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Tax Increment Financing is a tax subsidy that comes from city or county funds to assist developers with up-front costs to improve "blighted" areas. They are intended for essential community improvements that otherwise would not take place without the tax break. The city of Madison has approved its first TIF project for "affordable housing" near S. Washington Avenue.
How is the TIF evaluated to assure it is the best use of our local tax dollars? What should the approval process be? How should the community be involved in the decision?
TIFs can be a positive financing tool when truly needed and used in a limited and measurable way. When asked, Mayor Hexom explained to me the city must approve any TIF that meets the broad guidelines of state law similar to approving a liquor license.
However, the state Legislative Auditor told me the city can evaluate each TIF as well as establish its own application guidelines.
We need to comprehensively evaluate the projects and have a clear understanding of the end result. There shold be a stop for public review and a sign-off from affected groups in the community such as the school system before approval (as is done in other areas where TIFs are more common).
In regard to the current TIF, the Lake Area Improvement Corporation (LAIC) commissioned a housing study for the Madison area. Rather than show the need for affordable housing, to me it appears to support the opposite: that the average price of existing homes is $84,500 and that homes are currently being built within their benchmark of $120,500. There are 43 homes listed for sale right now, with 28 of them below that benchmark.
An unnecessary subsidy diverts taxes with no benefit for the community, increasing the profit margin and competitive advantage for one developer while the existing tax base accepts greater burden. This may explain why the city has received another TIF application.
In contrast, projects without tax subsidies immediately add to our tax base and pay their own way.
Our community and city council should be more advised on TIFs from independent legal sources concerned about our interests. Attorney Bill Ellingson represents the current TIF developer (Randy Schaefer) and the LAIC with their own goals and would like us to support these tax subsidies.
The LAIC supported Schaefer by purchasing a home to allow access to his TIF development. The city contributes heavily to the LAIC, so we probably assume it exists to promote the most effective economic development for the community, but the also receive substantial private support, so whose intrest is the LAIC most concerned with?
What happened to the goal of job creation? Rather than build subsidized housing, the simple focus on more stable, better-paying employment opportunities providing a future would be the most effective way to raise the standard of living in the community with benefits for all.
[John Hess, Letter to the Editor, Madison Daily Leader, 2008.03.05, p. 3]
Hess is arguing from a free-market perspective similar to what has appeared in these pages: government should act for the public good to do things the free market can't or won't do on its own, but if the goal is affordable housing, Hess argues that the free market is getting the job done. Hess points to 43 homes listed for sale, 28 of them meeting the LAIC's standard for "affordable." (A quick check on Realtor.com this morning brings up 50 listings in the 57042 ZIP, 24 of them under $120K... and one beasty on Lake Madison for $969K!)
With that many houses on the market, is there a housing crunch that warrants government subsidy of further housing development? And if we are short on affordable housing, will the city keep an eye on the TIF to make sure it fulfills its promise to address that shortage?
Those sound like good questions for the city commission candidates -- catch them at the public forum at MHS on April 3!
Randy Schaefer should sell the lots he just bought on NE 9th Street, east of Division Avenue if he needs some extra cash for his flooded creek development. Or maybe sell his cabin in the Black Hills. Other developers have built affordable housing and paid for their own infrastructure (streets, water and sewer lines, sidewalks) without City assistance. I agree with you Cory. Talk to your City Commissioners and the new candidates and talk to Mayor Hexom. We need to save our borrowing power for a legitimate project that benefits Madison, not just one person.
ReplyDeleteNow that Garfield School is no longer a school and has no playground equipment, we wonder if Mr. Schaefer would donate his land, or some of it, for a children's park. The location would be pretty good, protected by homes and it would serve a purpose since there is no park closer than the baseball diamonds, which means the kids have to cross the highway. Since the City had the land originally, it would make sense to develop a children's playground in the neighborhood.
ReplyDeletePeople may not want to buy a new home next to a creek and flood plain next to run down homes. We do need more new homes, maybe lower price homes that match the Habitat for Humanity pricing so people can afford payments. From what I read, $125,000 would mean the payment of about $1200 a month with tax and insurance and maybe people can't afford that earning $8 to $10 an hour. Maybe built them smaller and people can add on later when they have money.
ReplyDeleteActually, Anon, let me lowball your estimate. Madville Times headquarters came in a hair under $100K. Our monthly payment is about $520 at 5.15%. At similar rates (and they're going down again -- yay, recession?), I would think you could finance a $125K house for... what, maybe $700, $800/month? Depends on your down payment -- run your own numbers at SDHDA's mortgage calculator.
ReplyDeleteThe more we see about these TIF District finance plans, it appears that the developer is the only one who gains because they get all the streets, curb & gutter, sidewalks and water and sewer lines installed for free and don't have to pay any of it back when they sell their lots. The taxpayers pay it back for the developer. The community does not win or gain from that. LAIC bought that old house on Grant for the developer, so what does LAIC do if he doesn't develop it or go through with the plans? Can they force the developer to buy it from them or can they sell it and get their investment back? This has an odor to it and it isn't just dead carp in the creek.
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