So, apparently everyone wants to hear from me what I think about supporting TIF for the Gorman & Co project for the 800 block of East Washington.
First, let me say some things about the project, with or without TIF assistance.
A. I’ve been very pleased with how engaged, well-informed and understanding the neighborhood was in working with the developer and how responsive/open the developer has been in addressing the neighborhood’s concerns. I couldn’t have asked for a better process for those who participated in it.
B. I’m looking forward to some progress in beginning to revitalize the E. Washington corridor and bringing more housing options to the north side of the avenue and employment opportunities to the south side of the avenue.
C. I’m glad that we were able to find a way to have a more intensive use on this entire block (E Wash to E Mifflin, Patterson to Livingston) of downtown and still keep the Don Miller business in the City of Madison.
D. This is a great place for an infill project. It preserves existing housing (i.e. no demolitions) and adds to the downtown housing stock and replaces a surface parking lot.
E. This project is important because it will provide relatively affordable housing options for the area and has family-friendly housing along E Mifflin that will hopefully help increase the school age population so that we can keep Isthmus schools open.
F. I very much appreciate that this developer has worked on several affordable housing projects and just gets it. No unnecessary arguments about inclusionary zoning, in fact, an inherent understanding of why it is important.
Having said all of that about how good the development process was, the TIF discussion has been excruciatingly painful. While the development approvals for the GDP stage and the neighborhood process were wrapped up in about 6 months, the TIF discussion has been going on for nearly a year. I’ve said all along I wanted to know what number the staff believes is the amount of the gap and could support, because I do believe this is really a blighted area, not just within the very broad definition of the statutes, but at a common sense level, unlike Monroe Commons. (And when I say the property is blighted, I don’t mean to imply that the Don Miller business there is not valuable, its just that a surface parking lot on an entire downtown block is not the best use of the property and the E Washington corridor needs improvement.) I also feel that this is a pioneering project for the area and that without (“but for”) TIF, the project will not happen.
In January, at the Board of Estimates, the numbers that staff presented were a maximum of about $1.2M for a gap. Between that last meeting and now, it seems that we found several instances where the developer was counting costs differently or they have since agreed upon various assumptions and it turns out that the number that the staff now supports is $2.2 million for the first phase of the project. Since staff are comfortable with this number, it is a number I can support for this project.
But here’s the catch . . . you knew it couldn’t be that simple . . . we still have an additional $2M gap.
Gorman originally asked for $7 – 8 million. Obviously, we only have $5M in the 2006 budget. So, like other projects, the City of Madison asked the developer to phase their project. This helps the City of Madison in controlling our budget, but also allows us to assess a large project as it proceeds. In many cases the project may do better than originally anticipated and may not need additional (or as substantial of) assistance in later phases and the success of initial phases may make traditional financing more feasible.
In cases where we make the developer phase their project, we don’t allow them to count costs of subsequent phases at the time of the initial TIF request. This makes sense, but it also creates an additional $2M gap on the Gorman project because they need to purchase the whole piece of property now. (Staff agrees that the $2M number is correct.)
So, what to do about that additional $2M gap?
I’d argue that in this particular case, this is not at all like other phased TIF projects. In other cases, phasing of the land purchase was possible because there were no existing uses on the land or the existing uses were separable and the purchase of just part of the property was feasible. In the Gorman case, we have an existing business on the entire site and although other portions of the Don Miller business will be staying downtown, there is no obvious separation of the business that is located on this block. Therefore, Gorman has to purchase the entire block and there aren’t other feasible options. Additionally, I have been told (and have to confirm), that acceptable TIF expenses are for relocation of existing businesses. So purchasing the land for subsequent phases due to the relocation of the existing business is a legal use of TIF dollars and seems reasonable to be considered in this case. Also, I’ve been told that price that is being paid for this land is reasonable and to purchase it all now, before it goes up in price, seems to make sense to keep further TIF expenses in the future at a reasonable amount.
Having argued for giving additional TIF assistance, I have also asked that we try to find a way to be creative . . . is there some way that we can impose some protections for the City of Madison if for some reason the second phase doesn’t happen or it turns out that the project does so well that the additional $2M wasn’t needed? I’m ready to support the additional $2M if we can narrowly craft the reason for why we allowed purchase of the land for the second phase (help to relocate the existing business) and we adequately protect the City of Madison tax dollars.
One final complicating factor here . . . at some point, during 2006 we are anticipating a TIF request of about $4 million for the Todd Drive project that was referred by the Plan Commission last night . . . and leaves a $3M gap in our 2006 budget . . .
And lastly, I can’t write all of this without bringing up the fact that almost a year ago the Board of Estimates subcommittee (Judy Olson, Warren Onken and myself) finished a report on changes to TIF policy . . . and the plan commission acted on it . . . but it has been delayed at the current Board of Estimates since June or July . . . we need to get those changes in effect before more people have to go through this tortuous process.
