Archive for September, 2011

Tax Increment Financing is no place for short-term thinking

Posted in Uncategorized on September 29, 2011 by Jim Rosenberg

This week, Keene Winters of the Center Right Coalition of Wausau had a column in the Wausau Daily Herald in which he makes some points about Tax Increment Financing districts to arrive at what is probably an erroneous conclusion about a specific TIF expenditure in central Wausau. (I say “probably” because I can’t see decades into the future, so I can’t make a pronouncement about the outcome or wisdom of this decision.)  I’m not going to reprint his entire column, but here are some salient excerpts.

* * *

“In July, the Wausau Daily Herald ran two stories on how the city of Wausau used the TIF process to purchase 16 acres of riverfront land for $2.6 million with no immediate plans for development. The newspaper also reported that taking the property out of private hands eliminated some $55,000 in annual property tax revenue and that it would probably be a decade before development occurred.

“Huh? Where is the cash flow on this project? It’s minus $55K per year plus the cost of debt service with no concrete strategy to turn that around!

“Worse yet, the city has embarked on this massive brainstorming process where committees, council members, city bureaucrats and even architecture students from Milwaukee sit around and think about ways to spend some developer’s money. Would you like to be the developer that ventures his or her capital on a project with so many expectations?

The column concludes:

“TIF district management isn’t that tough. Have a developer with a plan to start. Keep the city’s requirements for the project simple, and have a solid strategy for the municipal cash flow. Then, the project can get done and be a win-win for everyone.”

* * *

First, let me say that it would fairly easy to debate on either side on this issue. But the Center Right Coalition, for which Winters is the local chapter coordinator, is a creation of Grover Norquist, president of Americans for Tax Reform. (If you’ve enjoyed the intransigence in Washington on the part of Republicans who signed “no tax increase” pledges and refuse to consider a balanced approach to deal with U.S. budget challenges, you can thank Grover Norquist.) Winters has been a Republican Party leader in several counties around Wisconsin, too. So since he has already chosen a dog in this fight, I’ll just choose the opposing viewpoint in the interests of being ‘fair and balanced.’

(In the interests of full disclosure, let me also say that I chaired the Wausau’s Finance, Economic Development and TIF district joint review boards  for a good share of the last decade, so I have more than a passing interest in this stuff.)

Municipalities in Wisconsin have few tools in the area of economic development, but tax increment financing is one that is extremely useful. While it would be great if there was always a developer standing in the wings on the front end and we could run the equations to cash flow a TIF district from Day 1, it often isn’t that simple. Moreover, even an overwhelmingly positive cash flow on a particular project may often provide little protection from criticism and the reason is simple: most people don’t understand tax increment financing. It is a case of the immediate vs. the ultimate.

Let me give you some examples. First, take a look at the Wausau West Industrial Park. It involved the acquisition of many hundreds of acres of land and the installation of millions of dollars worth of improvements using multiple TIF districts over several decades. Much of this work and expense was undertaken without any specific guarantee of development as these investments were being made, but with an understanding of what might be anticipated, in terms of additional property tax base and employment opportunities. By creating a positive environment for development with a multitude of individual actions over many years, it became achievable. I’ve yet to hear people say that setting up the industrial park was a bad move overall, although there has been debate over individual projects.

Now let’s take a look at TIF District 3, which is where the 16 acres Winters talks about in his column is located. In 2000, the City of Wausau expanded the district to include that particular property. The expansion also included a significant amount of property on the west side of the Wisconsin River, south of Bridge Street. This enabled the city to accommodate the Pic ‘n Save development, in which a substantial piece of blighted property with difficult soil conditions became used, useful and attractive.

With the Pic ‘n Save project, the city invested around $750,000 under the condition that at least $6 million in new tax base would be developed (a figure that has since been far exceeded.) While it might seem like a no-brainer that met all of the conditions Winters says he would like to see, it was tremendously controversial at the time the project was being undertaken.

TIF districts mitigate risk on the part of developers and when they are properly employed, taxpayers receive a return on the investments made, which comes in the form of new tax base, as well as job creation and a more attractive community. It is impossible to tell right now what might become of the 16 acres that the city recently acquired in TIF District 3. What is clear is that it creates a lot of new options for development and the city is a highly motivated owner. The city’s purchase also finally clears the way for an important segment of the River Edge Trail, which was not forthcoming under the prior ownership.

The city is now free, for example, to subdivide the property and make it available to developers who can advance plans that are in harmony with what the community sees as advantageous in its overall development. This inherently brings more potential players into the game than might otherwise have been the case, together with the ability manage the overall development area in concert with the city’s goals. In order to do that effectively, it’s important have some idea of what the community might want.

