are. He says they can look at it.

Mathiak says she wants to see the worst case scenario, Brasser says there is continuum of assumptions. He thinks it would be extended for a couple years. Mathiak asks what a couple is. Brasser says two. Mathiak says in Madison that is not always the case.

Worzala asks if there is a plan to change the document between now and when they vote?

Brasser says that this plan is based on 5 or 6 years of audited historical info since the district was open and a projection for only 10 – 12 years beyond that. It is much more detailed than they could typically do.

Worzala says wanted to clarify that he wants to see what it looks like today. He says that the numbers he has gotten indicate the assessments are going down and tax rates are going up and in the world of TIF, they will get increment even if the assessments go down. He says the $3M he is ok with it, that is less of a concern. However, they are using the increment from existing TID to pay for new project.

Mathiak says her concern is it will take longer to pay it back and appreciates walking us through the scenarios. It is helpful to have the framework, but what she has to think about is what they are asking the taxing entities to do. They can raise taxes, but they are in a real bind in the sense that when we cast our vote to we ask people to have their taxes go up because we don’t get the money from the closed out TID and do they ask tax payers to tolerate even higher taxes not because of school costs but because we are participating in and investment that has some risks to it. Its the holistic view she is looking at. We are leveraging the taxes from one part of the community for what we hope if future growth.

Worzala says there will be less money, but because tax rates will go up and we can’t stop it, then the TID area will not be taxed either way. (Not sure I understood that)

Mathiak apologizes for being a “pill” but she wants to see a scenario with what the TID would look like if the boundaries were different?

Brasser says that the end scenario is what she is looking for. Lots of discussion and explanations, many people talking at once.

GROMACKI GOES OVER TWO MORE DOCUMENTS
I didn’t hear which documents, and I didn’t hear the question Worzala is asking, so I didn’t understand.

Gromacki gets to his explanation. he is working off the cash flows and the report to the joint review board based on closure. He says it is based on their description. Estimated TID closure dates are off the cash flow statements. Missed a bunch, lots of noise. He says that the council adopted assumptions with 0 condo value, that leaves 44.8M in value. The TIF run estimates the amount of value when it comes on board, he hands out copies . . . (none for the public) . . . says the project value doesn’t change based on their assumptions. The tax rate is what changes, they assume tax rates go down. They some communities keep that flat, some increase it to make it look better. We do it more conservatively. He says the summary report they got.

Brasser says that the numbers come from his sheets that he explained earlier.

Gromacki says the numbers come from other analysis. $868,000 is income from the hotel annually. He says if they included the $7.5M, he says that you then have 53M, then you have 1.13M. Committee members seem confused.

Gary Poulson says if you add the condos don’t you have to take value out the hotel.

Gromacki says no.

Brasser says that if you include the condos, is this $7.5 the incremental value, do they replace the hotel rooms. They might have value of $15 -20M but the additional value is $7.5.

Worzala says that is not how you assess hotels, its based on cap rate and income. He says that if you change the number of hotel rooms that changes revenue and it changes the assessment. He says the assessor should just do the assessment. He says this is the wrong way to do it.

Brasser asks if the second line if it is more accurate to say the hotel is $36M and condos are $15M?

Gromacki says the condos are replacing the hotel room.

Brasser asks if it is fair to say the value of the hotel goes down with the condos. he says they can get the numbers, but it takes alot to change the estimated closure date by a year.

Worzala says that is ok, but then he wants to ask about the May 4 memo. He says the value of the hotel is important for other pieces.

Gromacki says that the jumps in increment value is small when the property value goes up by millions. He says fi the hotel is $44.8M, the median annual income goes up to $1.15M, that will help, but the estimated closure date is 2019, but if increases by $7.5M it still closes in 2019. He says they also looked at the base costs, but since council already done considering this, and that is their perogative, $16M is what is in there, but what if we took some of the public improvements out, they take out $2.8M using the same scenarios and they still close in 2019. He says even when they go to the smaller base value, they retire it in 2019, so the impact of different scenarios, its all closing in 2019. There is a matrix on the second page but it all closes on the same date. He they looked at the impacts on the districts, if just closed it, there would be over $1M, in 2019, the amendment would add $86M of 213M that they could levy in 2019, if they use the smaller district it would be $78M of $205M. (I hope I caught all those numbers right, hopefully I’ll just link to the document.)

Poulson asks if any TIDs close this year or next year.

Brasser says 23 in 2012, but none in 2011.

Worzala says if 2019 for all years, the other taxing jurisdictions might be inclined to say we prefer the lower base value, because the rest of it stays on their tax rolls.

Brasser says that is correct.

