A robust tax district on the East Side has enough money to pay for the $20 million Madison Public Market while contributing to upcoming projects on the South Side — if the city council and other tax agencies agree to spend it that way.
Alds. Syed Abbas, Regina Vidaver and Nasra Wehelie on Friday offered an amendment to Mayor Satya Rhodes-Conway’s proposed capital budget to include up to $6 million more in city support from the TIF district in the East Washington Avenue corridor for the public market to provide a funding gap of $5.2 million.
With TIF, the city and other local tax authorities agree to freeze real estate values in an area. Tax revenues from growth are then invested in private development or public infrastructure. When investments are repaid, the district is closed and the higher value property is fully returned to the tax rolls.
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To fund the market, the city intended to use $7 million in TIF, $849,000 in city funds, $3 million in private donations, a $3 million grant from the Federal Economic Development Agency, to use $.4 million and $4 million from a state program using federal COVID-19 relief funds. But at the end of August the city revealed Increasing construction costs had increased the cost by $1.8 million, increasing it to $20 million. So the city withdrew its application for the $3.4 million federal grant because the city couldn’t meet a deadline to guarantee how it would cover the new costs.
Then the city finance committee offered mixed signals about whether or how the city could close the funding gap. Some members questioned whether such spending was a wise use of public funds, and others said the city should stop developing the thriving TIF district, which includes the market called TID 36, because district funds should also contribute , to cover significant needs south side.
In September Rhodes-Conway proposed a capital budget for 2023 which continued the currently approved funding levels for the project but did not include additional funds to fill the funding gap. This shortage will delay construction on the market until at least spring and could jeopardize the project as a whole.
But TID 36 has now accumulated enough cash to provide more money for the public market and to contribute to a new South Side TIF district expected in 2023, said Matt Mikolajewski, the city’s director of economic development.
TID 36 is expected to have approximately $21 million in cash on hand by the end of this year. The district still has about $7 million in debt, the city is already committing $7 million in TIF to the public market, and another $6.5 million is needed for other expenses. At the moment, the district can cover all existing obligations.
But TID 36 is also now generating approximately $10 million annually for eligible TIF spend that cannot be spent until September 2027, meaning the district will have another $50 million by then. This money could be available for new spending, including the public market and donations to the upcoming South Side TIF district.
According to Mikolajewski, the city and the TIF Joint Review Board of Taxing Entities have four basic options for TID 36:
- Close the district early after current obligations are met and return all tax revenues to the tax sovereigns.
- Authorize the issuance of additional funds within the TID 36 limit, e.g. B. for the public market.
- Approve TID 36’s cash donation to other districts as discussed for South Madison.
- Do a combination of the above.
The city is now preparing a boundary and project plan for another TIF district on the South Side, TID 51, to be implemented in Q2 2023. Early analysis indicates that there are more than $100 million in TIF-eligible projects in the South Side District, but they will not all begin before the 2027 deadline for using or donating funds from TID 36, said Mikolayevsky.
“There is a way forward where cash could be used to fund both the public market and the initial TID 51 projects,” he said.
The new TID 51 will likely exist until 2042 and is expected to have the capacity to fund projects within its own borders, Mikolajewski said. “It was never expected that TID 51 would rely solely on donations from other TIDs to fund expenses,” he said.