This summer, the city – as one element of diligently managing a substantial asset that it has now acquired — solicited input from diverse parties. It made use of resources provided by the University of Wisconsin – Milwaukee’s school of architecture and urban planning to facilitate the process and prepare some ideas and visions from the property’s owners — people who live, work and do business in the City of Wausau. The role of UWM’s Community Design Solutions division in this effort is to create a vision for the land and to prepare a master plan with renderings of use concepts for the space. It doesn’t rule out good ideas that might emerge in the future, but it organizes public input so that it can serve as a helpful guide in setting a tone and theme for future development.

That seems like a reasonable thing to do and a cost-effective way to do it. But making use of cutting edge thinking and giving the new owners an avenue of proactive participation in the destiny of their community is something that Winters dismisses as ‘people sitting around and thinking about ways to spend some developer’s money.’

The City of Wausau has successfully effected hundreds of millions of dollars worth of redevelopment over the past dozen years, including tens of millions in the exact corridor that Winters is talking about. The overwhelming majority of that money was private investment. Much of that would not have been accomplished if the city had adhered to short-sighted thinking that insisted on immediate returns from easy recipes that involve no patience or vision.

JR

Keep your eye on the ball…

Posted in Uncategorized on September 28, 2011 by Jim Rosenberg

Pity the folks in Lake Wobegon. The Minnesota Twins stumbled through their season and finished with the worst record in the American League. The Minnesota Vikings are 0-3, after outscoring their opponents 54-7 in the combined first halves of their games. The University of Minnesota Golden Gophers will open their Big 10 season this weekend on the road against the Michigan Wolverines, fresh off their second loss at home when they came up short in a 37-24 decision to North Dakota State that dropped them to 1-3.

Meanwhile, all is well in the Badger State. The defending Super Bowl champion Green Bay Packers have rolled out to a 3-0 start and they’ve already beaten the hated Chicago Bears on the road, underlining their win against them in last January’s NFC Championship game. The Wisconsin Badgers will be hosting the Nebraska Cornhuskers Saturday and at this point, it looks like the toughest game in their schedule – but hey, they’re still favored by 9.

And then we have the Milwaukee Brewers, who find themselves in the playoffs after winning their division for the first time in 29 years. I punched in my special code to purchase playoff tickets when they came up for sale this morning. I had been drawn for the opportunity to pick up four seats for the divisional series and I actually had them in my sites, locked in on the screen. I cancelled out when I realized I didn’t have enough time to turn them around and, in fact, I didn’t even know when the game would be.

Anyway, all of this great stuff with Wisconsin sports teams will probably take some people’s minds off of all of the crazy stuff that has been going on with the economy, politics and the rest. It’s a nice diversion that’s probably a good thing after the year we’ve had in 2011 – at least to a degree and for awhile.

But I have a feeling that it will take either a very good basketball season or a significant upturn economy to keep that winning feeling going through next spring in Wisconsin.

JR

The curious life savings of Arvin Kuntz

Posted in Uncategorized on September 18, 2011 by Jim Rosenberg

Not long after beginning my career in the gas utility business, I received my first letter from Arvin Kuntz. He wasn’t a big fan of the gas company and from time to time, he would take the time to create a handwritten missive in which he would enumerate his grievances.

We received nastygrams from others, of course, but Arvin’s were so unique that they were actually memorable and I took the time try to find out a little something about this fellow, who had turned communicating the frustrations of being a disgruntled customer into some kind of an art form.

It is at this point that I need to tell you that while I may have a bit of discipline when it comes to my own dealings, I also have some admiration for the quality of irascibility in some people. There has to be something incredibly liberating about the ability to just blow up like Mount Vesuvius from time to time, blackening the skies with toxic gasses and covering the world in lava and ash in an eruption of what must seem like righteous anger. I may laugh at things more often and they may scream, but these are just different kinds of relief valves.

Arvin called himself an entrepreneur and his place of business – one of them, anyway – was Sav-O Supply. For those who are old enough to remember the 1970s sitcom featuring Red Foxx as a South Central Los Angeles junk dealer in Sanford and Son, you’ve got a little bit of a start on what Arvin’s business was about. He collected and sometimes actually even sold various things. Most of it related to building supplies. Inside the large, dilapidated industrial structure were doors, shutters, fluorescent light bulbs, bathtubs, doorknobs, windows, hardware, lumber, fishing gear, a few printing presses, power tools, paint, dishes, figurines, disposable rain bonnets, an electric organ and all sorts of other disparate items that he had acquired.

Arvin probably had enough doors alone to do the Empire State Building. He stacked, stored and moved the stuff around his building with a forklift and a freight elevator. Out in the yard was a fleet of fully depreciated trucks, along with other weathering stuff that was either too big to deal with or might not be much worse for the wear of being outside anyway. A south wing of the building collapsed a few years back and perhaps some of this stuff might have otherwise been under cover, but it’s hard to say.

