See below for hearing information, background and talking points on the Edgewater TIF. This directly impacts the schools by diverting property taxes.
Joint Review Board Hearing and the Edgewater Project
On Thursday, August 12, 2010 the TIF Joint Review Board will be holding a public hearing on amending Tax Incremental Finance District (TID) 32 in order to provide over $18 million in property tax based financing for the proposed luxury hotel plaza. The Board meets at 5:00 PM, 215 Martin Luther King, Jr. Blvd. Room 260 (Madison Municipal Building). Speakers will have three minutes to testify. A vote is anticipated in September.
If this goes through the closure of TID 32 will be delayed, meaning that for six years the benefits from that TIF investment will be used for the Edgewater instead of to fund schools, city and county services and MATC. With the schools and other local governments suffering from decreased state support and families having trouble with property tax increases this is a bad idea.
Below is some background information along with some suggested talking points. The Joint review Board needs to know that their constituents understand the issues and oppose the TID amendment. Please consider attending the hearing, testifying and/or contacting the Board and appointing authorities. It isn’t too late to stop this.
The idea behind Tax Incremental Financing is that a government body promotes development and funds infrastructure in “blighted” areas by borrowing against anticipated property tax revenues and then designating the growth in revenue due to the development (the increment) to repay these loans and associated costs. Once the loan is repaid and the district is closed, the increment becomes part of the general tax base.
TID 32 and the Edgewater
TID 32, anchored by the University Square redevelopment has been extremely successful. It is generating about $3 million annually in increment and is projected to close in three years.
The increment for the Edgewater project only meets the requirements for a stand alone TIF of $3.3 million. In order to give the project over $18 million in financing (or $15 million more than it can support) it has been proposed to annex the project to TID 32 and use the success of that TID to finance the luxury hotel plaza. This delays the closure of the district and postpones the time when the success of TID 32 will ease the property tax burden on the rest of us. While the TID is open, all increases in assessments and revenues in the district – whether related to the project or not – will be diverted to pay for the luxury hotel plaza, further shifting the tax burden.
Projections indicate that the amended TID would close in nine years, or six more than without the amendment.
The Joint Review Board
Because diverting property taxes to developments via TIFs has an effect on all taxing entities, state law requires that TIFs be approved by a Joint Review Board where these bodies are represented. In considering the creation or amendment of a TID the Board must employ these criteria:
- Whether the development expected in the TID would occur without the use of TIF (commonly referred to as the ‘but for test’).
- Whether the economic benefits, as measured by increased employment, business and personal income and property value, are sufficient to compensate for the cost of the improvements.
- Whether the benefits of the proposed plan outweigh the costs, in taxes on the value increment, to the overlying tax districts.
Although the “benefits” language in the third is somewhat open ended, considerations of the architectural or historic appropriateness of the project are largely outside the charge to the Board.
Of primary concern to the Board is whether temporarily diverting the projected tax revenues to support this project is in the best interest of the taxpayers and bodies they represent — Madison Metropolitan School District (MMSD), Madison Area Technical College (MATC) and Dane County.
Property Taxes, State Aid, Shared Revenue, the Economy and TIFs
The bulk of the City, the County, the school district and MATC budgets are funded by a combination of state aid (or shared revenue) and property taxes. The recent economic downturn and a continuing state structural deficit – projected at over $2.5 Billion for the next biennium – has shifted more of the responsibility to local property taxes. This has hit the school district particularly hard, with nearly 15% cuts in state aid the last two years and more of the same anticipated.
The economic downturn has also slowed the growth of the property tax base. The aggregate assessments of existing property has fallen slightly and growth due to new development is below previous years. Under these circumstances, increases in property tax revenues to make up for decreases in state aid require existing property tax payers to pay more.
All the taxing entities have sought cuts from same service budgets in order to ease the burden on tax payers. Again, the schools have been hit particularly hard, enacting more than $13 million in budget reductions for the 2010-11 school year.
Timely closure of TID 32 would ease this situation by adding the increment to the tax base; extending the life of TID 32 to fund the luxury hotel plaza would make it worse.
Based on the Above:
- The Edgewater Project can’t support the TIF.
- The taxpayers, the schools, MATC, the County and the City would all benefit from an early closure of TID 32.
- Delaying the closure of TID 32 will result in at least a $15 million property tax increase over the next nine years.
- The economic situation has already lead to property tax increases and cuts to programs and services; amending TID 32 will exacerbate this at a time when both families and governing bodies are struggling to make ends meet.
Other Things to Consider (most detailed in this briefing from CNI):
- The ratio of private investment to TIF isn’t good policy.
- The costs and benefits are not substantiated (The Joint Review Board has the power to request more information and a review of information they consider unsubstantiated)
- These include project costs as well as job and property value projections.
- Costs assigned to the TIF do not meet TIF requirements.
- This project requires deviations from guidelines in self-support, 50% payback, equity participation and personal guaranty.
- The operating agreement for the Plaza limits public access and works to the benefit of the hotel through catering and other requirements.
If you cannot attend the hearing, you can contact the Joint Review Board via email:
Gary L. Poulson
You can also contact the appointing bodies and ask them to advise their Member to vote against the amendment:
Dane County Board
MMSD Board of Education
Thomas J. Mertz and Jacque Pokorney
Co-Chairs, Progressive Dane