Here's My Federal Jobs Program

Legalize Marijuana.  It won't create nearly as many jobs as we need, but it's a start. It will also save some scarce law enforcement resources that are now directed toward busting family farm operations and provide a new source of revenue for our cash-strapped state and federal governments.  It will also allow profits from Wisconsin growing operations to be reinvested in Wisconsin rather than siphoned off by Mexican drug cartels.

If Tammy Baldwin wants to make a legislative splash in Congress prior to next year's Senate race, she should be introducing legislation (or at least signing onto something from Barney Frank or Ron Paul) that would do away with federal marijuana prohibition.

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.

Public Private Partnership to Provide Patronage Positions?

Details of Gov. Walker's plan to replace the Dept. of Commerce with a publicly-financed private corporation were released on Thursday.

Employees of the new entity will not be state workers with civil service protections. They will have the option of participating in the Wisconsin Retirement System. Hiring and salary decisions will be made by a Board appointed by Gov. Walker himself.

Rep. Robin Vos, co-chair of the Joint Finance Committee, spoke of the need to bring in the "very best people" and get rid of those who "need to find employment elsewhere." His choice of words reminded me of a Country Club membership committee. The need for "the best" at the new agency could certainly be used to justify inflated upper management salaries.

From Channel 3000:

It's not immediately clear how many private employees there would be at the new hybrid agency. Walker spokesman Cullen Werwie said last week that they didn't anticipate overall employment levels to differ much from where they are now.

Employment levels will be similar, although most of the Department's regulatory functions will be either eliminated or shifted to other agencies. Hiring decisions will bypass civil service rules. Taxpayers will be paying a similar number of people to do significantly less work. It sounds like the new entity exists largely to create high-paying patronage jobs for the well-connected. Crony capitalism (and your tax dollars) at work.

Will Hammes Sponsor the New Urbanism Convention?

Mayor Dave is seeking an opinion from the city Ethics Board regarding whether it is appropriate for him to send out letters soliciting sponsors for a possible convention of the Congress for the New Urbanism. Madison needs to raise about $280,000 toward convention costs if it wishes to host. City Attorney Mike May pointed out a potential pitfall of having elected officials raise money for outside organizations: "One concern is that business entities wishing to ingratiate themselves may be driven to make contributions."

Now might be a good time for Mayor Dave to call in a favor from the Hammes Co. After all, he's already done as much as he possibly could to aid their Edgewater development proposal, so no one can accuse him of granting favors in exchange for sponsorship of his pet cause.

Marijuana Farmers Stimulate Northern Wisconsin Economy

Last week, we learned of a major drug bust in northern Wisconsin.  A major marijuana farm was hidden in the Chequamegon-Nicolet national forest.  It is believed to be the work of a Mexican drug cartel. The cartels in recent years have begun growing their product closer to their markets, eliminating the need for risky border crossings.  The Wisconsin State Journal article made a point of mentioning that these Mexican growers bought supplies and equipment locally:

They followed one suspect to a Fleet Farm in Green Bay, where he purchased six pairs of pruning shears. They watched another man purchase 9 mm ammunition at a nearby Wal-Mart, documents said.

The marijuana was processed locally, at a house in Seymour. At least 12 men have been arrested in connection with the operation. An unnamed informant (who may or may not be among the dozen men facing charges) said he was living in California several months ago when he was recruited to work on a ranch.

I was amazed to learn that commercial grades of marijuana can be grown in Wisconsin.  I always assumed that, should pot be legalized, it would mainly benefit states like California and Hawaii.  However, this shows that there is a lucrative market for pot grown in the Badger state.

I will be interested to learn how many people were actually employed in this illegal operation.  Imagine if legitimate Wisconsin farmers could grow marijuana, employing local people and spending the profits locally, rather than wiring it to California and Mexico.  Imagine the sales tax revenue for the state.

Sheboygan Built It, But They Didn't Come

In 2004, Great Wolf Resorts opened the Blue Harbor Resort waterpark hotel in Sheboygan. The City of Sheboygan helped out with $10.2 million in infrastructure improvements, a $4 million loan to build the hotel and an additional investment of $8 million to build a city-owned conference center (managed by the hotel) next door.