For decades – and Arvin was around for a lot of them – Sav-O Supply was just another junky building among many up and down the banks of the Wisconsin River in Wausau. But as the city began to dress things up and other structures were razed to make way for progress, the continually deteriorating Sav-O Supply building was becoming an icon for urban decay. With code violations aplenty, the city eventually closed the building to the public and it was pretty much just Arvin and his stuff. He wasn’t anxious to sell and it seemed as though the property was on track for condemnation.

As I was chairing the city’s Economic Development Committee, I wanted to make sure that we bent over backwards in the area of due process. It was obvious to me that while Arvin could expect a fair price for the property, there was something more at stake here and it was his occupation.

Community Development Director Mike Morrissey assured me that the meeting I wanted to set up with him, Arvin and me would be a waste of time. I conceded that was probably true, but it would be important to say that we’d done it. Besides, I was kind of looking forward to it. Morrissey was a passionate, savvy professional — and an ex-door gunner in Vietnam. Arvin was a world-class curmudgeon. After all the boring meetings I’d been to in my life, a cage match like that sounded kind of interesting.

The meeting was established. Arvin showed up and it didn’t take long for things to head south. Morrissey calmly explained the city’s position. Arvin reached into his pocket and pulled out a well-folded sheet full of that handwriting I recognized from years gone by at the gas company and he began to brief us about his constitutional rights. I suggested an auction and Arvin would have none of it. The meeting ended.

What was clear to me was that while there may have been no way that this wiry octogenarian was making a living out of his ramshackle eyesore of an establishment, he was certainly making a life. I told Morrissey I was pretty sure he could outlive us both on pure piss and vinegar and we left it at that. The city didn’t forget about Sav-O Supply, but there were other fish to fry and a recession to deal with over the ensuing decade or so.

And then a few weeks ago, Channel 9 received a call from an auctioneer who was in the process of organizing a big sale at Sav-O-Supply.

“What do you know about that place?” My daughter asked. “A bit,” I said.

We learned that Arvin was no longer able to ply his trade and his family was in the process of attempting to help arrange his affairs, of which there is undoubtedly considerable arranging to be done. And this weekend, there was a big auction at Sav-O Supply – the one I knew Arvin never really wanted to have.

JR

Tammy Baldwin’s senate bid already tipping some dominoes

Posted in Uncategorized on September 12, 2011 by Jim Rosenberg

Democratic Congresswomen Tammy Baldwin’s announcement last Tuesday that she will run in the open race for the U.S. Senate seat held by Herb Kohl since 1988 touched off next day announcements by Assembly representatives Kelda Helen Roys and Mark Pocan that they will seek the congressional seat she will be vacating. Both Madison area dems were very visible during this year’s capitol protests and they have strong progressive reputations in an area where most people want and expect that from their legislators.

Politics is not a completely different game in Madison, but I would say that you have to be much better at it to be as successful as Tammy Baldwin has been. It’s a sophisticated and highly engaged constituency. Think of it like Olympic hockey. There’s a Canadian team and the Latvian team. There is an entirely different level of play going on between those two and it doesn’t take very long after the puck drops for that world of difference to become apparent.

The political farm system in Madison includes not only elected officials and their staffers, but scores of advocacy groups, lobbying organizations, administrative agencies and think tanks who all play the inside game with ambition and skill in a way that doesn’t commonly occur in other parts of the state. (The exception may be Milwaukee, where being a city council or county board member is actually a better gig than serving in the state legislature.)

It is out of this environment that Tammy Baldwin comes to run for U.S. Senate. A former member of the Dane County Board and the state legislature, she won her congressional seat in 1998 after four-term Republican Congressman Scott Klug decided not to run for re-election to the seat he had shockingly wrested from 16-term Democratic incumbent Robert Kastenmeier in the 1990 midterms. Kastenmeier retired to Arlington, VA – something that summed up one of the biggest raps on him in his race with former WKOW-TV news anchor Klug.

While her first two elections for Congress were relatively close, nobody has been able to capture even 40 percent of the vote against Baldwin in the last decade. (I chose her election night party last November at the Brink Lounge in Madison because I wanted to go to the one place where I was absolutely sure people would be celebrating a victory.) That makes it a big deal for her to give up a district that has become very reliable.

But the district’s altered state in 2012 includes considerable new territory to the west that is currently part of Congressman Ron Kind’s 3rd district. Baldwin’s 2nd also loses a chunk in the north to 6th District Congressman Tom Petri – a moderate Republican first elected to the House in 1978. There is also a piece of the east central region in Baldwin’s current district that ends up in Congressman Jim Sensenbrenner’s 5th District for the 2012 elections. (This could be entertaining, since there couldn’t be much more contrast in Wisconsin’s Washington delegation than what exists between Baldwin and Sensenbrenner. In addition, he may be the only state politician that can make former Congressman Dave Obey look like Dale Carnegie.)

