At least that’s the way Economic Development Director Tim “I am TIF staff” Cooley sees it . . .
This Economic Development Committee meeting had people shifting uncomfortably in their seats (if they were lucky to have them), staring down at the floor in embarrassment and shaking their their heads as they recounted some of the comments said at the meeting . . . city staff, committee members and on-lookers alike. It was a little stunning. And I didn’t even stay for the Alder Thuy show . . .
I was stuck standing in the hallway again, not that people didn’t offer me chairs, but the outlet was there and there wasn’t enough seats for everyone. I couldn’t hear everything as people in the hallway were talking and making noise and the maintenance people were, you know, doing their jobs.
Also, as background, the meeting started at 5:00 committee members were first given the resolution they were discussing at 2:40 that afternoon, and the 15 page legal memo [currently not available on legistar (added later)] was handed out at the meeting, but was sent to the alders around 3:52 – and of course, the committee “had to” vote that night or not weigh in. More on ridiculous Wednesday later . . .
And another fun fact . . . there are 13 positions listed for the committee. There are three vacancies, but they count towards quorum. While there were 7 people in the room at one point, I think, only 6 committee members were there for the vote and at times maybe only 5. However, remember I was standing in the hallway and most of the time there were people blocking the doorway. How did they have quorum when they voted? What am I missing on this one? Were they counting Cooley as a committee member, cuz he sure acted like one instead of staff.
Anyways, here’s the gory details surrounding the Danisco TIF Application, with my comments [in purple]
Mikolajewski described the resolution. Michael May described his 15-page memo [but some people clearly didn’t listen]. Basically he summed it up as being a “yellow light”. That he is not saying that they can’t use another test, but there currently isn’t one and without that, they risk being hauled in front of the District Attorney.
Clarke explains a computer system that is used to analyze the impact of jobs that uses a multiplier affect and asks if that can show that the city would reap the benefits back, would that meet the “but for” test. May says its more about the public purpose test, but doesn’t really help with “but for” test. [Apparently, that went over quite a few people’s heads, or they chose to ignore it.] Clarke asked again in another way, May says in a competitive process program that might be helpful, but you need more than that.
Torklidson asks about liability, she says that times are different now than they might be in 5 years. In 5 years, 20 jobs might not be a big deal. May says that the Jt review board would look at it for the “but for” test under current circumstances. The question is how the court would treat it. [Had problems hearing during this part.]
Selkowe asks if there have been cases where the “but for” has not been met and they went around that analysis to the committees and the council to get approval. Gromacki says not in Madison that he remembers.
Clarke asks how BioAg was approved with all those conditions, Gromacki says that it met the “but for” test but had other issues.
Clear asks what other communities use – do they do a competitive factors analysis? May says doesn’t know. He’s heard allegations that some communities are not doing it right but no court challenges, except Baraboo case. The court said finding that Walmart needed money for a portion of the project was enough.[Couldn’t hear, probably missed some stuff.]
Gromacki says there are anecdotal stories all over the state. He talked about the Village of Warres and Altoona, but again, I couldn’t hear.
Selkowe asks about timing. Someone explained that it hasn’t gone to the Board of Estimates because the text was just done yesterday. Selkowe says she doesn’t want to lose the opportunity to weigh in, but would like some time to consider the information she just got handed.
Cooley says that Danisco is what is before them, not the overall policy decision. They need to decide if they are comfortable giving Danisco TIF money when they don’t meet the “but for” test. He says that the rationale is that municipal financing and competition for businesses is going to be accelerating quite a bit due to the recession – and we need to use the tools available to us.
Selkowe says she didn’t get an answer about if they have to act tonight. [I should have counted how many times people said that after Cooley stopped talking, he’s a master at using alot of words to say nothing and not answering the question.]
Clear says there are two questions: procedure and Danisco’s time line.
Mikolajewski and May try to jump in and answer the first question. Mikolajewski explains when the next meetings are. Council hopes to discuss at first meeting in September. The next EDC meeting is after that. If they wait they could push the decision into October. He says that Board of Estimates (BOE) can proceed without an EDC recommendation. May explains the details of the time line. BOE meets on the 17th, so the the question is if EDC has to act by September 1 or 15.
Compton talks for quite a while, saying many of the same things she said about Danisco at the Board of Estimates. [Couldn’t hear, missed some stuff.] She talks about her philosophy on TIF and what it should be used for, complains about developers having to pay for infrastructure improvements that supports their projects. She says that isn’t done anywhere else. I think she was saying that was enough to meet the “but for” test, but it was hard to follow. Also says “but for” our money, they will go to Rochester. She says that people won’t live in Madison just because it is Madison. These people have lived all over the United States after all.
