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Original post:
At its August 9 special meeting, the Monona city council declined the role of rubber stamp for a proposed $2.55 million TIF assistance agreement with Meriter Clinic for a new two-story 43,000 square foot building with a guaranteed minimum value of $15M plus. The council scheduled a second special meeting on August 16 at 7:30 PM.
The Process
The CDA only approved the TIF assistance and developer's agreement last Thursday (August 5) and the council was asked to approve it last night on a first reading. Moreover, the council meeting was scheduled at 6 PM with the Plan Commission scheduled for 7 PM in the same room. The first 20 minutes or so was taken up with a good presentation about Monona's TIF districts.
The administrator spent a few minutes giving a overview of the project. The Mayor then spent a good 10-15 minutes justifying the deal he (along with the CDA) negotiated with Meriter over the 6 or 7 months. As I recall it was about twenty minutes to seven and the council had not even begun a discussion. When we did, Alder Wiswell went first and used up a good chunk of the remaining time in a Q&A with the developers, including a few stemwinders. One wondered where the question was going as time ticked down. Alders Veserat and I stated some reservations, Alder Busse gave some of the CDA perspective, and - shazam - we were 20 minutes over. The council adjourned without acting on the proposal.
To recap: Mayor negotiates with the developer for months, council gets the proposed deal on Thursday, a meeting is scheduled for the following Monday with what amounted to a one hour time limit.
The deal
Is the deal a good one? In some ways, not only is it a good deal, it's a great deal. The vacant office building and orange storage sheds get replaced with a new clinic (with a good possibility of expansion; Meriter has acquired the former DNR building to the north of the storage sheds).
Does it meet the 'but for' test? Yes. The project would not happen without the TIF assistance. The part that makes me hesitate is the recent history of the property's ownership. In 2009, the city assessed the parcels (6408 and 6410 Copps Avenue) at $1,878,200. In 2010, the city reassessed the property at $3,000,000 based on the September 2009 purchase by Livesey. In 2010, Meriter is acquiring the parcels for $6,000,000. This higher value is justified by the income production of the storage business and the value of the real estate.
So, if we left things as they are, the property should be reassessed to $6M and generate about $120,000 in property taxes (about $30,000 going to the city) without spending $2.55M for TIF assistance. Of course, then we would still have two eyesores at a very visible entrance to the city. Moreover, Livesey could redevelop the front parcel as say a drugstore and keep the storage sheds for an unknown period of time. The city might still be asked for TIF assistance for another project down the road. This stand-pat option comes with a good deal of uncertainty.
TIF money is kind of funny money. The city would get paid back in full for the $2.55M in assistance from the property taxes on the increased value of the site. The TIF district would then continue to receive all of those taxes until TIF 6 is defeased (probably many years into the future since TIF 6 was just created.). TIF 6 will almost certainly become a 'donor' district contributing its excess revenue to other TIF districts. For example, we are using TIF 2 revenues to fund the city's share of Monona Drive Phase 1, which is in an underperforming TIF. That funding allowed the city to avoid borrowing for Monona Drive and is saving the city some $1.2M in borrowing costs. (The utilities are still borrowing for their sizable share of the project.). Perhaps TIF 6 could be used to fund future phases of Monona Drive.
From the developer's standpoint, TIF assistance is free money. It's not really a loan because they pay it back from property taxes that they will owe on the property.
This project will not happen without TIF assistance. There is a profitable business ($460,000 net/year) that has to be acquired in addition to the real estate. To make that transition happen, the project needs the TIF money. So, do we want to use that funding tool to make this project happen?
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By the way, we are told that defeasing TIF districts (so that the property taxes get split up among all the taxing jurisdictions) does not necessarily help the school district because they would stand to lose state aids based on the increase in non-TIF property value in the district.
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The state DOR has some very good info on TIFs at this web page:
http://www.revenue.wi.gov/report/t.html#tif
Including a 2005 report explaining how TIFs work:
http://www.revenue.wi.gov/ra/tifbkg05.pdf
and a 2009 TIF value report (Monona's info is on page 17)
http://www.revenue.wi.gov/equ/09tifrep.pdf
Meriter's plans.
Previous posts: http://mononadoug.blogspot.com/2010/08/special-monona-city-council-meeting.html
http://mononadoug.blogspot.com/2010/08/monona-cda-considers-meriter-clinic.html
http://mononadoug.blogspot.com/2010/07/monona-plan-commission-considers.html
I sometimes disagree with the mayor, but on an issue such as negotiating with Meriter, I have a fair amount of trust he knows what he's doing. That is a blighted area by my personal standards. This will help anchor more redevelopment in what remains a somewhat crummy area of Monona.