It is generally accepted that Democrat Kind and 7th District Republican Sean Duffy both come out ahead in the wholesale turf trading that occurs in their districts. Baldwin probably doesn’t, but it may also make Congressman Kind a little less willing to give up his congressional district to challenge Baldwin, with the converse possibly playing into Baldwin’s decision to run.

It’s difficult to say how Tammy Baldwin will fare in a statewide race. She was the first openly gay non-incumbent to be elected to the House of Representatives and she would be the first openly gay non-incumbent to win a U.S. Senate seat, if she prevails next year. Her domestic partner for 15 years was Lauren Azar, a former member of the Public Service Commission of Wisconsin who resigned earlier this year to become a senior adviser to U.S. Energy Secretary Steven Chu.

Although I didn’t know her personally, I was very impressed with Azar and slipped in favor of her appointment to the PSCW in 2007 at her confirmation hearing before the Senate utilities committee. This was based strictly on my view of her background and what she had to say at the hearing. A few weeks later, a handwritten thank you note from Azar appeared in the mail, which surprised me with its graciousness for what I saw as a very small gesture of support toward a person who was so obviously well qualified.

I was unaware of Azar’s connection to Baldwin at the time, but none of it was ever any particular secret, either. Baldwin and Azar were one of the first couples to register their same-sex partnership with Wisconsin’s new registry in 2009 and there was a statement from Baldwin when it was terminated the following year, with word that neither would have any further public comment about it, which they haven’t. So what little I can tell you first hand about either is that they are both long on intellect, integrity, insight and class. These are things that will never be in oversupply.

Of course, Baldwin’s resume does just fine on its own. She was one of 133 members of the House to vote against the authorization to invade Iraq. As we pass the 10th anniversary of the attacks that were partially used to falsely justify this unconnected and ill-advised adventure that has cost more than the stimulus bill that the GOP constantly maligns, it’s too bad that her view didn’t carry the day. She also opposed overturning the Glass-Steagall Act, which had wisely separated federally insured commercial banking from investment banking activities since the Great Depression. (I guess we all know how that one turned out.)

 National Republican Senatorial Committee spokesman Chris Bond said the GOP is looking forward to the clear contrast this race will provide. Me too.

JR

Starbucks CEO Howard Schultz wants to make a difference

Posted in Uncategorized on September 2, 2011 by Jim Rosenberg

I think we ought to listen to what this guy has to say, so I’m passing it along. Have a great weekend and think about this for Tuesday. There is a place for corporate citizenship in our country and we shouldn’t leave it up to the Koch brothers to decide what it should be.

JR

September 2011

Dear Starbucks Friend and Fellow Citizen:

I love our country. And I am a beneficiary of the promise of America. But today, I am very concerned that at times I do not recognize the America that I love.

Like so many of you, I am deeply disappointed by the pervasive failure of leadership in Washington. And also like you, I am frustrated by our political leaders’ steadfast refusal to recognize that, for every day they perpetuate partisan conflict and put ideology over country, America and Americans suffer from the combined effects of paralysis and uncertainty. Americans can’t find jobs. Small businesses can’t get credit. And the fracturing of consumer confidence continues.

We are better than this.

Three weeks ago, I asked fellow business leaders to join me in urging the President and the Congress to put an end to partisan gridlock and, in its place, to set in motion an upward spiral of confidence. More than 100 business leaders representing American companies – large and small – joined me in signing a two-part pledge:

First, to withhold political campaign contributions until a transparent, comprehensive, bipartisan debt-and-deficit package is reached that honestly, and fairly, sets America on a path to long-term financial health and security. Second, to do all we can to break the cycle of economic uncertainty that grips our country by committing to accelerate investment in jobs and hiring.

In the weeks since then, I have been overwhelmed by the heartfelt stories of Americans from across the country, sharing their anguish over losing hope in the strongest and most galvanizing force of all – the American Dream. Some feel they have no voice. Others feel they no longer matter. And many feel they have been left behind.

We cannot let this stand.

Please join other concerned Americans and me on a national call-in conversation on Tuesday September 6th hosted by “No Labels,” a nonpartisan organization dedicated to fostering cooperative and more effective government. To learn more about the forum and the pledges, visit www.upwardspiral2011.org

America is at a fragile and critical moment in its history. We must restore hope in the American Dream. We must celebrate all that America stands for around the world. And while our Founding Fathers recognized the constructive value of political debate, we must send the message to today’s elected officials in a civil, respectful voice they hear and understand, that the time to put citizenship ahead of partisanship is now.

Yours is the voice that can help ignite the contagious upward spiral of confidence that our country desperately needs.

With great respect,

chief executive officer, Starbucks Coffee Company