Information and Thoughts About the Proposed Extension of the Dairy Drive Campground

• Background
• Funding Constraints and the Expenditure Restraint Incentive Program
• Funding Needs for the Forthcoming 250-Bed Bartillon Shelter
• Conclusion, Proposed Site Extension, and My Thoughts

This post includes information about the temporary urban campground serving chronically homeless individuals at Dairy Drive, the complicated situation of available City operating funding for homeless services in 2026, information about an effort to keep Dairy Drive open past the long-planned close-down date, and why I am unlikely to support the proposed resolution extending the site.

I'm sharing this post to be transparent about my understanding of this complex and increasingly frustrating situation. 

Background

If you lived in Madison and followed local news in 2021, you may remember the encampment of unhoused individuals at Reindahl Park, and the very problematic situation that it became as the number of campers grew and as the health and safety situation there deteriorated. The Madison Common Council passed a resolution on August 31, 2021 declaring the situation to be an emergency and directing City staff to pursue an alternative location to locate a planned encampment at 3202 Dairy Drive and, paired with substantial service offerings to keep the new location stable and safe. The City installed 30 temporary 8 by 8-foot shelter structures (different from permanent and more durable tiny houses used, for example, by Occupy Madison) were placed at the site along with a bathroom.

Operational expenses for Dairy Drive provided in the contract with Madison Street Medicine include property management and on-site support services for getting into permanent housing, mental health counseling, and substance use disorders. Costs associated with electricity, waste removal, pest control, emergency phone line, and general property maintenance have been supported by the City of Madison outside of the service contract with Madison Street Medicine. I think it’s fair to say that, despite a rocky time of incidents early on, this was overall a successful venture: the operator claims that, of 97 adults experiencing unsheltered homelessness, around 77% “left to positive destinations” according to the resolution to extend the site.

Though its contract and funding have been extended by the City a few times to round out four years of operations, it was always meant to be temporary, and now the federal funds the City used to support the site have run out. The closure and site restoration plan was announced in the spring of this year.

Funding Constraints and the Expenditure Restraint Incentive Program

This memo from City Community Development Division staff describes the history of Dairy Drive funding in detail. Dairy Drive costs between $60,000 and $70,000 per month to operate Dairy Drive, which can currently house up to 29 people - one of the original shelters was damaged and removed.

Funding for Dairy Drive operations has come primarily from one-time federal funding from the City’s allocation of American Rescue Plan Act (ARPA) State and Local Fiscal Recovery Funds (SLFRF). Other funding sources have included a one-time COVID-related allocation of Community Development Block Grant (CDBG) funds; proceeds from tax incremental district (TID) 39; contributions from Dane County; a small, non-COVID federal grant; and, private donations.

As mentioned above, the federal funds the City was using to support this project have run out and so any future operating funds would have to come from other sources. Madison’s 2026 Operating Budget development process is ongoing right now. While it would be possible for us to use the City’s tax levy funds to support Dairy Drive, the Operating Budget is limited by state law in several ways. The challenge for the 2026 budget will be the State’s Expenditure Restraint Incentive Program (ERIP), which provides a grant to municipalities who limit their budget’s spending growth – that limit being about 4% in 2026. The City of Madison depends on that ERIP grant as a source of revenue, estimated to be $7 million in 2026. According to an August 25th City Finance presentation (slide 11) to the Finance Committee, the estimated cost to continue existing City services in 2026 without Dairy Drive will be $378.8 million. The maximum amount the City is allowed to spend and still qualify for the $7 million ERIP payment is $380.4 million. That leaves an estimated $1.6 million that the City could still spend under the ERIP limit, above what it costs to provide the existing level of services in 2026.

Funding Needs for the Forthcoming 250-Bed Bartillon Shelter

The new, permanent, 250-bed shelter for unhoused folks at Bartillon Drive to serve all of Dane County will open in 2026 and needs to be staffed. This is a shared project between the City and Dane County. According to City Community Development Division Director Jim O’Keefe’s letter explaining his agency’s 2026 Operating Budget Request, it will cost about $3.2 million to operate that new shelter overnight-only and $4.2 million if we want the shelter to offer daytime services as well. To come up with the City’s share of operating funding, the Community Development Division 2026 Operating Budget Request asked for a new $1 million allocation for Bartillon shelter support not included in the cost-to-continue estimate, to be combined with a continuing allocation $700,000, already included in the cost-to-continue estimate, for a total of $1.7 million. That $1.7 million in City funding for the Bartillon shelter, plus the other forms of City financial support for homeless services, represents more money than the City of Madison has ever spent on serving this population. From a big-picture point of view, the Bartillon shelter will have the capacity to serve nearly many times more people than the Dairy Drive site does: 250 individuals compared to 29.

For me, the really serious red flag here is that County officials have not been proactive or transparent with the City about their plans to fund their share of the Bartillon shelter’s operating costs – which I believe is a very serious concern for this shared City-County project's future. Last Thursday, County Health and Human Service’s 2026 Operating Budget presentation showed that the County plans to eliminate its share of Dairy Drive support funding as part of their budget cuts in 2026, rather than diverting those funds to supplement the County’s share of Bartillon shelter costs. Here’s a link to a recording of that portion of their presentation. Their presentation did not discuss funding for the Bartillon shelter in detail. And remember, the Bartillon shelter’s minimum cost to operate on a nights-only basis will be $3.2 million (and $4.2 million if it is to offer daytime services).

The City will also have to find money to staff the new Reindahl Park Imagination Center library facility on the growing Northeast side of Madison, located nearby the new Bartillon shelter. The Library’s 2026 Operating Budget request asks for $326,000 to cover that cost in 2026.

Conclusion, Proposed Site Extension, and My Thoughts

If the City allocates funding in the 2026 Operating Budget to continue City services at existing levels, opens the Bartillon shelter (especially given the risk of insufficient County support for operations), and opens the Reindahl Imagination Center on the Northeast side, there is not enough money remaining under the 2026 Expenditure Restraint Incentive Program spending limit for the City to continue Dairy Drive funding at a level that continues to provide the necessary services offered there. If the City were to spend at a level that exceeds the Expenditure Restraint Program limit, the City would no longer be eligible for the $7 million grant from the state. The City relies upon that grant to balance the budget, making this a scenario that I believe we must avoid. (This is also why I believe it's essential that the City use already-allocated 2025 dollars to cover site demolition/restoration costs, rather than letting those 2025 dollars lapse and adding this need to our 2026 ERIP spending limit problem.)

The resolution to extend the contract for operating Dairy Drive until April was proposed by District 6 Alder Davy Mayer whose district includes the area around the Social Justice Center, which has had its own challenges with unsheltered homelessness recently (here’s a link to background info on that situation). He suggests in this blog post that the two issues are related, and explains in this blog post why he’s sponsoring the extension resolution. His resolution proposes to keep the site open through April while allocating no additional financial support for the service provider due to the City facing the Expenditure Restraint Incentive Program limit and the discontinuation of County funds, both described in detail in the above section of this post.

I appreciate the work Alder Mayer has put into looking for a solution through this coming winter. Under the Expenditure Restraint Incentive Program limit, if the City is going to fund its share of the Bartillon permanent shelter, the City has extremely limited options to find more money to continue Dairy Drive. The County’s 2026 Operating Budget outlook is pretty rough, which I fear complicates the County's financial support for the Bartillon shelter before they even get to the issue of Dairy Drive funding. Given this bad funding outlook in 2026, I worry that extending the contract for Dairy Drive without the financial support to continue a high level of supportive services for Dairy Drive residents sets up this site to become a bad situation.