[I don’t think the question about if wait til Sept 15th was ever answered, but I couldn’t hear.]
Stone asks what kind of jobs will be created. Mikolajewski says manufacturing and professional. Stone asks how the gap is determined. Gromacki explains they compare capital/equity the developer can amass and the expenses and that they also look at the loan to value ratios required for borrowing. Gromacki explains but for and points to language in the resolution. [Couldn’t hear, missed some stuff.]
Cooley explains something. [Couldn’t hear.]
Stone asks if they are going to create 25 new jobs or are we worried they will take jobs with them. Cooley explains they intend to leave the jobs they already have here, here. He says that what we are looking at is phase 2, which is a $16M project that creates 25 jobs. If they don’t do phase 2 here, then they won’t do other phases either. It could be $43M plus 120? jobs.[Couldn’t hear.]
Stone asks if “but for” looks at just the current phase or future phases? Cooley says that part of this is a judgment call. He says it is different than when use TIF for real estate developers vs a company. He says we can craft a policy that we will look at multiplier effect and quality of jobs. He says this is a question of if this is a tool where we artificially tie our hands and put more restrictions on ourselves than required by state law, and is this a tool that we want to use?
Stone asks another question . . . [Couldn’t hear.]
Cooley is saying that if we don’t approve it they won’t develop more here. [Couldn’t hear.] Compton says the only reason they went to Rochester is because of our process. [Couldn’t hear.]
Clear asks if it is typical that TIF only funds 2.5% of the project. Gromacki says that company made $35M last year – hard to say they “need” the money. Clear asks again – Gromacki says something [Couldn’t hear.], but he says that it is more about the capacity. Gromacki says that the value of the project isn’t the same as the amount of money that they are spending. He talks about another project where 40 or 50% of the project is not assessable because of the high tech improvements. So the money invested doesn’t translate to the property value to be taxed. He says he hasn’t done that analysis at this point because gap analysis says they don’t need the TIF. [Couldn’t hear, missed some stuff.]
Clarke says that they should remember their Economic Development Plan recommendation about how they need to make TIF more flexible. He says they should look at if they can find a different standard, because clearly they don’t meet the “but for”.[Ahem, right, and that’s the law.] He says a business could committee should ask for $30, $300,000 or $30M and how do we decide how much is too much. Says they also have to look at the multiplier. What are 25 jobs worth and what would we invest to get them? He says that presuming it is legal, he thinks they should invest and then offer some way to evaluate the number.[First, I have no idea how he presumes this is legal. Second, he just said they had no way to figure out how to determine if they get $30 or $30M and third, justifying giving them the money afterwards is going to be hard to defend in court.] He asks again, “How do we know when it is $500,000 or a milllion.” Cooley says that they can do an analysis of the impact of these jobs, Clarke explains the Workforce Development Board software.
Torklidson clarifies that what is not asking us to change the TIF policy, but to make and exception to the policy.
Cooley says that the policy will come back here. Recommending exception is what is in front of them.
Clarke moves that staff should do their best analysis of the economic impacts of the jobs created. Cooley says ok as long as Clarke can get access to that software.
Clear disagrees, concerned that we’re throwing away the rules that we have about how we make decisions and what is a good use of TIF. This has been our gold standard up til now in every case. Now we’re saying, come on down. And, that as long as you can demonstrate that you can create some jobs and make the claim that we can’t verify or be supported by the facts that we would go ahead and make the loan. Whatever they may say about us not being in a bidding war with Rochester, that is what is going on. There will always be someone with deeper pockets. He says tis like competing for a sports team to come to town. He says if they do that anyone can threaten to leave or threaten to not come here, then we have no basis to make a decision on.
Selkowe echos Clear. Says we just spent years discussing tif policy and wonders if we want to reconvene that body. That is separate to being held hostage, companies will say to us if you don’t give us what we want we’re out of here, takes us down a slippery slope. Can’t imagine the message that sends to other companies in the area. Other will have the perception [Couldn’t hear.] . . . She says this undermines TIF staff and sends a message that if you don’t like what they say, we can just do an end run around them and put another process in place to get a different decision. Its not about if we want to keep the company and have them succeed – she hopes staff is looking into other resources we can offer, this is about if we will completely set aside our policy for one company that is asking for peanuts. There is a strong indication that they are bidding us off others and they are sweeten the deal. Understand that is what businesses do, and that’s ok, but we have a policy. Might be best project in world, but doesn’t meet our policies.
[Couldn’t hear, I wasn’t even sure who was talking.]