Last year, Great Wolf took a $24 million write-down on Blue Harbor, valuing the hotel at $6 million.  They also sued the city, arguing that their assessment was much too high and they had overpaid their property taxes for the past few years.  They reached a settlement, and the City of Sheboygan will refund almost $263,000 in property taxes.  The settlement money will come from the TIF district that includes Blue Harbor.

Meanwhile, Great Wolf is trying to sell the Blue Harbor Resort.

The moral of the story is that cities should be very careful about investing millions of dollars in hotel projects in the name of economic development and tourism.  Taxpayers should not finance real estate speculation.

I Smell a TIF Request

The organizers of Madison's World's Largest Brat Fest have a grand vision to improve the John Nolen Drive corridor.

The city has been coy about the details of the proposal, but Economic Development Coordinator Tim Cooley reportedly told the paper via email:

"Today, you can travel from the Beltline to the end of Olin-Turville Park without ever seeing the lake, and with limited opportunities by the public for recreation and enjoyment of the area."

I sincerely hope he didn't mean to imply that the lack of lake views along John Nolen between the Beltline and the end of Olin-Turville Park is a problem that needs to be solved.  I can think of several ways it could be addressed, none of them good:
1. Re-route John Nolen Drive to hug the lakeshore along the length of Olin-Turville Park.
2. Cut down a bunch of trees (and level the hill) at the park.
3. Demolish the Sheraton.
4. Elevate John Nolen Drive and create an urban park underneath to connect the Alliant Energy Center with Olin-Turville Park.

I'm just fine with waiting until I reach the causeway to enjoy the lake view from my car.  A pedestrian bridge isn't a bad idea.  Some nice plantings along the road would also improve things without breaking the bank.  Let's see what they are actually proposing and how much it is likely to cost Madison taxpayers and schools.

Revisionist History from Monona Terrace

Today's Wisconsin State Journal had an article about the impending retirement of Monona Terrace Director Jim Hess.

The online version (but not the print edition) includes this little nugget about the highlights of Hess' tenure:

683 conventions and conferences - including a national conference in 2002 for mayors that required significant security and offered a big opportunity to showcase the center - with an economic impact of over $300 million.

Funny, I seem to recall that the security concerns pretty much kept all the attendees locked down in the convention center (and the public far away), turning downtown into a ghost town and bitterly disappointing the area businesses who had hoped to benefit from the convention. The city received very little economic impact for the money it had to shell out for security.  The fiasco helped to end Mayor Sue Baumann's political career.

I'm surprised that Monona Terrace's press release bragged about that unfortunate bit of history.  Of course, it wasn't in the print edition of the paper; no doubt there simply wasn't space. 

Maybe I Should Start a Pool

Which downtown hotel will be the next to come to the City for TIF for a remodel or expansion?

Will Inn on the Park or the Madison Concourse cry about needing to update their space to compete with the Edgewater?

Or will the Hilton talk about the need to add rooms to support Monona Terrace?

Will the next request be for more than $16 million?

How will the City be able to refuse? After all, if they give new proposals less preferential treatment than they gave Bob Dunn's, it will look like they were playing favorites.

More About Taxpayer Subsidies

This started out as a comment in response to other comments, but it got ridiculously long.

The Monroe Commons TIF was not straightforward. It involved a lot of innovative math to avoid violating the 50 percent limit. There was a large subsidy placed on each condo to pay for the grocery store. The repayment formula was unrealistic to start with, but the Council seems not to have realized that. Yes, the market tanked. Anyone who believed the real estate boom was going to last forever had no business speculating in the market with taxpayer funds. I hope the developer manages to meet the commitment to make up the shortfall.

With regards to Capitol West, the city counted on a sufficient number of condos being sold and added to the property tax rolls. That hasn't yet happened, hence the State Journal reporting "Alexander has no issues with tax payments, but has struggled to sell enough condos to meet obligations for $4.27 million TIF loan."

