Penny-wise and pound-foolish in Madison: A TIF talk
Tax incremental financing, an economic development tool that lets municipalities borrow money to lend to businesses to finance projects that would otherwise not happen, is receiving a lot of attention lately. I want to make sure to stress the “lend” part. TIF is not a handout or a grant, and it gets paid back and then some to the city and the taxing districts.
There are some pretty staggeringly good numbers out there in terms of our return on investment from the projects we have done in Madison. However, the merits of TIF are not at the heart of the current debate. It’s whether or not the state of Wisconsin should change current law to allow extending the life of a tax incremental financing district in the city of Middleton by an additional 10 years to accommodate four companies that are potentially expanding into Middleton.
Madison is saying, “This isn’t fair!” and “This bad public policy!” “They are stealing our jobs!” And so on and so forth. They have some very valid points. However, Madison shouldn’t be stomping its foot saying, “It isn’t fair.” Madison should be thinking, “Holy cow! Why are businesses flocking to Middleton, even though Middleton has exceeded its allowable TIF, and needs state TIF law changes to expand and recruit companies? Why aren’t they coming to us, when we are only using a fraction of our allowable TIF?”
Well, I’ll save you the suspense. Our TIF policy is an absolute abomination. It is basically a laundry list of what you can’t do, what you have to do if you meet the criteria, and how much extra money we are going to squeeze out of the TIFee at every possible turn. It is a policy that is written as a social engineering tool and in response to fears that someone will take advantage of the city (the classic case of some bad apples spoiling it for everyone). There is a lot of reactionary legislating in that document.
The second major reason is that even if you do meet the TIF criteria and can abide by the policy, you still have to run the gauntlet of the Madison City Committee and Commission process. Ask Bob Dunn, or any number of developers, how much fun that is. Ask how it feels to have your TIF tanked even after you finally survived that brutal process and gotten approval. You can guarantee that if Middleton had a big lake with a hotel in need of renovation, we’d all be partying on that hotel terrace this summer. It’s not state law that needs tweaking as much as it’s Madison policy that should get a do-over.
I’ve worked with developers for six years, and when I started that job, I asked what Madison TIF policy should look like. A well-seasoned Madison developer said, “We shouldn’t have one; it doesn’t make any sense, because businesses that are going to need TIF are going to have unique circumstances, and should be viewed on a case-by-case basis. You are just boxing yourself in with a rigid policy.” That was six years ago.
Madison is talking about making changes to how it handles TIF. I still like the option of getting rid of the existing “policy” (as in ordinance, and therefore you need council exceptions to get around the cumbersome requirements) and replacing it with TIF “guidelines” (as in, we have a good idea of the kind of projects that we’d like to see, but we’re also open to suggestions). The city of Milwaukee has a two-page ditty that lays out its guiding principals and priorities. The state has a law that governs the use of TIF. Abide by those, develop some rational and reasonable guidelines, and examine each application on its merits. It doesn’t mean you have to say yes to every project. You shouldn’t say yes to every project – prudence in TIF practice does not require an albatross of a policy that is clearly putting us at self-imposed disadvantage in the economic development arena.
Madison says the state needs to keep the playing field level. Well, unless Madison does something about its policy, there is nothing the state can do to level the playing field. It’s like poking yourself in the eye with a sharp stick and complaining you can’t see as well as everyone else. Face it – our neighboring communities have a high quality of life, great workforces, top-notch schools, and increasing entertainment options, too.
Madison has a TIF policy and an arduous process that is like a sandbox full of scorpions, and it’s getting mad that everyone would rather go play in Middleton’s – with the shiny new toys and a mom who makes you lemonade. Madison, take the steps you can to level the playing field with your own policy and focus on how to get businesses to want to come work with us. In the greater scheme of things, we are much better off if Madison AND its neighbors are continuing to prosper and thrive. Lemonade all around!
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