Downtown: The Madison Story

The way we build and renew our capital city invests in people, neighborhoods and healthy urban growth By Dick Wagner

Anthropologists tell us that early tool-making societies mark the beginning of Homo sapiens, or knowing beings. They usually talk in terms of hand axes, but the human race continues its tool making today.
When cities like Madison were in rapid decline in the 1960s and ’70s, inventive folks started to construct new tools for urban growth. Many are rooted in state law and policy, among them the State Building Commission’s urban policy, the use of Tax Incremental Financing (better known as TIF) and WHEDA tax credits for housing. Here’s more insight to all three.
In the late ’60s Gov. Oscar Rennebohm, then a regent, championed the migration of state offices to the suburbs. Land was cheap, so the state could build abundant parking. Unfortunately, highway building costs to accommodate the growth in traffic and pollution from water runoff were unintended consequences.
In the ’70s environmentalists and urban planners who had the ear of then–Gov. Pat Lucey and Madison’s state senator Fred Risser lobbied the Building Commission to adopt a policy favoring urban sites for state offices. “State agencies shall give first consideration to central city location, including areas recommended by local officials,” according to the new language, and a string of downtown state offices followed.
While some were aesthetically deficient, the buildings were strong catalysts in revitalizing nearby neighborhoods as the next generation of state employees invested in housing on the isthmus. The state has continued to protect its now more than half-billion-dollar investment in the central city by reinvesting and updating these buildings.
 

 

What’s In A Name
While buildings are bricks-and-mortar investments for today, TIF, a redevelopment tool created in the 1970s, is a unique—and often misunderstood—down payment on the future.
The key to the TIF tool is in the name: tax increment, and the theory behind it is that urban investment in the middle of a city—as opposed to an empty agricultural lot on the outskirts—faces complex issues that might require a stimulus to encourage developers who might otherwise face an uphill battle financing the project. Blight, usually in the form of underdeveloped, neglected or contaminated residential or commercial properties, can look risky to lenders, which developers rely on to help finance the project.
If an urban development succeeds, the higher tax base (assessed value) produces an added increment in property tax over what was there previously. In contrast, no project means no increment.
TIF opponents question why the city would spend millions on development when schools, roads, social programs and more need our immediate attention. TIF in fact addresses these important issues by creating incentive to develop underutilized areas. Without TIF there is likely no added tax revenue to go to all the usual suspects—city, county, and those schools that are on the property tax bill—since the area is blighted. So the issue is how the city can create incentive to develop in a blighted area by loaning money for projects.
This process addresses the issues raised by TIF opponents by assisting the development of a blighted district in general, particularly by repairing or creating public amenities such as roads, and then adding revenue for schools and other taxing jurisdictions by virtue of the increased property taxes created by the increment of the TIF district upon closing.
TIF loans or grants are often funded by bonds that the city issues on a case-by-case basis. The TIF loan is made by the city for a particular project on the assumption that the assessed value of the area will increase as a result of the development. Taxes paid on the increased value go to repay the TIF bonds. The city must spend this increment on eligible project costs included in the TIF district plan for the duration of the district’s lifetime. A TIF district, or TID, has a maximum life of 27 years but can close as soon as the loan is repaid. Since the inception of TIF, 39 districts have been established with a total incremental value of more than $1 billion.
The first TIF decisions in Madison allowed many buildings and businesses of today to succeed. Capitol Centre—the Mifflin and Dayton Street housing development and grocery store—was one of the earliest TIF developments in the central city that helped spur a culture of reinvestment. Recent projects include the Block 89 redevelopment, Capitol Point Condominiums and University Square. Now it is as much a part of urban planning as zoning and building permits though most projects never need or use it, despite public perception otherwise.
For TIFs and their partners TIDs, the return on increased investments and the growth in assessed values far exceeds the capital expenditures under the TIF agreements. It is a winning strategy for everyone.


 

New Century, New Tools
A more recent urban tool came into use through a partnership between developers, the city and the Wisconsin Housing and Economic Development Authority, or WHEDA. Under the program, called the Low Income Housing Tax Credit, a portion of a project must reserve units for those who qualify at levels of fifty or sixty percent of the county median income. Recent project proposals require the fifty-percent level not to exceed $40,000 for a family of four.
Like TIF, the tax credits program has faced its own detractors over miscon-
ceptions about “low-income” housing, conflating the notion with older images of public housing for welfare recipients, the homeless or the unemployed. But an annual income of $40,000 equates to hardworking families earning wages in industries from health care and education to retail and construction.
The city has utilized these credits, worth more than $4.3 million, for projects in diverse geographic areas. To name a few: Madison Mark, Park Terrace, Yahara Place, Park Central and the City Row Apartments in progress on Johnson Street. All of these developments have contributed to our quality housing stock, permitted residents with different incomes to live in great neighborhoods and given our central city the gift of urban renewal in the truest sense.
Other tools used in the
evolution of our cities include Business Improvement Districts (we have a great one for Capitol Square and State Street), Planned Unit Developments, Zoning Code rewrites, Comprehensive Plans and many more.
The human mind continues to make urban tools that complement the times we live in. What will be our next hammer and saw, and how can we as a community expand our knowledge to create them? Here in Madison, you’ll find many active neighborhoods that are learning these tools, and inventing new ones, to help bring reinvestment that keeps our cities healthy.

Dick Wagner, a former member of the Dane County Board of Supervisors, currently serves on the Board of Directors for Downtown Madison, Inc.

*SPECIAL PROMOTIONAL SECTION

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