Overture Center is a huge mess. Its draft budget for 2010-11 has a deficit almost twice as big as MCAD's reserves.  Who will make up the shortfall if not the City?  The City is also on the hook through 2011 for part of the remaining debt (part of the 2005 refinancing deal). It continues to subsidize the center's operations, much as it did for the Madison Civic Center.

Marc Eisen wrote a terrific story in Isthmus a few years ago on Overture's big mistakes which included this:

Mistake #4: Not programming enough free events. Paul Kosidowski, writing in these pages a few weeks ago, pointed out how crucial the old Crossroads was to the Civic Center for casually pulling the public into the building for children's shows. (It also, I would add, served as a short-cut to traverse the downtown.) The Crossroads functioned surprisingly well as a town square within the building.
Overture so far has no similar democratizing feature, and this only adds to complex's hoity-toity stand-offishness. This is not good. Not only because Frautschi dedicated the arts complex to the whole community, but because at some point the community may be asked to dig into its pockets to maintain Overture. 

While Overture's resident community arts groups have indeed increased their offerings (both in number and scale), a number of other community arts groups have struggled. 

Regarding the library, I did mis-state the facts. I should have said "17 million in TIF for a shiny new $37 million library."  $37 million was the total amount that the Council approved in the capital budget for the new library (not the total cost of the proposed Fiore mixed-use project though, which would have been $88 million). I apologize for not spotting the error before I published the post.  It will be corrected.  I have followed the saga of the proposed downtown library fairly closely.

And I never speculated about the age of Monroe Commons condo residents.  I was thinking of the patrons of Trader Joe's, the gourmet grocery store that was the reason for the Monroe Commons TIF.  Capitol West was the high-rise condo development I had in mind.  Regardless of who lives there, it adds a certain urban energy to the look of our downtown.

Madison Taxpayers Subsidize Yuppie Lifestyle

It has become more and more apparent that the City of Madison's taxpayer-funded assistance to private developers has not been the win-win it was claimed to be. The city is trying to collect almost $200,000 owed on the Monroe Commons TIF "loan" -- a deal that was so complex that I doubt most of the City Council even understood what they were approving.

Randy Alexander's Capitol West development has also struggled to make the payments on its $4.27 million TIF "loan" -- in 2009, the city had to re-write the deal, in order to prevent a default.

The city is also on the hook for the Overture Center's operating budget deficit. While the OC's cheerleaders claim that it has boosted property values and been an economic development engine for downtown, one wonders why, in that case, so many of the Capitol West condos remain unsold. The cheerleaders also talk about the public benefit of having a vibrant community arts facility. They conveniently forget that the OC's predecessor, the Madison Civic Center, hosted even more community arts groups, most of whom cannot afford the higher rents at the OC.

Now, after backing off his $37 million TIF request for a shiny new library $17 million TIF request for a shiny new $37 million library in favor of a scaled-down remodel, Madison's Mayor is still pushing for $16 million in TIF for the Edgewater project.  For this project, he has bullied committees, touted dubious jobs numbers and pushed through ordinance changes.  The property is not currently in a TIF district, and the request also violates other aspects of the city's TIF policy, so more rules will need to be re-written. On top of all that, much of the "loan" will be "repaid" by raiding property taxes from the successful University Square project, money that would otherwise go into the general fund.  Brenda Konkel and Kristin Czubkowski have more details on the most recent Edgewater TIF application.

I think the real reason for all of this is that Madison's west-side power brokers want to pretend they're living in Manhattan, with high-rise condos, Broadway shows, gourmet groceries and elegant, overpriced hotels.  I expect our new improved downtown library to have an entrance flanked by lion statues.  We already saw a return of the Statue of Liberty on the lake this past winter. Maybe we can drop a lighted disco ball from the top of the State Capitol on New Year's Eve, too.

Mayor Dave's $37 Million Erection Won't Go Up

Late last summer, Mayor Dave included $37 million in his capital budget for a grand new central library on West Washington, to replace the decaying building a few blocks away. He insisted that new construction rather than renovation was a better deal for the city, and he enthusiastically pushed his grand vision for the new development.

