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Monday, March 2, 2015 |  Madison, WI: 21.0° F  A Few Clouds
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Who will pay for Judge Doyle Square?
Several governing bodies will be asked to forgo tax revenue
Mertz: 'The rest of the city is going to be paying increased property taxes for this.'
Mertz: 'The rest of the city is going to be paying increased property taxes for this.'

The Judge Doyle Square project now being contemplated by the city has been billed as the largest city project ever. If it happens, the city isn't the only public body that will be paying for it.

The Madison school district, Madison College and Dane County will all be asked to give up tax revenue.

"The rest of the city is going to be paying increased property taxes for this, and we need to be weighing the benefits," says TJ Mertz, a Madison school board member. "We're going to look at this very carefully. Right now, I'm skeptical of it."

The city is now reviewing two proposals for the project, which includes a new parking ramp, a headquarters hotel for Monona Terrace, offices, retail and housing. The Texas-based Journeyman Group is pitching a $178.7 million project, while JDS (fronted by Hammes Corp.'s Bob Dunn) is pitching a $159 million project.

Journeyman is asking for a $47 million grant in tax incremental financing, and JDS would like $17 million.

Tax incremental financing, or TIF, uses future gains in property tax revenue to finance development. When a TIF district is created, all of the property values within it are frozen for taxing purposes. For the life of the district, the taxing bodies don't get any more tax revenue, even though property values there increase or new projects are built.

The extra money collected from new projects or increased property values is set aside for development grants. These grants have to be approved by the Joint Review Board, which is made up of representatives of the city, Dane County, the school district and Madison College, as well as a community member selected by the other board members. Mertz represents the school district on the Joint Review Board, and although he has serious concerns about the project, he says he'll vote however the school board tells him to.

The city's current guidelines cap grants at 50% of the taxes the project would generate in new tax revenue during the life of the district. But the city can make exceptions to that rule, and for Judge Doyle Square it will have to. Journeyman's TIF request is being calculated at 190% of the incremental value and JDS at 93%.

The Judge Doyle Square project is within the boundaries of tax incremental district (TID) 25, a project that was created to help revitalize the area between the Capitol Square and Lake Monona. It helped finance the revitalization of Block 89, on the southeast side of the Capitol Square, with new offices, restaurants and a Walgreens drugstore.

The district is nearing the end of its life, but it has $16.4 million in reserves available for projects. If the district were to close without using that money, it would be divvied up, with the school district getting the biggest share, about $7.3 million.

But the city is contemplating using that $16.4 million for the Judge Doyle Square project. This would extend the life of TID 25, keeping new property values off the tax rolls until 2023. Alternately, the city could create a new TID, but this would keep the Judge Doyle property off the tax rolls for another 20 years.

Aaron Olver, the city's economic development director, argues that because the district is doing so well, it can pay for an extraordinary project.

"The question that's being hotly debated is, what's the return?" Olver says. "That's in the eye of the beholder."

Mertz says the school district prefers to have TIF districts close as fast as possible.

"If TID 25 closes and you add $200 million to the tax base, we could raise more money without raising taxes on homeowners," he says. "That's a real nice thing to be able to do."

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