[Couldn’t hear, but I heard the part where he declared himself the TIF god.] Basically Cooley says he wants the tool – attorney has given the yellow light, we can make these changes. “I am TIF staff” He says we need to “unshackle our hands” and that Madison can’t just sit by and do nothing. [What an insult, not just to Gromacki, but the entire TIF staff team, including the city comptroller Dean Breasser and Anne Zellhofer from the city attorney’s office as well as Don Marx.]
Compton says [Couldn’t hear.] – I don’t know. Economic development is a wide, vibrant – some think it is giving $106,000 to a farm in a strip mall, we just did that last night, with a clear caveat – if they create 6 years worth of jobs they get half the money back. Compton says that there is a place for that, this is Madison, we can do that, but [Couldn’t hear.] She says we are sitting with bioag potential, on the cusp of positive industrial development for the city of madison. She says she is talking to lots of companies, including some solar, she says there are companies that have 1400 or 1600 jobs and this would be an anchor.
She says we can spend a little money to have so much happen. She says we give money for petty things – this is stimulus for the area. She describes this as a personality fight about who has the most chest hair.[I have no idea, don’t ask me. She must have been having a Thuy moment.] She says what she sees is a city that needs a shot in the arm and people who can figure that out. Understands this is out of the box, out of the policy, then we should change that policy, because we see this company as a vital shot in the arm. They have chosen the city of Madison to plant a seed. [Couldn’t hear.]. . . . put corporate welfare out of your mind . . .
Stone says she has concerns about abandoning the policy and that the crieteria shouldn’t be created to match the deal we are doing.
Cooley says it will be subjective absent better tools. [Couldn’t hear.]
Clear asks Compton and Cooley to help fill the credibility gap. $13M project, we’ll loan you $12.7M but just can’t get the last $300,000?
[Couldn’t hear but this is where Cooley says we are playing poker and calling people’s bluff. Several people pointed that out to me, and it makes Clear’s comments later make sense. At this point, I gave up and crowded into the doorway with pen in hand – I had to be nearly standing in Don Marx’s pocket in order to hear. I’m not sure how much I missed here.]
Compton says that she thought the most frustrating part of the TIF policy was Industrial TIF.[I think I missed some more here.]
Compton says that this is not a threat. It’s not $106,000 but 3 times that. She says this project has the “look and feel” that they will do what they say. [I believe this was in comparison to the CDBG project they discussed last night.] She says we’ll get this money back with that they bring to the table and by just being there. She says that we are allowed to do this by state statute, if not stopped by the council.
Clarke says he is struggling because we have not done this before. He talks about a woman from Department of Commerce told them that they are not players in economic development within the state. They do deals all the time and we aren’t part of them. We have to get competitive and this is what happens and yes it is a slippery slope and he is worried about it being a race to the bottom, but this is how it is done. If we want to play, we have to do this. We should just trust the professional staff we have hired.
Torklidson talks about the book store and how when new and big companies call about a big book order, she knows they are looking at Amazon.com and she is too, to determine what price to give them. Sometimes she cuts the price to get in the door. She has to make that kind of decision all the time. She says that she is only guided by her ethics, but she has to compete against the world. She says we should not be so rigid, but then she adds, of course since this is City money, it might be different.
Clear says this is completely different decision making process. He doesn’t want another visit to the D.A.s office, or worse. He says that the yellow light from the city attorney’s office is more orange to him. He says he is not concerned Danisco is going to run away and that he is uncomfortable “playing poker with tax payers money”. He also urges them to look at the amount of increment that is in the district. He says that we need to borrow money to make this happen and the tax payers will begin paying that back next year and it could take years to get the money back. He says we need to think carefully about that.
Clarke asks what risk we are taking.
Clear says that it could take up to 20 years for us to get our money back. Then he asks the mayor’s office to comment.
Mendoza who’s been standing in the doorway the whole time thanks them for serving. Says the Mayor is weighing the same issues the committee is weighing. He is interested in seeing the company grow here, but he is concerned about the threshold we are about to cross. He is still thinking and this discussion will help inform his decision. He asks what we will get and what the multiplier affects are. He says the Mayor wanted to engage this body and others to help weigh the pros and cons.
Selkowe says she is concerned that there are others in the queue who have followed the rules and since TIF is first come, first serve, there might not be money left for the. She says its not fair for people who played by the rules to be denied.
Compton talks about Pelliteri being next in line. That’s in her district too.
Cooley says . . . [Couldn’t hear.]
Clarke clarifies his motion and they vote. The vote is 2 – 4. Clear and Selkowe are no. Clarke, Stone, Torklidson and Sanchez are aye’s. [So, everyone voted and there were only 6 votes on a committee that has 13 seats and the number of seats is what determines quorum.]
There’s more to the story, for another day. But there you have it . . .
