Sunday, February 20, 2011

Some Reasons Why the City of Madison Should Stay Out of Real Estate Speculation

Madison's Mayor and City Council are clearly not experts in commercial real estate. Why then do they keep engaging in commercial real estate speculation with taxpayer funds?  In today's economic climate, that is especially irresponsible.  There are plenty of signs, which they are inexplicably ignoring, that building hotels with taxpayer funds is a really bad idea.

One recent downtown Madison hotel project still sits unfinished and won't generate tax revenue anytime soon.

The City of Sheboygan has not realized the expected revenue stream from the Blue Harbor conference center.

Las Vegas is a cautionary tale of irrational exhuberance in the hotel construction business.  What do they think a new Marcus Hotel adjacent to Monona Terrace will do to the Edgewater's occupancy rate?

Wisconsin Rapids' only hotel with a conference center was several months delinquent on both room taxes and property taxes and has just gone into foreclosure.  The Edgewater TIF "loan" (actually a hand-out) was justified with inflated projections for both room and property taxes.  I doubt the city will see anywhere close to that additional revenue, and taxpayers will be left holding the bag, much like in Wisconsin Rapids.

6 comments:

Deekaman said...

ah...something we agree on. Government speculating with taxpayer money. No good ever comes to it.

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Dan said...

I agree with you on some of this. The Edgewater will suffer some big damage to it's hotel numbers, along with the rest of the hotels in the city.
On the other hand, what legal right does the city have to protect certain projects? There is really none and you have to let the free market work itself out.

Ordinary Jill said...

Dan, the city played favorites with Edgewater, giving them $16 million in TIF dollars for their expansion (when they weren't even in a TIF district) and changing several city ordinances (including one regulating construction along the lakeshore). They never should have done so, in my opinion.

Dan said...

I think, though not sure, i agreed with you on that.
I used to live down the street from the Edgewater when going to school. Just curious, what did they do to expand? Seems like they had such tight quarters, they didn't have room to expand outdoors.
In Vegas, there is a glut of hotel rooms and you can get a room for the price of a buffet and yet they still want to add rooms. Ceasers wants to finish another tower, adding about 1000 more rooms to the Strip.
So, should government regulate how many hotel rooms a city has, even if it hurts the businesses? Same with gas stations, grocery stores? Good arguments on both sides.

Ordinary Jill said...

I'm not saying that government should regulate how many rooms the city has. I'm saying that government should not finance hotel construction, because it's a risky investment that does not necessarily create more jobs (if the new hotels simply cannibalize business from existing ones).

Regarding the Edgewater expansion, if I remember right, they are tearing down the 1970s tower addition and replacing it with something bigger, and I believe they are also going to build closer to the existing street.