It turns out that the $37 million did not cover the actual development costs. Mayor Dave thought he could negotiate via the budget (a tactic pioneered by Milwaukee County Executive Scott Walker) and force Fiore-Irgens to lower its price after the city accepted its bid (narrowly chosen over one from T. Wall Properties). The Mayor and City Attorney kept the City Council in the dark during the futile negotiations. Now, some alders feel disrespected, and the Mayor has nothing to show for it.

Now that he's given up on his library project, I suspect Mayor Dave will go all in over the $16 million in TIF for the Edgewater project. It's his last chance to prove he's an alpha male. He's already had to give up his plan for trolleys, and he's deferred to Dane County on siting a high-speed rail station at the airport rather than downtown.

Just imagine what downtown Madison could be if we all shared Mayor Dave's vision:

Competing to Sell our Souls to Big Brother

Madison is abuzz (pun intended) over Google's search for a guinea-pig city for its experimental high-speed fiber network. I find it amusing that, while someone started a Facebook page called "Bring Google Fiber to Madison Wisconsin!", apparently no one thought to demonstrate community support (one of Google's vague criteria for choosing the winning city) via Google's own shiny-new social network.

I am hesitant to be an early adopter with anything Google. I thought long and hard about opening a Gmail account. I admit I was creeped out from the start by the fact that Google's bots would monitor the content of my emails for advertising purposes. I'm of a generation that still read Orwell in high school. Americans have fought long and hard to keep our government from eroding our privacy, only to happily give it up to a private-sector corporation whose "Don't Be Evil" slogan is laughably ironic in the face of Google's Chinese ventures.

Google agreed to censor its search engine in China in exchange for the opportunity to enter the Chinese market (and gain lucrative advertising revenue thereby). Google (perhaps unwittingly, perhaps not) provided the totalitarian Chinese government with all sorts of incriminating information on democracy activists and other dissident citizens through those citizens' Gmail accounts.

Last month, Google signed up all Gmail users (not only without their permission, but even against their will) for their new Buzz social network, turning private email contacts into public followers. This was an attempt to leverage Google's market power in the web-based email world into market power in the world of social networking, all the better to sell you stuff. Does anyone doubt that Google will closely monitor all Internet traffic over their high-speed network and share the information with advertisers?

Remember how concerned civil libertarians were over the previous administration's warrantless wiretaps, and the big telecom companies' collusion (and subsequent request for immunity)? Google is on the way to having more information on Americans (law-abiding and otherwise) in its databases than the NSA, CIA and FBI combined. If the Chinese government could hack into its citizens' Gmail accounts, do you really think our government can't? Thanks to Google's search algorithms, fishing expeditions will be faster and cheaper than ever.

And why in the world is everyone assuming that Google will foot the entire $97 million construction cost for its test network? They cite both community support and resources as criteria. Don't you think they'll expect TIF money, or at least a property tax exemption? Jerry Frautschi taught Madison taxpayers that it's a good idea to look that gift horse in the mouth, since you'll be paying the dental bills.

For more information, read Erik Paulson's excellent analysis, Kristin Czubkowski's latest summary, and the Onion's typically-prescient satire.

TIF Is Not a Loan; It's a Handout

With all the talk about the $16 million in tax incremental financing sought by the proposed Edgewater development, I keep reading references to the city being "paid back" through increased property taxes. People seem to be forgetting a few pertinent facts:

1. If the developer did not get the TIF money, but financed the entire cost itself, the property owners would still owe the same increased property taxes to the city, and the developer would have to repay the bank (or other investors) the entire cost of the development.

2. If the city did not give out the $16 million in TIF, and if the project was built anyway with private financing, the city would still get to collect the same amount in increased property taxes.

3. Keeping these two facts in mind, the $16 million in TIF cannot really be a loan. It is a development grant. The use of TIF is meant to make possible developments that are in the public interest but could not happen without TIF assistance.

