City could cover public market funding gap with TIF revenue

Aldes. Syed Abbas, Regina Vidaver and Nasra Wehelie on Friday proposed an amendment to Mayor Satya Rhodes-Conway’s proposed capital budget to provide up to $6 million more in city support for the TIF District in the Corridor of the East Washington Avenue for the public market, which has a Funding Deficit of $5.2 million.

With the TIF, the city and other local taxing entities agree to freeze property values ​​in an area. Tax revenues from growth are then invested in private development or public infrastructure. When the investments are repaid, the neighborhood is closed and the higher value property is returned entirely to the tax rolls.

To fund the market, the city intended to use $7 million in TIF, $849,000 in city funds, $3 million in private donations, a $3.4 million grant from the Federal Agency from economic development and $4 million from a state program that uses federal COVID-19 relief funds. But in late August, the city revealed that rising construction costs had added $1.8 million to the cost, bringing it to $20 million. The city therefore withdrew its application for the $3.4 million federal grant because it could not meet a deadline to guarantee how it would cover the new costs.

Then the city’s finance committee gave mixed signals about whether or how the city could close the funding gap. Some members questioned whether such spending was a good use of public funds and others said the city should not further exploit the thriving TIF district which includes the market, called TID 36, because the district’s money is also being considered to help meet significant needs on the South Side.

In September, Rhodes-Conway proposed a capital budget for 2023 that maintains current and approved funding levels for the project, but did not include any additional money to help fill the funding gap. This shortfall will at least delay construction on the market until early spring and could completely threaten the project.

But TID 36 has now built up enough cash to provide more money to the public market and contribute to a new South Side TIF neighborhood planned for 2023, the city’s Director of Economic Development Matt Mikolajewski said.

The TID 36 is expected to have a cash balance of approximately $21 million at the end of this year. The district still has about $7 million in debt, the city already commits $7 million in TIF for the public market, and about $6.5 million more is needed for other expenses. At this time, the district can cover all existing commitments.

But TID 36 also now generates about $10 million a year for eligible TIF expenditures, which can’t be spent until September 2027, meaning the district will have an additional $50 million available at that time. This money could be available for new expenses, including the public market and donations to the next South Side TIF district.

The city and the TIF Joint Review Board of Taxing Entities, Mikolajewski said, have four basic choices for TID 36:

• Close the district soon after current obligations are met and return all tax proceeds to taxing jurisdictions.
• Approve to spend additional money within the limits of TID 36, as for the public market.
• Approve the donation of TID 36 in cash to other districts, as discussed for South Madison.
• Do a combination of the above.

The city is currently preparing a scoping and project plan for another south side TIF district, TID 51, to be implemented in the second quarter of 2023. Early analysis suggests there is over $100 million in TIF-eligible projects in the South Side District, but not all of them will be started by the 2027 deadline for using or donating TID 36 funds, Mikolajewski said.

“There is a way forward where the money 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 it should have the ability to pay for projects within its own limits, Mikolajewski said. “TID 51 was never expected to rely solely on donations from other TIDs to pay for expenses,” he said.