Three Issues That Make a Statement
March 31, 2009 4:37 PM
The City Council has three issues on tonight's agenda that together could form a powerful statement about Madison's response to the national recession: the Northeast Neighborhoods goals, the BioAg Gateway proposal and the new TIF policy. Taken together these actions would say that our city isn't responding to the recession by pulling inward, but rather by moving forward with some confidence in the future. And they start to create a picture of what a progressive city's response to the recession looks like.
Neighborhoods of the Future
Over the next two decades or so Madison will develop 2,500 acres in an area between I-94 and U.S. Highway 151 called the Northeast Neighborhoods. I added the plural "s". The first planning attempts had been thought of as the Northeast Neighborhood, but it seemed to me that no area that large could be a single neighborhood. Instead, it should be many small neighborhoods of a radius of a quarter mile to a half mile with a central focal point like a park or a small retail area or a school or library. And it should be a very green plan. We should be designing places for the reality of expensive energy so that they are sustainable in the long run. If we do it right it, might even be a place that captures the national imagination.
So, we decided to start not with a specific plan, but with a set of simple goals. I asked Andrew Statz, our Natural Step coordinator, to develop them and he did a great job. The basic idea is to reduce water consumption, rain water runoff, vehicle use and energy consumption by 25%. The tricky part is deciding what baseline to work from. Ald. Satya Rhodes Conway pointed out correctly that if we use a baseline for energy that is current household consumption we're setting the bar too low because the current aggregate base will include lots of old houses (like mine) that use a lot of energy. The problem is that finding another baseline that is easily measurable or where the data is readily available is difficult. We're working on it, but the best thing to do tonight might be to move ahead and keep hashing out the details.
Not Just Another Business Park
Also on tonight's agenda is the BioAg Gateway. This is a business park on the city's far southeast side in the shadow of the State Department of Agriculture building. The idea is to cluster bioag industries here to create the kind of dynamic creativity that happens when researchers and entrepreneurs in the same general field interact with one another on a daily basis. At its center would be Biolink, a building where new businesses could be incubated with the help of professionals who know the industry. There's a good chance that the Federal government will help out with several million dollars to create the facility, but a local match is needed. Here too, alders have asked good, tough questions and they've done their due diligence. It's a project that's not without risk, but I think that the risk has been substantially reduced with amendments adopted at the Board of Estimates last week. Essentially, the BOE substitute will require that a half dozen issues related to the project are addressed as a condition of making the local tax incremental financing commitment on the project. The BioAg Gateway could be a great catalyst that will leverage research and our already strong agriculture industry to build a stronger economy coming out of the recession.
Splitting the Difference
On Tuesday night the Council is likely to adopt a new Tax Incremental Financing policy. The new policy emphasizes economic development and job creation at just the time we need it.
Thanks to the good work of TIF Policy Committee Chair Tripp Widder and the committee members, there's very little controversy left to discuss. The one remaining small issue involves an obscure policy called "equity participation," or as it is less affectionately known "the equity kicker." Call it what you want, the basic concept is essentially something like a windfall profits tax. The idea is that if a developer who gets city taxpayer help through TIF realizes profits over 12%, the taxpayers should share in the good fortune. The policy to this point has been that the city would split the largess evenly with the developer. This seems fair to me since the developer did the work to build a project that was highly successful but the city provided some of the financing to make the project feasible in the first place.
About the only thing the TIF committee did that I disagree with is moving the city share of the equity payment to two-thirds. That just doesn't seem reasonable given that the city would not have done anything to make the project successful. It was in large part the developer's hard work that made the profit. So, I think the split should remain 50-50.
Another problematic recommendation took half of the city's share and put it in the Affordable Housing Trust Fund. Since there's no relationship between the success of the development and affordable housing I don't see the reason for funds to go in that direction. Moreover, by the time the economy recovers enough to create even the possibility for profits over 12%, it's the city's general fund balance that will need bolstering. So, it seems to me that all of the city's share should go to the general fund rainy day account when possible to help rebuild our rainy day fund after the recession ends.
Now, there is an interesting proposal on the table from Smart Growth Madison. They suggest that we forgive the 50% city share of the equity kicker if the developer produces at least 15% of the development affordable to people who make 80% or less of county median income. This would provide a significant incentive for developers to produce affordable housing in every TIF-supported housing development.
It's all a little academic in any event since the new policy moves us away from using TIF to support housing projects in general. The new policy recognizes appropriately that the downtown housing market has been pretty well primed. Nonetheless, it seems that to the extent that equity participation happens in the future, a 50-50 split makes the most sense and the Smart Growth proposal should be carefully considered by the Council.