Following Mayor Paul Soglin’s presentation of potential revisions to Madison’s taxing policies, a city committee convened Tuesday to evaluate the new options.
In a statement from Soglin, the mayor said he was interested in reviewing Madison’s tax incremental financing policy for several reasons, including reflecting changes in real estate markets, maximizing net new construction and clarifying policy language.
The revisions would be presented to the city’s Board of Estimates and City Council for consideration.
Soglin said during the Economic Development Committee’s meeting that TIF has played a major role in revitalizing Madison’s downtown in the past, but in comparison to Middleton and Verona, growth in new infrastructure development is behind.
“This raises the question if we use their same standards,” Soglin said. “We can compare TIF requirements in Madison versus other communities.”
Madison’s Director of Economic Development Aaron Owens said the TIF program is utilized in particular areas of Madison to freeze tax bases for a period of time. This allows the city to pay off its investment in new infrastructure developments while generating money to put toward public goods such as roads and bike paths.
Owens said Madison has a lower net new construction growth rate than other cities in Dane County, such as Verona. However, he said it is difficult to accurately compare growth rates between cities.
“If Verona were to build a new Hilton hotel, Madison would need 12 new hotels to affect its growth rate the way it would affect Verona’s,” Owens said.
According to Owens, economic pressure to be more competitive within Dane County despite this challenge is a reason for making changes to the TIF policy.
Owens said possible reforms regarding equity participation in the TIF policy could be beneficial. He said equity participation loans between the city and developers could benefit the city if the project is profitable.
Owen said if a developer needs TIF assistance from the city and is expecting to make $20 million, but ultimately makes $30 million, the city would argue it should receive some of the profit to use for public projects.
Developers might believe this would be unfair, Owens said. He also suggested the idea of a pay-as-you-go TIF policy to mimic the one currently practiced by Verona.
“Developers will borrow the money themselves,” said Owens. “The city will then pay the developer to pay off their debt, rather than borrowing for them like the current TIF policy.”
Owens said retail development grants in the new TIF policy would allow retail stores on State Street to remain competitive with food and beverage establishments. He said there would be improvements in tenant costs with larger grants from TIF that would keep the retail industry vibrant.
He told the committee that the new TIF policy should articulate the vision, goals and values of Madison clearly. He added unnecessary language should be eliminated.
Committee member Joseph Boucher made a motion to continue TIF policy revisions at a later time because of time constraints at the meeting. The committee also approved a motion to create a sub-committee of three members to allow for more in depth discussion of possible revisions.