Furthermore, the cost to the city would be more than just the $16 million given to Hammes. The city would have to borrow the money, which would increase its debt and raise the interest rate it has to pay on all its borrowing.

I am not impressed with the way the city wants to give this developer a free pass to ignore city ordinances (not just the Landmarks ordinance, but also the shoreline development rules, which are meant to protect the lakes and prevent property damage from flooding).

What really pisses me off, however, is the eagerness to throw millions of dollars of taxpayer money at a private developer for a dubious economic development argument. The developer refuses to commit to hiring local construction workers for family-supporting wages. How much do you want to bet we'll be seeing out-of-town subcontractors bringing in immigrant construction workers for minimum wage?

I do not begrudge hard-working immigrants the right to work in this country, assuming they are here legally. However, when the primary justification for public financing is the addition of jobs to our local economy, I want to make sure those jobs go to permanent Madison-area residents (whether immigrants or native-born citizens) who will spend much of their salaries on goods and services in this area, rather than send it to their families in Milwaukee or Chicago or Mexico.

Several years ago, Beaver Dam gave Wal-Mart a whole bunch of tax incentives to build their distribution center there, in the name of economic development. Residents were horrified to learn that prisoners were brought in for the construction work.

To all the folks who think the city should give carte blanche to any developer in the name of making Madison more "pro-business", be careful what you wish for. The Edgewater is already a profitable hotel. The owners have chosen to neglect the building in order to squeeze more short-term profits out of it. It's kind of like the Rio hotel in Las Vegas, which was recently described as "the most tired and used up looking 20-year-old I know, hands down."

Why should the city give money to an entity that refuses to properly maintain its property?

Why should my tax dollars be spent on corporate welfare, when the city refuses to put enough plows on the street after a major snowstorm?

Why should my tax dollars be spent to further gentrify downtown, when we are already stuck with the white elephant that is Overature Center? That was supposed to re-vitalize the downtown and foster economic development, at no cost to the city. Yeah, right.

I've heard this sales pitch before, and I'm not buying it.

More Questions About the Edgewater TIF

I read the account of the city council meeting where the $16 million in TIF funds for the Edgewater was kept in the capital budget.

It was reported that the property tax increment from the new development would be approximately $750,000 to $1 million per year. That is very important, since the city cannot count room tax and sales tax revenue toward the TIF payback calculations (since Edgewater will be poaching business from other downtown hotels, whose room and sales tax collections for the city will therefore decrease).

It wasn't clear, however, whether the $750,000 to $1 million property tax increment referred to the city's share of the property tax bill, or to the total property tax bill. This is also important, since the county and school district get a cut of the annual property tax bill (but are not ponying up for the TIF money).

I don't think the $16 million makes sense as an investment for the city in future property tax revenue. The payback will be long, and interest must be paid in the meantime on the $16 million the city will borrow to finance the project.

It may make sense as an economic stimulus measure, to create some construction jobs now and additional service jobs later. If that is the justification for the investment (and it was certainly the reason for organized labor's support of the project), then Alder Satya Rhodes-Conway's attempts to insert some union-friendly requirements on the project make a lot of sense. After all, if taxpayers are forking out money to buy jobs, we should be sure they are family-supporting jobs that will go to area residents (rather than minimum-wage jobs that will be filled by trucked-in immigrants who will send or spend most of their paychecks back home).

How long will it be, though, before Inn on the Park comes to the city to ask for TIF money to remodel and expand, in order to compete with the newly-refurbished Edgewater? Inn on the Park is also past its prime. Will the city be able to deny them a level playing field? Should city government pick winners and losers in a soviet-style planned economy? How many hotels can we afford to remodel?

NIMBY Neighbors Prefer Hole in the Ground to Target

Earlier this week, there was a neighborhood meeting to discuss plans for a new, smaller-than-usual Target store next to Hilldale mall, in the large hole that was dug for the aborted Whole Foods project.

While many welcomed it, there were, predictably, some loudmouthed NIMBYs who oppose another big store. Wake up, folks, you chose to live by a shopping mall. What the hell did you expect?