ReplyDeleteI think the council was wise to delay until all your questions get answered. Hopefully the Meriter people understand this. There was no indication that it was last night or never, right?
Also, what is a stemwinder? Having seen Alder Wiswell drone on and on over the years, I maybe get your drift, but not sure.
BTW, I think Monona Drive is beginning to look fabulous. The view over the marsh from atop the intersecctin of Femrite and Monona Dr is beautiful now that's it is unobstructed by utility poles. I like the street lights. Looks like those downard facing ones that don't cause light pollution? I wish we could slowly start replacing all the street lights in Monona with fixtures that do not shine upward.
Like Reagan's speechwriters said, "Trust, but verify."
ReplyDeleteNo, last night was not a 'now or never' deal, but they say they need a decision by August 19.
Stemwinder's meaning has changed. I'm using it in the newer sense as in this:
http://www.worldwidewords.org/qa/qa-ste3.htm
An example of the new sense appeared in the
Washington Post on 10 July 2001:
"The race is, in some respects, a giant popularity contest, and Hoyer’s somewhat ponderous speaking style and white-bread image may be a drawback. “The question for Steny is, does he know when to stop?” said one ally, referring to Hoyer’s stemwinder speeches."
I like Jeff and he's doing a good job in his council president role behind the scenes, but he does go on sometimes - an we were pressed for time last night.
"By the way, we are told that defeasing TIF districts (so that the property taxes get split up among all the taxing jurisdictions) does not necessarily help the school district because they would stand to lose state aids based on the increase in non-TIF property value in the district."
ReplyDeleteDoug -- that may be the case, but the ever-expanding use of TIFs, and the expansion of both the size of TIFs and their number, does have tax implications for the school district (and other taxing entitites in Monona).
Yes, increases in property value generally lead to decreases in state aid for any given school district. But the state considers the valuation of the district as a whole; my guess is that there are parts of the MG school district going up in value, and other parts going down (many homeowners in Monona, for instance, are seeing devaluation of their houses). Defeasing a TIF district may be in the best interest of the school district, if it helps offset property devaluations elsewhere in the district.
But the more important consideration is the mix of property taxes paid in the school district (and the county, and MATC, and the city...). For every dollar's worth of property included in non-defeased TIF districts -- almost always commercial property -- that's a dollar that has to picked up somewhere else, be it the Wal-Marts of the world (which, to its credit and largely uncreditd by any of its critics, did not seek TIF financing), or more importantly homeowners.
Really, there's no getting around this -- property kept in TIF districts that the city declines to defease benefits from a tax "freeze" that is picked up by, mainly, homeowners.
That's not to say this particular TIF-assisted project isn't a worthy one. But as you note, the city gets into these with the best of intentions, and yet some TIFs "underperform" as you mention, and homeowners are left picking up the bill. Glad the council waited.
" In 2010, the city reassessed the property at $3,000,000 based on the September 2009 purchase by Livesey. In 2010, Meriter is acquiring the parcels for $6,000,000."
ReplyDeleteIs the city interested in buying my lot for double the assesed value and I thought that properties were supposed to be assesed at 100% of value?
You really do need to quote the next sentence:
ReplyDelete"This higher value is justified by the income production of the storage business and the value of the real estate."
Properties can be valued based on the income produced. Looks like this one may have been underassessed. Use of the income approach for commercial properties needs to be considered by our assessor. We will be interviewing assessment firms soon as the current contract is expiring.
"This higher value is justified by the income production of the storage business and the value of the real estate.""
ReplyDeleteDoug even if I quote the next sentance my point is still on point. The city is buying a prop.that is a little under assesed????
Any chance you could underasses me by half and then buy my property when I see fit. Sorry, I know it is not your fault, but once again the peasant are subdizing the business community and they get richer.
I am a peasant and I am fine with "subsidizing" this via TIF. It will provide jobs in the immediate area and revitalize a crappy area in Monona - and mostly these are pretty good jobs wiht pretty good benefits. Further, this will help the small, private sector businesses such as restaurants in the area.
ReplyDeleteGood Lord, I hope nobody "underasses" me!
ReplyDelete"I am a peasant and I am fine with "subsidizing" this via TIF. It will provide jobs in the immediate area and revitalize a crappy area in Monona - and mostly these are pretty good jobs wiht pretty good benefits. Further, this will help the small, private sector businesses such as restaurants in the area. "
ReplyDeleteI agree with this poster and her comments. It is not like we create TIDs to pay for new gas stations.
"her comments?" well, I suppose it would be wise to assume this was a woman seeing as how it was such an intelligent comment. :)
ReplyDelete