Worzala says they would get the 2%. He then goes back to the value of the hotel. He is having trouble accepting the assumptions, that is not how you assess a hotel. He asks how many floors. Gromacki says 8 floors. missed some . . . . Worzala and Gromacki discussing numbers used to assess the project. They are discussing the condos again.

Roger asks if city policy prevents condos? Does the state?

Gromacki says yes and no.

Worzala asks what the resistance is to include the condos.

Gromacki says they would get more TIF.

Roger doesn’t understand.

I don’t understand Gromacki’s explanation – he says that it would require more of the rest of the district to support it. If the condos do better then great, more increment from the project and less from the district, but if consider blue sky, then has to go back to

Worzala says that there is nothing blue sky about the condos. It makes no sense to continue the fallacy that this a hotel, when this is a condo. The law doesn’t say that we don’t’ include them. He says the vlue of the hotel is wrong.

Brasser sasy taht it all ends up 2019.

Roger says that is irrelevant, its all speculation, you can’t really plan on it. The excess they get back is for one time costs. He says, lets just call it what it is. Give it a range if hotel or condo. That is a better presentation.

Gromacki says they have done that. He says they can run new numbers, but it won’t give you what you are looking for.

Worzala says if they don’t ask the assessor and that isn’t included in the discussion, then he has very strong reservations.

Poulson clarifies that the motion is to get more info. Mathiak seconds. Roger says no action was noticed. They decide not to make motions, but staff assure them that their concerns were heard and they will try to address them and bring them more info.

Worzala says the assessor should assess the property.

Brasser says that assessment is less than an exact science than he is making it out to be.

Gromacki also goes over Mathiak’s questions. He says they went over the “true cost” to eliminate blight. He says he will start with the gap analysis.

Lots of noise in the hallway, someone waiting to get in the room . . . .couldn’t hear a thing.

Gromacki says that he gap analysis creates the “true cost”, he says everything was in acceptable ranges except the extraneous costs of building the plaza. They had an independent engineer look at the project and they found the costs within acceptable range. He says some costs could be high and that would reduce the gap. Gromacki says they look at costs and equity. He reviews where the equity comes from. Says it is a tight lending situation. He says that is the cost.

Mathiak says that her question has nothing to do with the Edgewater. She doesn’t believe she specified the Edgewater, she wants to know about the neighborhoods.

Gromacki tells them to look at the project plan, 2nd amendment one. Tells them to look on page five. She says you can see the other money that will come in and . . . didn’t hear . . . he says taht the TIF makes it easier to improve the area with TIF and it does so by partnering with overlying taxing jurisdictions. He hands out sections of the TIF manual, page 1, 1.1 “what is TIF”, reads to them. He says the original idea of TIF loans, they used to just do infrastructure, but not if eligible and not fully assessable to residents, then it is eligible. he rattles off some other examples. He says that is their explanation on the public improvements except the small cap TIF. He says the idea was to convert rentals to owner-occupied. Very short time in TIF 28, one or two loans. Interest to reinstitute the program, not a program the city has. Yes, there are tax credits available and the average citizen has not been availing themselves of the project.

Mathiak asks if there is documentation of people not using Historic Tax credits.

They talk about maintenance vs major changes, conversions to single family units.

Mathiak asks why this neighborhood needs this assistance but other neighborhoods do this all the time. other neighborhoods do all this. Gromacki says they don’t convert rental properties, Mathiak says they do. Gromacki says that the value of a rental property is more cuz it is based on the rent but owner occupied it is worth less and not much incentive to go to bank and get a loan to decrease the value. Mathiak says that it happens all over the city. Gromacki says questioning a program established by council. Mathiak says that the “but for” is pretty clear, this is a nice thing, let help people out, but at this time we can’t do it.

Roger asks if shethinks the small cap TIF muddies the water. She says yes. She says she needs to understand why the only possible way to have things that happen elsewhere, can’t possibly happen in these specific neighborhoods.

Roger asks if the included increment for the increase in value because of the investment. They did not.

Mathiak says that they should start assessing capital square and state street for the full costs of the projects, you are asking us to freeze a huge chunk of the Isthmus because they can’t paint and put on a porch railing without TIF assistance.

Poulson says its not in their perview, its part of the project plan.

Gromacki says they can vote up or down.

Worzala says if a member thought that might change their vote, that might be useful information. He asks again if its already in there. They say it is. Worzala asks why they would add costs.

Brasser shows them where to look to find existing costs in the plan, he says small cap TIF not necessarily in there . . . and with that . . . I have to go . . . I have to get back to work after nearly two hours of this meeting. There are a few people left in the room. Dean Mosiman from the Wisconsin State Journal, Fred Mohs and Pete Ostlind, Alders Clear and Maniaci. Mario Mendoza from the Mayor’s office, Gary Peterson and a handful of other folks . . .

Sorry . . . duty calls . . . .