One man expressed concern with their product mix, saying he doesn't want another outlet for the People's Republic of China. Others urged Target to pay livable wages.

Most of the overpriced clothing sold at Macy's is made in China (Indonesia, India, Vietnam and Mexico are also represented). I knew a young woman who worked at one of those overpriced Hilldale boutiques, and she did not make a living wage. As for the size of the store, were they this concerned over the Whole Foods proposal? How about the big Borders bookstore nearby?

I suspect that most of their objection is actually not to the size of the store (a design that Target has used in a few other urban settings), the source of their products or the wages they will pay, but to their target demographic. Most of the stores at Hilldale are seriously overpriced to keep out the riff-raff.

This project is golden. Target even agreed to put the parking underground and pay for all of it without TIF money. The extra customers will occasionally patronize the other stores at Hilldale, so the whole area will get a boost. If it's not good enough for you, move to Maple Bluff (no big box stores there).

New Romantic Poetry

With apologies to Samuel Taylor Coleridge:

In Madison did Mayor Dave
A stately library decree.
His reasoning was firm and brave:
On building costs we'll surely save
If we move now, said he.

A hundred-five-thousand square feet of space
With glass and steel will be built apace.
There will be sunlight bright shining in all year
And far more space for citizens to use.
On days with weather that is warm and clear
We'll all enjoy the patio on the roof.

But oh, that steep taxpayer burden which landed
Twice as hard as Edgewater's sixteen million.
A savage fee the citizens were handed,
An island of public debt on which we're stranded
With no rescue from a Frautschi or a Goodwin.

And when the old library is vacated,
With scavengers and wrecking ball both sated,
A brand new hotel hopefully will rise,
To further clutter downtown's shaded skies
With empty rooms and yet another bar.
At least there'll be someplace to park your car.

The ramp will not fill up with out-of-towners;
Our airport is not major -- what a downer.

(I planned to finish it, but I've spent too much time on it already.)

New Words for an Old Jingle

Hammes will rebuild the Edgewater (Water)
With the help of TIF, sixteen million
Thank you, Dave Cieslewicz
Screw Monona Terrace
Hammes

If We Build It, They Still Won't Come

Remember when the power that be in Madison were telling us taxpayers that building a convention center would be an excellent investment in future economic growth? They had optimistic projections about all of the convention business that would come to our fair city.

Not everyone was so enthusiastic. Downtown hotel operators were not pleased that the city might consider subsidizing their competition. No problem, the boosters said, we don't need an adjacent hotel; we have plenty of rooms downtown already. Your businesses can only benefit.

Many taxpayers did not like the idea of subsidizing the convention industry. No problem, the boosters said, we won't need a city subsidy to operate the convention center, just to build it.

Well, the optimistic projections were entirely fictional. We never stopped subsidizing the operation of Monona Terrace. We were told after the first few years that we weren't getting enough convention business because there was no adjacent hotel. If we build the Hilton, we were told, the conventions will come. So once again, the city ponied up (with TIF funds) in hopes of grabbing more convention business.

Now, we are being told, the Hilton is not enough. We need another hotel in the vicinity, and the city is being asked to subsidize its development. Enough, already.

We are never going to attract major conventions, because we do not have a major airport. It is neither convenient nor affordable to fly into Madison compared to Chicago, Milwaukee or Minneapolis. The difference between first and second tier convention cities is the proximity of a commercial airline hub.

The few big conventions that Madison attracts are due to the proximity of special facilities or expertise (like the World Dairy Expo or the Stem Cell Summit that UW-Madison held last Fall). They came here without a shiny new hotel being built in the Madison Municipal Building.

We are being sold a bill of goods by the Marcus Corporation (who wants to build the new hotel, as long as it's taxpayer-subsidized). If the Madison Visitors & Convention Bureau and Monona Terrace really want to attract more convention business, they won't ask for another hotel; they'll ask the city to subsidize more flights into Madison. Maybe the city should operate a twice-daily commuter shuttle from O'Hare and give group discounts to meeting planners.